Dive Brief:
- Tmall Global, an online marketplace operated by Alibaba, launched two initiatives: Centralized Import Procurement (CIP) and Tmall Overseas Fulfillment (TOF), designed to help international brands and businesses enter the Chinese market.
- The procurement initiative uses six global procurement centers set up by Alibaba to source imported goods "for all the online and offline outlets within the Alibaba ecosystem," Tmall Global's announcement said. The release did not specify where the centers are located.
- The fulfillment platform allows brands to sell small assortments of products to "fine tune their product assortment" before fully entering the Chinese market.
Dive Insight:
Alibaba has been on the acquisition trail expanding its logistics services. The e-commerce giant recently purchased a 14% stake in STO Express, China's fifth largest carrier. Alibaba also bought stake in YTO Express Group, Best Inc and ZTO Express.
The latest initiatives in procurement and fulfillment enhance Alibaba's end-to-end supply chain, allowing it to serve Chinese consumers as more than just a marketplace to purchase goods, but rather a full-service provider from source to consumer.
Full control over the supply chain is a growing trend. Amazon is a prime example, bringing services from the first mile to the last mile in house. Control of the full supply chain can initiate faster fulfillment and delivery for e-tailers and reduce the costs associated with third-party services.
"Alibaba, and other large companies, feel that removing the middle man gives them better control over the customer experience, and very likely reduces costs typically absorbed by consumers," Tushar Patel, CMO of Kibo, previously told Supply Chain Dive.
China's bustling activity was historically associated with developed cities along the coast and ports exporting goods around the world, but the nation's domestic market is expanding rapidly. China's e-commerce market is expected to reach $1.8 trillion by 2022. Young Chinese consumers in particular fuel demand for foreign brands, online shopping and an overall "love for content," Tmall Global said in its announcement.
Inland logistics hubs are popping up to serve Chinese consumers, although infrastructure is still lacking in many rural areas of the interior.
CIP and TOF could offer an advantage to international brands that see potential in the Chinese market but are unsure how best to target the consumers.
"The program is a quick and low-risk way for international brands to enter China," Tmall Global said of its procurement solution.
