1688 found a new solution to anti-inner-loop

Author | Liu Baodan

Editor | Huang Yu

As the oldest business within Alibaba, 1688 is restarting with an entrepreneurial attitude, trying to find new solutions in the context of e-commerce saturation.

Recently, at the Taizhou 1688 Product Selection Center and 1688 Merchants Festival conference, 1688 revealed its plan to rely on offline product selection centers, make heavy investments in industrial belts, with a focus on 177 industrial belts in 40 cities, among which the 68 billion-level industrial belts are the top priority.

Behind the heavy investment in the supply chain, 1688 is considering breaking the cycle of e-commerce saturation and seeking a new possibility.

Since the beginning of this year, the price war in e-commerce has brought pressure to the source industrial belts, with e-commerce sellers pushing source manufacturers to provide lower prices, leading to many instances of cutting corners and reducing quality, causing inferior products to drive out good ones. The establishment of the product selection center is 1688's anti-saturation initiative.

The head of the 1688 Merchant Development Center stated that there are two models for factory business. The first model is to continuously lower prices, while the other model involves reconstructing the supply chain based on AI technology. "Based on AI and demand, we have efficiently matched supply and demand, finding the shortest matching path between supply and demand, which is 1688's strategy in today's industrial belts."

This is also an important implementation of 1688's digital supply chain strategy. Through the product selection center, 1688 can delve deep into the supply chain while providing buyers with product selection and procurement needs.

In November last year, Alibaba Group identified 1688 as one of the first batch of strategic innovative businesses, with the other three businesses being Xianyu, DingTalk, and Kuake. These strategic innovative businesses will operate as independent subsidiaries, using more independent strategies to face the broadest market.

1688 is Alibaba's oldest business, mainly providing matchmaking and online trading services for factories and sellers, playing a crucial role in the early development of Taobao. After undergoing positioning adjustments, 1688 has embraced new development opportunities and has determined its strategic direction to focus on building a digital supply chain.

"At present, 1688's transaction volume ranks fifth, following Taobao, Tmall, Douyin, Pinduoduo, and JD.com. Even if 1688's e-commerce volume grows larger, China does not need another e-commerce platform like 1688. What is needed instead is a supply chain that integrates Chinese manufacturing quality, sources, prices, trends, and new products," the aforementioned person stated.

Within 1688, the digital supply chain is like a digital chip, with the potential for integration and being integrated. It integrates the source factory goods produced in China over the past 30 years. After such integration, the chip should be integrated into all places with traffic.

As per the ideal expectation, when a merchant or factory joins the digital supply chain, its products can be sold domestically and internationally, offline and online, to B2B and B2C. In other words, once a factory joins the digital supply chain, its products can be sold across the entire network.

Since the beginning of this year, 1688 has been working towards this path, with the product selection center being one of the core projects based on this strategy.

As the first official product selection center of 1688, the operating model of the Taizhou product selection center can be summarized as "four in one": the government provides the platform and guidance, 1688 offers technology, sales channels, and digital capabilities, the local industrial chain owner is responsible for daily operations, and local source factories are stationed As of September 2024, 1688 has signed agreements to establish 12 selection centers, with 4 already in operation, mainly concentrated in the Yangtze River Delta and Pearl River Delta industrial belts.

Next, 1688 will comprehensively implement the focus on selection through budget, personnel, and business aspects.

First, establish a special investment budget to build offline selection centers in key industrial belts and open digital flagship stores for selection centers online; second, increase the number of personnel deployments in core industrial belts; third, all core businesses of 1688 will gradually extend to industrial belts, with the first business to go to industrial belts being 1688 Member Store.

According to insiders, 1688 Member Store is benchmarked against offline Sam's Club and Costco, aiming to create a "white-label supply chain-driven omni-channel member store" to provide services to members online and offline.

Wall Street News has learned that the supply of 1688 offline member stores will be relatively vertical, based on different industrial belts emphasizing different sources of supply. Next, 1688 will gradually combine the characteristic trend products of each industrial belt with offline selection centers, allowing every 1688 member to buy nationally featured white-label products locally.

At the same time, 1688 YX will also rely on some selection centers to collaborate with major brand OEM factories in China and factories with strong R&D and manufacturing capabilities to launch 1688 YX's OEM products, further leveraging the advantages of a scaled supply chain.

It is evident that 1688 has made significant strategic investments and decisions regarding selection centers. However, challenges are also apparent.

On one hand, the core of the digital supply chain lies in matching supply and demand, with 1688's strength lying in the supply side, while understanding user demand requires market validation; on the other hand, creating a new supply chain model through AI, especially the ability to rapidly respond to demand, places high demands on the entire industry chain's coordination.

Last year, Alibaba underwent the most extensive organizational restructuring in history, allowing 1688 to establish an independent market position, shed various burdens, and embark on a new entrepreneurial journey. For 1688, this is a rare opportunity.

After more than 20 years of dormancy, 1688 is finally about to carve out its own path