In March 2024, Alibaba's direct-from-factory sales platform 1688 successively established three stores on Taobao, named "1688 Premium Selection Taobao Store," "1688 Enterprise Self-Procurement Tmall Store," and "1688 Industrial Experts' Choice Tmall Store."

For consumer goods, there's "Premium Selection," and for industrial products, there's "Experts' Choice." Manufacturers on 1688 no longer need to set up new stores on Taobao and operate a new platform. Instead, they can rely on the "semi-hosted model" to hand over their products to 1688 and directly connect with the consumer market. Compared to managing two platforms themselves, this model allows manufacturers to only handle shipping and after-sales issues, significantly reducing operational costs.

For consumers, the initial three stores offer shopping services such as zero-yuan orders, free shipping for single items, 24-hour delivery, and 7-day no-reason returns. Therefore, 1688's entry into Taobao is the best choice for both consumers and suppliers.

In recent years, 1688 has quickly gained prominence in the B2C sector with its rich industrial belt supply and high-quality factory resources, even sparking heated discussions and popularity on social media platforms like Xiaohongshu.

1. Young People Flock to 1688, a B2B Platform Going Viral in the B2C Space

Currently, 1688 has transformed from a "direct-from-source" B2B platform into a frequently mentioned B2C platform among young people. The phenomenon of young people flocking to 1688 and making this B2B platform go viral in the B2C space is mainly due to 1688's unique advantages and the shift in young consumers' mindset.

"Buying quality without overpaying" and "prioritizing cost-effectiveness" have become the buzzwords for the younger generation. 1688's factory-direct sales eliminate brand markups and middlemen, making its prices more affordable compared to similar products on other platforms.

According to reports, the product categories in 1688 Premium Selection stores mainly consist of daily necessities and household items, reflecting that the primary target consumers after 1688's entry into Taobao are the "post-95" or "post-00" generation. This move undoubtedly accelerates 1688's alignment with "Gen Z" e-commerce, attracting attention from groups like the new middle class and sophisticated moms. Additionally, 1688's products are positioned in the mid-to-high price range, adding a layer of quality assurance to its inherent "discount" appeal.

In December 2023, 1688 CEO Yu Yong stated at the "New E-Commerce Summit" hosted by "Tianxia Wangshang" that 1688 primarily targets users aged 25 to 30 in first- and second-tier cities and is already laying out strategies for the C-end consumer market. The platform's "1688 Premium Selection" has achieved annual sales of 30 billion yuan.

Thus, 1688's viral success is no accident. Against the backdrop of the current economic downturn, consumers are more eager for cost-effective products, and 1688 meets this demand by offering a wide range of high-quality yet affordable goods.

2. Why Is 1688 So Popular?

1688's strong appeal stems from its unique charm and advantages.

Affordable prices are one of 1688's most notable features. As a B2B e-commerce platform under Alibaba, 1688 brings together a large number of direct manufacturers and wholesalers, offering consumers a rich selection of products. Since most products come straight from factories, eliminating middlemen, prices are more competitive. This pricing advantage makes 1688 the go-to place for consumers seeking high-value products.

Beyond pricing, 1688 also provides factory guarantees. Most sellers on the platform are factories that directly manufacture the products, ensuring strict quality control. Consumers can shop with greater confidence when choosing products from 1688. This factory guarantee not only boosts consumer trust but also lays a solid foundation for the platform's long-term growth.

Lastly, 1688 leverages the principles of "grassroots economics" (种草经济学) by promoting and marketing through online media platforms. On social media platforms like Xiaohongshu, many users share their shopping experiences and recommendations, sparking more attention and buying frenzies. This social shopping approach not only increases the platform's exposure but also enhances the user experience. Guided by grassroots economics, 1688 has successfully attracted a large number of young consumers.

3. 1688's Viral Success in an Economic Downturn: Could It Be the Next Pinduoduo?

In an era of economic downturn, many netizens believe Taobao's "dream collaboration" with 1688 is born out of necessity. Looking back at e-commerce trends in recent years, from the rise of Pinduoduo to the popularity of Douyin Mall, "low prices" have become this year's e-commerce mantra. To stand firm in today's e-commerce landscape, a "price war" is inevitable.

As a platform that connects directly with suppliers, 1688 has a significant pricing advantage. Taobao recognized this, leading to 1688's entry into Taobao, hoping to gain an edge in the "price war."

However, based on the current situation, although 1688 has achieved notable success in the B2C space, it still faces challenges competing with e-commerce giants like Pinduoduo. Pinduoduo, as an emerging e-commerce platform in China, has quickly captured market share with its unique "group buying + social" model and efficient supply chain management, winning over a large user base. Pinduoduo also excels in user experience, brand building, and marketing, giving it a clear competitive advantage over platforms like 1688.

Additionally, 1688 primarily reduces product margins through wholesale, but this "wholesale" characteristic cannot be fully leveraged on Taobao's platform, resulting in minimal "price reduction" effects. This is far from Pinduoduo's approach, making it difficult for 1688 to gain a pricing advantage.

It's also worth noting that Pinduoduo focuses on meeting consumers' diverse needs by continuously expanding product categories and services to enhance user experience and satisfaction. In contrast, while 1688 has abundant product resources, it still has room for improvement in catering to diverse consumer demands.

However, a staff member previously stated: "The purpose of opening stores on Taobao is not just to sell products but to test products in a larger market, incubate super products, and turn them into 1688's digital supply chain products for full-network sales. This transforms 1688 from a source for the entire network into a source for new products." Li Nanxing mentioned that they have submitted a second batch of products, all of which are new, hoping to use the C-end for product testing and gauge market feedback based on sales performance. According to reports, 1688 will also experiment with self-operated branded white-label products on Taobao, such as those under "Premium Selection" and "Experts' Choice."

This reveals that 1688's ambitions go beyond a simple price war. Instead, it aims to conduct deeper market testing and product incubation through Taobao's vast platform. Leveraging Taobao's extensive user base and powerful data analytics, 1688 can better understand consumer needs, optimize product design, and create more competitive new products.

At the same time, through self-operated white-label branding, 1688 can further enhance its brand image and strengthen consumer trust and loyalty. This strategy is crucial for elevating 1688's competitive position in the e-commerce sector.

Opinions on 1688's entry into Taobao vary, and it may be too early to draw conclusions. However, one thing is certain: as the e-commerce market continues to evolve and consumer demands diversify, 1688 will need to continuously refine its business model to better meet market needs and achieve sustainable growth.

References:
Data source: Internet

Figure 1 source: https://mp.weixin.qq.com/s?src=11×tamp=1711898833&ver=5172&signature=il-K27dgejAgF3mcwZa3o3lvH85W01poJSW73Fmi0oERCxfA3ksdWw2javwXGvNNbbLvG6olG1EYajlt4i6elJlKDnxQBhGRBRGMgIeiEomnD1IOcpz7Ve4IsgjTTncc&new=1

Figures 2, 3, and 4 source: Taobao/Xiaohongshu screenshots

Reference article: 1688 Launches Full-Scale Entry into Taobao