AliExpress: Is Amazon under Siege in Europe?
AliExpress is attacking the uncontested market leader in Europe. Brands and sellers benefit by listing and advertising on the platform.
While most of the Covid-impacted Europeans have been home-shopping on Amazon, AliExpress has continued to silently yet aggressively grow into the market. AliExpress is a subsidiary of the Chinese behemoth, Alibaba Group. On the surface its marketplace allows consumers to buy mainly cheap Chinese merchandise. Its appearance is colorful and noisy to unaccustomed eyes.
There is more to the story. Up and coming Chinese brands, like Xiaomi, offer what might be called a brand experience to European taste. Products of first European brands that sell direct, like Kimbo Coffee in Italy and more than 10,000 mostly smaller Spanish companies, are selling on AliExpress. [1]
A lot seems like this is just an MVP, a minimum viable product, by a startup: Only sellers registered in Spain, Italy, France, Russia, or Turkey can list their products. Most features for merchants are still free or very cheap. Functionality is obviously not fine-tuned to the European consumer. Rather the lowest possible price is mostly the core differentiator. Consumers have to tolerate longer shipping times and the somewhat awkward user experience. Consequently, AliXBlog, features numerous articles on getting the best prices, cheapest products, and how to deal with issues of the platform. [2]
But when you hear there is a partnership with El Corte Inglés, the gigantic Spanish department store chain, this might get us thinking.
“Collaboration with AliExpress is a lever to boost online sales, and especially expansion in the international market. For its part, AliExpress will be able to take advantage of our logistics infrastructure in Spain.” — Eduardo Sotillos, Purchasing Director at El Corte Inglés [3]
More than a startup
Sales figures for AliExpress are hard to come by. Typical statistics only show Alibaba Group. This only gives a sense of the deep pockets behind AliExpress but no clue as to how big it really is.
Analysts expect AliExpress sales in Russia at $6bn in 2020. [4] It has been the number one e-commerce site in Russia for years. In November 2019, AliExpress was number two in Spain. [5] We know that compares to $2.6bn sales on amazon.es in Spain 2018. [6] Note, the two countries have about a similar GDP, although Russia has 3x more inhabitants.
In July 2019 AliExpress was already the number three marketplace in Italy — only weeks after allowing Italian companies to sell on its platform for the first time. Amazon, the number one, was almost 20 times as big. [7] Even without newer figures, it is clear AliExpress has left a considerable footprint in Italy in the meantime.
Disruption at work
Economically speaking, we are facing a disruption scenario. [8] AliExpress targets people who cannot afford to be choosy. More than 60% of its customers are under 35 years old. [9] They do not have a lot of money — a superficially unattractive target group. But these individuals will put up with long delivery times, an unknown platform, difficult search, etc. As AliExpress is gaining a foothold, it is learning about the market, improving the platform, and drawing more brands that are excited about the target group.
AliExpress has chosen the countries in Europe which are still expecting stronger e-commerce growth rather than those with a higher e-commerce penetration, such as Germany and the U.K. [10] It is always easier to grow in an expanding market. This is only the opening act.
“Given the popularity of the AliExpress marketplace in Spain, the Alibaba Group is using Spain as the jumping-off point to grow its marketplace in Western Europe.” — Peter Vahle, forecasting analyst at eMarketer. [11]
Curtains on the second act are already being lifted. E-commerce decision-makers at major European brands said that AliExpress is in talks with them to bring them onto the platform. Similarly, an AliExpress Russia spokesperson said it wanted to increase the share of local sellers to 50% by 2022–2023. And it is working to cut delivery times from China from 20 to 10 days. [4]
Initially, all this is likely not a (very) profitable endeavor for AliExpress, but the company can fight this. It has resources. Alibaba Group owns 58.2% of all retail e-commerce in China [12], contributing $49bn to its $75bn overall sales in fiscal 2020 (ending March 2020). [13] Alibaba has stated the intent to invest $15bn into its global expansion within the next 5 years. [14]
More important they are used to a competitive market, while Amazon is used to be the leader. A leader with a dent in its pride, as Amazon had to withdraw from China in 2019. [15]
“Our ambition is to always be the leader, although we do not see this as a competition. We believe the market is large enough for there to be two, three or more large companies of ecommerce.” — William Wang, CEO of AliExpress in Spain and Portugal [5]
The real play will be on sooner than we think. AliExpress has built access to a highly cost-conscious consumer base across Europe, it is adding major brands and driving higher spending to the platform. At the same time, the platform is continuously innovating and gradually gearing more towards local tastes.
Wang Mingqiang, President of AliExpress announced she intends to grow its global seller base 14fold until 2024. Expect her to follow through. [9]
The Perfect 10: AliExpress marketing
To get your products on stage and to turn the spotlights on, AliExpress offers a growing number of marketing tools. They show their heritage in Chinese e-commerce culture. Therefore, they look and feel different to Amazon and other familiar Western marketplaces. While this presents an entry barrier to some, it is also a great opportunity for everyone willing to try. It is easy.
1. Free Storefront
In China brands usually do not have their own online shops but rely on trusted marketplaces, e.g., Tmall or TaoBao. Like malls, some of those marketplaces offer individual stores.
AliExpress has a similar offering. Selling your products on AliExpress, therefore, is a lot more like creating your own website than just listing products. While this certainly means more effort, it also allows a brand to display itself. On AliExpress a brand is more than an item on a shelf. It is a message, value, content, and lastly, solution, i.e., product.
When a customer searches for an item, she will find a search results page. Clicking on a result will lead to the appropriate store for that particular item, changing the look and feel of AliExpress.
Brands are frequently complaining about the lack of this level of branding possibilities on Amazon. While a brand store on Amazon exists, it feels somewhat neglected. If a consumer does not specifically look for it, she will never see it.
This feature seems a bit unexpected in a low-price marketplace. It is heritage and a great asset in pursuing the ambition to enter the big brand business.
2. Exclusive: Country Specific Malls
For many countries, there are specific malls, like “La Collezione Italiana” or “Plaza España”, where consumers find offers and products geared toward the local market. Access for brands is limited and not self-service.
3. Free: Price and Bundle Promotions
There are discounts, countless options for coupon codes and bundle pricing. As to be expected for a platform focused on low prices, there are numerous good tools to manage price promotions. Expect shoppers to be flocking towards good deals. And expect other sellers to compete on price as these features are available to every seller.
4. Free: E-Mail Campaigns
Selling on AliExpress can be boosted immensely with good old e-mail. AliExpress features an integrated e-mail platform for marketing messages to promote individual items with some interesting targeting options. Think people who have just looked at your product or put something into the cart without buying. This works amazingly well. And it is free.
5. Paid: Affiliate Marketing
A brand can offer up to 90% commission to its affiliates. The standard is about 9%. The level of flexibility is pretty unique in the market. This makes AliExpress affiliate marketing really attractive to partners. It allows brands to work with affiliates to promote their products, who would otherwise not have been interested in the collaboration. This can hugely increase the reach of promotions.
6. Free: Follow Brands
The mobile app offers a feed, where brands and shoppers can post. There is the usual liking, sharing, and following. AliExpress creates a social shopping experience on its platform by adding the appropriate shopping buttons.
This feature also connects to Facebook and Instagram to target people. While Chinese shoppers are very accustomed to doing everything inside a single platform, European shoppers are — at least for the moment — more prone to separating social platforms from shopping platforms. It is a possibility this will change as people spend more time on AliExpress.
7. Paid: Influencer Marketing “AliExpress Connect”
AliExpress has launched its own influencer marketing matching platform AliExpress Connect. It allows brands to put up ads to find interested influencers. The integrated Task Center allows to broker tasks to them. Influencers can apply to work with a certain brand and agree to accept tasks thereby entering a digital contract with a brand.
Influencers can produce and post content on popular platforms, like YouTube, Facebook, Instagram, TikTok, etc. The influencer either gets paid a fixed fee or a commission based on used promo codes. Payment works automatically through AliExpress Connect.
8. Exclusive: Live Shopping
Introducing a new product? Need to show the features of a product to your customers? With the live shopping channel, brands can show the AliExpress shoppers their products in a live video feed. At the same time, they can offer promotions. Watchers can ask questions. This can be very dynamic and individual. Of course, the presenter can wait with the show until she has an audience. So especially in times of Covid lockdowns AliExpress Live can be a new type of virtual store.
Unfortunately, this feature is for accredited sellers only, so do not expect to be live as a newbie. But as this feature is so wide-spread and popular in China, further rollout can be expected.
Currently, in Europe, most live shopping channels are still deserted, in terms of audience. The coolness payoff is still higher than the direct sales impact. Your first AliExpress Live show will draw some press.
9. Exclusive: Interactive Games
Only weeks since its release, shoppers can now play games to win coins, which in turn they can use to shop. They can farm little plants and grow trees, play Sudoku, cards, and more. Again, AliExpress is developing its mobile app into a pastime. Like social commerce above, this further keeps its audience captive to the platform.
Getting a product into any of these games, is where the fun for brands starts.
10. The missing piece
After reading the above European advertisers will miss the performance marketing toolkit, they are so accustomed to. Sorry, there are no sponsored ads. No keyword advertising.
It will be coming. For now, the above — while different — still provides tremendous opportunities to push sales on the platform.
How is the AliExpress Different from Amazon
The table below shows some more key differences between AliExpress and Amazon:
9 Steps to Direct Your Show on AliExpress
The audience is taking seats. If you are ready to go on stage, what should you do?
AliExpress has teams in Spain, Italy, Turkey and Russia to help major brands onboard. Then there are agencies that can help build and execute a successful AliExpress strategy for any size brand or seller. But before you talk to either, I suggest:
- Go to AliExpress.com, browse around, and find a product you might like. Try to get one of the coupons you will inevitably be offered. Make a purchase and savor the experience. You might be confused, maybe annoyed, and hopefully intrigued. Do the same thing on the mobile app.
- Take note for yourself or get the internal commitment that this will be a strategic initiative and not a short-term profit generator.
- Decide on a product or a set of products you would want to list.
- Enlist the support of your local unit in Spain, Italy etc. and setup the account with their VAT ID. If your business does not have a subsidiary in any of these countries, you will have to wait until AliExpress comes to your country. Or you can find a broker.
- Hire someone to create your store and manage the campaigns. Or do it yourself, if you are skilled and eager to learn.
- Run some PR positioning your brand as forward-looking because you are the first one from your industry on AliExpress.
- Use the PR and maybe some other tactics to drive traffic to AliExpress to generate sales.
- Keep on learning.
- Be ready to grow as things unfold.
Thank you for reading.
I love to learn. If you would like to discuss or leave a comment, please e-mail me at medium@inupio.com.
Below are some of the published references that went into writing this post. In addition, I have spoken to a number of relevant people and shared experiences from my own work.
[1] https://locatus.com/en/blog/why-alibaba-wants-to-conquer-europe-from-spain/ https://de.aliexpress.com/store/5731088?spm=a2g0o.productlist.0.0.1eec5ce3iKkCMa
[2] https://alixblog.com/
[5]https://www.expansion.com/empresas/distribucion/2019/11/09/5dc5d76d468aeb15618b463c.html
[6] https://www.statista.com/forecasts/871159/spain-top-online-stores-spain-ecommercedb
[7] https://ecommercenews.eu/aliexpress-welcomes-sellers-from-europe/
[8]https://hbr.org/2015/11/how-understanding-disruption-helps-strategists
[9]https://www.alibabagroup.com/en/ir/presentations/Investor_Day_2019_AliExpress.pdf
[10]https://locatus.com/en/blog/why-alibaba-wants-to-conquer-europe-from-spain/
[12] https://www.repricerexpress.com/amazon-vs-alibaba-winning/
[14]https://onlinemarketing.de/e-commerce/aliexpress-in-europa-grosse-marken-weiterhin-skeptisch
[15]https://www.cnbc.com/2019/04/18/amazon-china-marketplace-closing-down-heres-why.html
[16] https://promossale.com/aliexpress-sale-dates-2020/
[18]https://sell.aliexpress.com/__pc/4DYTFsSkV0.htm?spm=a2g0o.home.1000001.4.4d2b12e2r0CCjY
