Alibaba on conquering Europe in a ‘different way’
Despite being one of the world’s biggest businesses few Britons have heard of Alibaba. Its European head discusses how the Chinese company plans to grow in this part of the world.
It is telling that Alibaba founder Jack Ma was one of the first businessmen to meet with President Trump after his election win, with the pair thought to have discussed plans to create 1 million jobs by helping US SMEs sell into China.
However, despite being one of the most powerful brands in the world, worth an estimated $49.3bn (£40bn) according to Millward Brown’s 2016 BrandZ ranking, Alibaba is still relatively unknown in the West.
Its efforts last year are beginning to have an impact, though, given a new analysis by BrandZ of China’s most successful global brand builders sees Alibaba claim third place behind consumer tech brands Lenovo and Huawei. The study also claims “negative perceptions around Chinese products are declining”.
But Alibaba does not care much for consumer brand rankings, instead seeing itself as a door to enable the likes of Trump and Western businesses to “truly prosper” in Asia.
“’Disruptor’ can sometimes be a lazy term and is not one I would use,” says Terry von Bibra, Alibaba Group’s general manager for Europe. “If you want to put a tag on it, fine, but we’re an enabler not a disruptor. Alibaba doesn’t want to be the next Amazon in Europe, but a business that breaks down the boundaries of anything that makes it difficult for Western brands to successfully trade into China.”
Whatever the model, it is a business that is growing rapidly. Third quarter revenue hit $7.7bn (£6.2bn) during the third quarter, up 54% year on year. As a result, the brand has adjusted its forecast for the 2017 financial year from 48% year-on-year growth to a 53% increase compared to last year.
Brand building in Europe
In order to act as an enabler for businesses looking to expand in Asia, the brand is aware of the need to build its profile in Western markets.
China’s biggest ecommerce platform is a complicated beast, hosting 25 divisions. But von Bibra says its approach to brand building in Europe is a lot more straightforward, focusing on being an ecommerce partner for businesses. Last December, Alibaba teamed up with CNBC to sponsor a new TV series called ‘Pop Up Start Up’, an Apprentice-style show that follows 12 aspiring manufacturing entrepreneurs.
I’m not sure emulating a retailer such as Amazon that is already so established in the West is the key.
Terry von Bibra, Alibaba Group
The six-part show, which aired on Sky’s CNBC International channel, sees each contestant sell their products in a pop-up shop, with the participant who makes the most weekly profit earning a £20,000 prize. The idea is to make the brand’s image as an enabler obvious to consumers as well as businesses.
“The TV show is about slowly changing the way people think about us,” explains Bibra. “This is the first serious marketing activity we have done globally and it isn’t a short-term fix but more something we want to build slowly.”
Bibra says word-of-mouth buzz will be just as big an asset. “One of the biggest hurdles to cross-border trade is overtly harsh customs or taxes, so we’re focused on trying to make that easier. If we help change that, then that can only benefit the brand.”
Meeting Trump, he insists, is not a bid to influence governments, but more an example of Alibaba “observing and reacting”.
Tensions between the US President and China are already high, with Trump angering one of the world’s biggest nuclear powers by taking a phone call with the President of Taiwan Tsai Ing-wen. It was a highly controversial move as Beijing claims Taiwan is a renegade province that will be reclaimed by force if necessary.
So can Alibaba ease these tensions? “We are focused on cross-border trading. It is important for us that governments work well together, as they make the trade deals, not us,” he hesitantly responds. “We can only hope to make Trump understand how important that is.”
Bibra does not appear too concerned following Prime Minister Theresa May’s confirmation that the UK will lose access to the European single market. “Certain business decisions will become more difficult [because of Brexit],” he admits. “If inflation makes demand and areas softer or weaker, that might be a hurdle. But it will not stop UK businesses coming to us or wanting to realise great ideas with us. I don’t see demand for Alibaba suffering.”
Omnichannel key to success
As part of its annual Singles’ Day sales event – the lucrative Chinese holiday that celebrates single people – Alibaba saw sales hit £14.3bn last year, a rise of 32% on the 2015. Impressively, more than 80% of these orders were made via smartphones.
Von Bibra advises: “Online-heavy brands tend to think of offline as old fashioned, when the reality is the consumer doesn’t distinguish as they use both interchangeably throughout their average day.
“Retailers are confused about drawing this artificial line between online and offline sales. And we’re hoping brands stop looking at it as some kind of secret science. Omnichannel is absolutely key to success in Europe but Asia especially.”
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Yet despite its dominant ecommerce position in China, von Bibra says Alibaba is not in a rush to become a consumer brand in the same way in markets such as the UK, where its ecommerce operation primarily offers stock items for businesses.
Before joining Alibaba, von Bibra helped bring Amazon to Europe and says he is “fully aware” of how crowded the UK retail scene is.
“In terms of budget, we can move mountains if we really believe that investing in something is the right thing to do. But I’m not sure emulating a retailer such as Amazon that is already so established in the West is the key,” he argues. “We need to be smart and find a different speciality in this part of the world.”
This could be a wise approach. A survey for Marketing Week conducted by market research firm Qualtrics of 1,000 British consumers shows 38% have questioned the credibility and authenticity of a Chinese brand in the past due to a lack of trust as well as concerns over quality, counterfeiting and unethical production.
By focusing on the B2B world Alibaba could potentially save millions by not having to convince Britons of its quality as a consumer brand. However, the survey also suggests a general lack of brand awareness.
Consumer electronics firm Xiaomi is the least well-known brand (unknown to 74% of respondents), followed by OnePlus (64%), Hisense (62%) and then Alibaba (55%). And with more than half of the nation potentially unaware of what Alibaba even is, von Bibra admits there is a long way to go.
He concludes: “If five years from now I read an article in the UK press talking about us, I would love to see people understand our company. We want to reduce the complexity and break down the business to a few simple brand propositions. In particular, that should be all about how we’re here to help consumers as well as businesses.”