Taobao officially joins the ranks of companies expanding overseas

Author | Liu Baodan

Editor | Zhou Zhiyu

In the face of the certainty of the overseas opportunity, Alibaba is once again increasing its efforts. Following Alibaba International, Taobao has also set its sights on the overseas market.

Recently, Wall Street News learned that Taobao has launched a "Global Free Shipping for Apparel" program, relying on the Taobao APP to mainly serve overseas Chinese. The platform provides postage subsidies to achieve global free shipping.

An industry insider close to Alibaba stated that Taobao's attitude towards going global is very firm. This is the top priority for Taobao's apparel business this year, with the highest internal priority, and it is not a short-term plan but a long-term strategic initiative.

In fact, Taobao has explored overseas markets before. As early as 2016, Tmall Taobao's overseas business was launched, mainly serving overseas Chinese. By October 2020, the Taobao APP had covered consumers in over 200 countries and regions. During the 2021 Chinese New Year shopping festival, over 20 million overseas users purchased New Year goods on Taobao.

During last year's Double 11 shopping festival, Tmall Taobao's overseas business also launched the "Cross-border Hassle-free Hosting Service" activity, providing one-click overseas services for domestic Tmall and Taobao merchants. It is with this previous experience in going global that Taobao has finally made the decision to expand overseas.

As for why they chose the apparel industry, a very important reason is that the domestic apparel industry is becoming increasingly competitive. This year, apparel merchants are facing challenges such as high returns, high inventory, and high costs. Taobao needs to find more incremental space for apparel merchants in a cost-effective way.

The challenges faced by merchants are also challenges for Taobao. From a platform competition perspective, the domestic e-commerce competition is fierce, and it is crucial for Taobao to enhance its differentiation capabilities. The domestic e-commerce market is still engaged in a price war and is facing a stagnant situation. Taobao urgently needs to find a new path.

Apparel is obviously a good choice. According to Statista, the global apparel market size has reached $673 billion by 2023. With the popularity of smartphones and the impact of the pandemic, the penetration rate of e-commerce in the apparel category has significantly increased.

However, Taobao is already half a step behind on the path to going global. Therefore, the company is trying to differentiate itself in terms of merchant recruitment, product categories, and customer base.

Firstly, in terms of merchant recruitment, Taobao adopts a semi-hosted approach. Merchants do not need to open another store, but can sell to overseas consumers through the Taobao app and enjoy zero returns, zero refunds, and zero shipping insurance, with costs borne by the platform. Merchants earn for every sale made, which is purely incremental.

At the same time, merchants have the right to set prices and own the goods, without having to consider cross-border logistics. After receiving orders from overseas consumers, as long as the goods are sent to domestic overseas warehouses, once they arrive at the warehouse, it is considered a confirmed receipt.

Secondly, in terms of product categories, Taobao does not engage in OEM manufacturing, but emphasizes on design aesthetics for going global. This time, Taobao's plan encourages a large number of original style merchants to go global. Essentially, this is a large-scale overseas expansion of Chinese trendy apparel.

Different from other platforms that mainly serve local customers, Taobao's apparel going global mainly serves overseas Chinese communities, including students studying abroad, overseas working populations, or immigrant Chinese. Taobao targeted this niche market from the beginning Currently, it can be seen that Taobao Fashion's biggest advantages in going global are twofold. Firstly, Taobao Fashion's supply chain capabilities. It is understood that about 2 million new fashion stores are opened on Taobao each year, with over 400 million users buying clothes on Taobao annually. Secondly, Taobao's sister companies Alibaba International and Cainiao will be responsible for overseas operations and distribution services.

Industry insiders mentioned that Taobao Fashion's overseas project involves integrating Taobao with Alibaba International's retail e-commerce platform "Huopan". Products are not only sold to overseas Chinese through Taobao's international platform, but also sold to global markets through AliExpress and Lazada.

However, the challenges in the overseas market are also evident. Taobao Fashion's global expansion faces uncertainties in policies and regulations, as well as intense market competition.

In August, Taobao Fashion's initial overseas coverage will include Singapore, Malaysia, South Korea, Hong Kong, Macau, Taiwan, and other Asian regions. By the end of the year, it will expand from Asia to Australia, and gradually achieve global free shipping.

Zhang Xiaojing, the Greater China Executive Director of Sullivan, told Wall Street News that local policy changes are the biggest challenge that cross-border e-commerce may face in the future. In the rapid expansion of cross-border e-commerce businesses, companies need to closely follow policy changes in each country to ensure legal operations and timely adjustment of business models.

E-commerce has become another emerging track for successful overseas expansion of Chinese manufacturing. From SHEIN, TEMU to TikTok Shop, Chinese e-commerce platforms have become the most dazzling force in the army of going global. This also means that Taobao will face competition from Chinese counterparts. In addition, overseas competitors such as Amazon and Shopee are not to be underestimated.

Fashion going global marks a new beginning, indicating that Taobao is officially joining the ranks of going global. Coupled with Alibaba International and Cainiao, which have long been expanding overseas, the Alibaba ecosystem is entering a new era of global e-commerce