Alibaba: China is a huge challenge and a huge opportunity

When J. Michael Evans tells a filled auditorium at the National Retail Federation’s annual trade show that patience is one of the key requirements for retailers expanding into China, you might want to listen.

See, he’s worked in retail in China for decades and he’s a top executive at a company that appears to have a pretty good handle on the Chinese market — Alibaba. The gigantic China-based marketplace has 600 million regular customers and hosts more than 200,000 businesses and brands, including about 10,000 that are based in the United States.

“It isn’t as simple as showing up in China with a product and saying, ‘There are 600 million people on Alibaba’s platform. Surely somebody must be interested,” Evans, president of the Alibaba Group, said during an interview with Ian McGarrigle, chairman of the World Retail Congress.

“Building your brand and building your consumer base and building that consumer relationship in China takes time,” he continued. “If you’re impatient; if you’re in a hurry; if you view this as something that you’re hoping will impact your quarterly results, this year and maybe next year; then it’s not the market for you.”

China will be a $1.8 trillion online market by 2022

And it’s true. The road to cross-border commerce in China is littered with those who saw the opportunity, but overlooked the challenges faced by Alibaba. Nonetheless, the opportunity remains and is growing. Online sales alone in China reached $1.15 trillion in 2017. By 2022, Forrester says, the figure will be $1.8 trillion.

More importantly, cross-border commerce in China in 2017 surpassed $100 billion.

And when you listen to Evans, it’s clear the growth in those numbers in coming years will be staggering. He pointed out that China’s middle class has swelled to 300 million people. Within five years, he said, it will be 600 million.

They key for those expanding into China, of course, is understanding those consumers.

“The Chinese consumer is very young,” Evans said. ” The Chinese consumer is very curious and very interested in new products and new ideas, creative things that are coming from other parts of the world.”

In some ways, Chinese consumers have taken commerce trends that exist in other parts of the world and super-sized them. Mobile is not only king, it is practically everything. Mobile payments are huge.

“That consumer base — young, mobile, affluent — is also very story oriented,” Evans explained. “They actually do quite a lot of work to understand what a brand or what a (small or medium business) or what a retailers is selling, where the products come from, and why they will fit their lifestyle today and in the future.”

But Alibaba — and the sellers on the marketplace — appear to have cracked the code, for now. Consider those 600 million consumers. They buy stuff — a lot of stuff. Evans said Alibaba has $780 million in sales. It delivers 70 million packages a day. On Singles Day, the platform saw $31 billion in sales and delivered over 1 billion orders.

Impressive numbers — and potentially scary for retailers who are not Alibaba. Evans did not address competitive fears directly, though he objected to being described as the Amazon of China, pointing out the platform is a marketplace that shares customer data with its merchants.

Alibaba will focus on developing markets next

But Evans did say that Alibaba is currently focused on markets in Southeast Asia, India, Russia and other less mature markets. More work in Europe and the United States will come after progress is made in the first priority, Evans said.

Of course, China, as a market, isn’t going anywhere, despite the current economic slowdown in the China. The short-term is volatile, Evans said. But think of the long term.

“Long term, 10 years from now, that economy will probably be the largest economy in the world,” he said. “Consumption, as part of total GDP, will be the largest piece.”

And one thing, Evans said, is certain about China.

“It will not be a market that most small businesses, brands and retailers can afford to ignore.”

Photo by Mike Cassidy