For Brands, Alibaba Is The Gateway To China And Chinese Customers

China has the largest internet population and thus contains a large addressable market for brands wishing to grow their international sales via marketplaces. Brands though should be clear about where they should list and invest their resources. This morning, I read Doug Young's "New Road to China E-Commerce Leads Through" and feel I need to correct some of his assumptions.

Alibaba provides investors with a tremendous opportunity

In late May, Citron Research, which is famous for shorting stocks that it believes is overvalued by investors, did an about-face and released a report that stated its bearish on the most shorted stock in the world. Citron Research highlighted the following:



While most commonly referred to as 'The Amazon of China,' Alibaba has a differentiated business model from Amazon… If investors needed a catchphrase this would be more appropriate: ‘The tollbooth to middle class consumption in China.'

Brands should understand that large e-commerce marketplaces like Amazon and Alibaba provide customers with a selection that is not seen on other marketplaces such as I argued in a previous post that "The Amazon of China" definition is being used incorrectly and should be stopped. Alibaba has a tremendous impact on Chinese e-commerce. The mere fact that Citron Research, which has historically been critical of Alibaba and other stocks, generate research that highlights its change in view speaks volumes about the impact that Alibaba has.

Alibaba meets with entrepreneurs, not corporations, to showcase the 'Gateway to China'

In June 2017, Alibaba held its inaugural Gateway '17 event in Detroit, Michigan that had 3,000 entrepreneurs join Alibaba to learn about the opportunity to sell their products into China. The summit was designed to help small- and medium-sized businesses in the U.S. better understand the China opportunity. This was the largest event Alibaba has ever hosted outside China, yet it seems that Alibaba does not partner with others. 

In September 2017, Alibaba held another Gateway event in Toronto, Canada"The interest in Gateway '17 Canada has been incredible and signals that companies of all sizes are keen to go global. China is such a big opportunity for Canadian businesses who have the high-quality brands, products and travel experiences that are in demand by today's China's booming middle class," said Michael Evans, president of the Alibaba Group. The Toronto event had 3,600 attendees who, according to event data, were from small businesses with fewer than 50 employees. In two North American cities, Alibaba met with 6,600 entrepreneurs who are only focused on learning and interacting with Alibaba personnel with the end goal of moving their products into China. 

While is opening offices in Europe as reported in early 2018, Alibaba held two events in 2017 where founder Jack Ma spoke directly to audiences about how China should fit into their business strategy.

The size and spending on the opportunity

According to a February 2018 SEC filing, Alibaba has 617 million monthly mobile users and 552 million active users on its China retail marketplaces (Tmall and Taobao). In comparison, according to Tech In Asia, has 292 million customers. Seventy-five percent of the world's most valuable consumer brands (according to Forbes) already sell on Alibaba's Tmall. 

Alibaba has 100,000 users on Taobao and Tmall that have been conferred "Alibaba Passport" holders, people who spend an average of $45,000 USD collectively on the Alibaba shopping websites every year. has not disclosed spending by its most loyal customers. Brands will want to be able to access Alibaba's most loyal customers that are found on the 88 membership program as these customers are some of Alibaba's most valuable customer based on spending on the marketplace websites.

Alibaba provides opportunities

Alibaba has been clear in that it does not want to compete against its marketplace partners. The company wants to provide a platform that can generate sales for its partners without the fear that Alibaba will compete against them like Amazon does in the U.S. Alibaba does work with partners to develop new products based on the data that it has collected from customers. For example, according to Alizila, Alibaba partnered with Mars to develop a chili-infused Snickers bar for Chinese consumers, "capitalizing on the growing popularity of mala, the Chinese word for 'numbing and spicy.'"

In conclusion, brands should understand that if they want to access over 500 million customers, Alibaba should be your point of interest in growing your business in China. Alibaba is the gateway to customers that understand online shopping better than most and are willing to purchase products from other countries based on their desire to own high-quality products.

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