Alibaba undercuts Amazon in Europe to woo brands

Small businesses have joined its AliExpress platform but larger brands are holding back

AliExpress, the European platform of Chinese retail giant Alibaba, has approached well-known brands like Mango and Benetton to appear on the website with limited success. Some brands did not feel the platform was the right showcase for their products
AliExpress, the European platform of Chinese retail giant Alibaba, has approached well-known brands like Mango and Benetton to appear on the website with limited success. Some brands did not feel the platform was the right showcase for their products. PHOTO: REUTERS

MADRID • After years of reconnaissance, China's retail king Alibaba is finally making its move on Europe. It is undercutting Amazon sellers' fees to attract vendors but has had mixed results, said six sources with knowledge of the matter.

A flood of small businesses have in recent months joined its European platform AliExpress, but some larger brands are holding back, according to the sources.

AliExpress has approached well-known brands including Mango, Benetton and Spanish fashion group Tendam, owner of Cortefiel, to appear on the site with limited success, according to five sources involved in the approaches who declined to be named because the discussions were confidential.

Some of the brands did not feel that the website, whose fashion offerings include an imitation leather miniskirt for about US$18 (S$24) and an acrylic batwing sweater for US$14, was the right showcase for their products, sources said.

A senior executive at a large fashion company, which turned down AliExpress' approaches in Europe, said its brand needed to be in an "aspirational environment". Another described the AliExpress platform as "a work in progress".

But AliExpress chief Wang Mingqiang told Reuters in an interview at Alibaba's headquarters in Hangzhou, China, that foreign brands needed time to understand the platform.

With space to design their own stores within the platform, brands can build their own homepage, with pictures and videos, to create the feel they want, he said.

Both Benetton and Tendam declined to comment officially on whether they were approached. Neither brand sells on AliExpress, but they do sell on Amazon.

Mango said it did not sell on AliExpress, with no further comment. It does not sell on Amazon.

A spokesman for AliExpress did not say whether the company had approached these brands or others.

"We are continuously exploring opportunities to work with different partners and committed to acting as a trusted partner for both consumers and sellers," the company said.

GETTING TRAFFIC, VISIBILITY

I think that AliExpress has been associated for a long time with Chinese products - it's a question of time but I think they are doing all that is possible to get traffic and visibility.

MR ALVARO DOMINGUEZ, managing director of Spanish cosmetics start-up Le Tout, which started selling on AliExpress last year when the platform opened to local sellers.

Alibaba has until now focused on selling inexpensive Chinese products overseas through the AliExpress platform, such as US$3 USB cables and US$2 crystal earrings, curbing its appeal to a wider audience.

But in the past six months, it has started a drive to open up the platform to local vendors and brands as it seeks to replicate a highly profitable model of virtual malls that has seen it swallow more than half of online sales in China.

"Overseas sellers have a better understanding of local users, their products have better designs as they are closer to local users," said Mr Wang.

MONTHLY FEES WAIVED

The company is initially targeting Spain and Italy, plus the Europe-Asia gateway nations of Russia and Turkey, among its top markets under the previous, first-phase business model launched in 2010.

Spain, a big Western country with strong local brands, is the kind of market that Alibaba needs to win over if it is to meet chief executive Daniel Zhang's target to more than double its customer base to two billion by 2036 despite a stuttering Chinese economy.

Its progress there illustrates its strategy, as well as the obstacles it could encounter, as it plots global expansion.

AliExpress has waived monthly rates for sellers in Spain to attract their business while commissions for goods sold are set at 5 per cent to 8 per cent, according to a senior source close to the company.

By comparison, it costs €39 (S$59) a month plus sales tax to sell on Amazon, plus a commission for every object sold of 7 per cent to 15 per cent, with some items such as jewellery and Amazon device accessories commanding higher rates, said an Amazon spokesman.

Amazon declined to comment on AliExpress' move to open its platform to local sellers. The US company is the largest online shopping marketplace in its five main European markets - Britain, France, Germany, Italy and Spain, according to e-commerce analyst Marketplace Pulse.

Thousands of small businesses have moved to register on AliExpress in Spain since it was opened to local sellers last year, said AliExpress' spokesman.

She declined to be more specific, but added that it would compare favourably with Amazon, which said that more than 8,000 small Spanish businesses sold on its platform in 2018.

In one of AliExpress' most high-profile signings so far, Spanish department store El Corte Ingles said last June that it would boost its presence on the platform to seven fashion lines.

Spanish cosmetics start-up Le Tout started selling on AliExpress last year when the platform opened to local sellers. The company sells around 12 times more in volume on Amazon than AliExpress, said managing director Alvaro Dominguez.

"I think that AliExpress has been associated for a long time with Chinese products - it's a question of time but I think they are doing all that is possible to get traffic and visibility."

REUTERS

A version of this article appeared in the print edition of The Straits Times on January 09, 2020, with the headline 'Alibaba undercuts Amazon in Europe to woo brands'. Print Edition | Subscribe