The Chinese tech giant has emerged as a key supplier of PPE — and a global ecommerce player.
Alibaba already had its sights on global expansion — but the coronavirus outbreak has given China’s largest ecommerce company an opportunity to accelerate that vision.
In recent weeks, the Hangzhou-based tech giant has emerged as a crucial middleman between Chinese factories and immense global demand for the equipment needed to fight the pandemic — from protective masks to hand sanitizer and ventilators.
In part, this is down to the donation efforts of founder Jack Ma and Alibaba’s charitable arm, which has shipped more than 40m items of personal protective equipment to 150 countries and pledged to give 101m masks to the World Health Organization.
But Alibaba’s new-found PPE proficiency has also opened it up to an enormous potential new market, as global consumers turn to the Chinese ecommerce giant for the first time and discover what else it has to offer them.
In Europe and the US in particular, the company’s platforms have benefited from an acute spike in demand that has made protective equipment difficult to find locally and on overburdened ecommerce platforms such as Amazon and eBay.
In Spain and Italy, traffic to the company’s AliExpress platform, which connects Chinese merchants with shoppers around the world, increased by 20 per cent according to SimilarWeb data.
In recent months, Alibaba has targeted southern Europe in particular, where online shopping is less well established than in countries such as the US, UK and Germany, and so its competitors are not so entrenched.
The company has poured advertising resources into these regions in an effort to win new customers. According to Sensor Tower, Alibaba’s were among the most-displayed shopping app advertisements in France, Spain and Italy in February and March on Facebook’s ad network.
Meanwhile the company is also gaining new customers across other parts of Asia.
PPE supplier to the world
Alibaba’s emergence as a go-to supplier of PPE comes in the midst of a global expansion plan that was already under way. Last year, AliExpress opened up to local sellers in Spain and Italy, among other countries, undercutting some rival platforms by charging lower commissions.
According to David Dai of Bernstein Research, the company is pursuing international growth on two fronts: directly through AliExpress in mature and competitive markets, and through locally run ecommerce platforms in emerging markets.
In recent years, the company has cultivated a substantial global footprint, with a patchwork of local ecommerce sites including Singapore’s Lazada, in which it has invested $4bn, and Turkey’s Trendyol and Pakistan’s Daraz, which it acquired in 2018. Elsewhere, it has invested $945m in Indonesia’s Tokopedia, taken a stake in India’s Snapdeal, and formed a joint venture, AliExpress Russia, which has come to dominate online sales in the country.
Before the outbreak took hold, Alibaba’s international ecommerce businesses contributed about 6 per cent of its sales in the fourth quarter of 2019, having grown by 23 per cent from the previous year. Its logistics arm Cainiao reported 67 per cent growth — in part a result of ferrying more packages overseas to its 120m annual overseas shoppers.
AliExpress, which was launched in 2010, is at the centre of its international efforts, though so far it has offered global customers a somewhat mixed proposition: lower prices in exchange for longer waits, since most packages originate in China. As a result, AliExpress — which offers everything from vacuum cleaners to wigs — has been most successful in countries where Amazon’s penetration is low and rapid delivery is hard to come by.
In the first three months of the year, AliExpress ranked among the most downloaded shopping apps in countries including Spain, France and Poland, according to data from Sensor Tower.
Meanwhile the company has seen an uptick in air shipments — mostly containing face masks and other medical gear — to its European hub in Liège, Belgium, where its logistics arm, Cainiao is building a €75m ($82m) logistics centre over about 30 football pitches’ worth of land. The hub connects to a new freight train line from China and is critical to Alibaba’s plan to take on Amazon in Europe.
“From Hangzhou to Liège we used to do three flights per week. Now it’s four. We are adding another one in the next two weeks,” said James Zhao, general manager of Cainiao Global Supply Chain.
Cainiao plans to build a similar logistics hub in Africa, Mr Zhao said, noting that preparations were still in the early stages. The ecommerce company hopes that the continent’s 1.2bn people could help it meet its goal of reaching 2bn customers by 2036.
Beyond the mask business
After the current crisis, the challenge for Alibaba will be to harness its recent gains and convince the world to turn to it for more than just PPE.
“The mask business is providing a reason for customers to try AliExpress. When people realize it’s easy to buy masks on AliExpress, they will use it to buy other things in the future,” said Chris Bu, a manager at Alibaba-backed 4PX, a Cainiao logistics partner.
In Europe, the company faces a battle similar to the one it overcame in its home market, where five years ago it was known for slow, unreliable shipping compared with rival JD.com, which pioneered next-day delivery. Alibaba eventually prevailed by investing heavily in its logistics infrastructure and taking stakes in partner courier firms — and is now pursuing a similar strategy in Europe.
4PX had warehouses in seven European countries and was working with AliExpress to build out local fulfilment options, said Mr Bu.
“China’s ecommerce took off after the Sars outbreak. I believe we will see a similar trend in Europe this time,” said Mr Bu.
Still, the company’s freewheeling marketplaces pose challenges to luring casual shoppers away from Amazon.
Last week Alibaba took steps to prevent sales of counterfeit and low-quality masks — an issue that has tarnished China’s reputation as a provider. Factories selling masks in bulk on Alibaba.com now have to undergo additional verification and most AliExpress shipments to the US have been curtailed as sellers are reviewed.