Considered to be a direct obstacle to Pinduoduo in overseas markets, Taobao recently secretly launched a new overseas project.
It is reported that the project is called the "Big Clothing Global Free Shipping Plan", and Taobao Clothing will provide high postage subsidies, directly providing free shipping to overseas consumers. Merchants have the right to set prices and purchase goods independently, without the need to open a separate store or consider cross-border logistics. After receiving the order, they only need to send the goods to the domestic consolidation warehouse, and upon arrival, they will be confirmed as received (confirmed receipt), with no returns, no refunds, and no shipping insurance.
Why did you choose to act at this time? Taotian responded to a reporter from China Business News that domestic e-commerce is too competitive, especially this year, the women's clothing category is trapped in a vicious cycle of high return rates, and the business of clothing merchants is very difficult. Taobao hopes that this move will help merchants quickly expand into new markets overseas at a low cost.
However, many industry insiders believe that this move has obvious implications for Temu and SHEIN under Pinduoduo. Clothing is a traditional advantage category on Taobao, and it is not surprising to expand overseas markets by leveraging the advantages of Alibaba's overseas e-commerce sector. Observers close to Alibaba point out that there are still many details to be clarified about this plan, such as how the platform will subsidize merchants and how to handle returns in overseas markets, especially in high return rate categories like clothing.
Regarding more detailed issues, Taobao has not yet provided a response. The specific implementation situation still needs to be revealed in more details after the first phase of the project lands in Asia such as Singapore and Malaysia. It can be confirmed that Taobao is trying to take advantage of Alibaba's e-commerce system to "take shortcuts" in overseas markets. In overseas markets, when Taobao meets Pinduoduo again, it will be a wonderful scene for cross-border e-commerce in 2024.
Taobao copying 'shortcut'
In response to the secret launch of the "Global Free Shipping Plan for Big Clothing", the relevant person in charge of Taotian Group explained in an interview with reporters.
The project mainly focuses on four characteristics: "low threshold" and "low cost". "Low threshold" refers to the fact that Taobao and Tmall merchants do not need to open separate stores or make special settings for their products. It is still the original Taobao and Tmall store, with one interface and one set of logic, directly facing overseas consumers through the Taobao App.
Next is low cost: the biggest advantage compared to China is zero returns, zero refunds, and zero shipping insurance. Merchants will not have any new operating costs, and selling one order earns one order, which is purely incremental. "Taotian said that for merchants, they do not have to worry about logistics: merchants have the right to set prices and goods independently. After receiving orders from overseas consumers, they only need to send the goods to the overseas warehouse in China, and the goods will be confirmed upon arrival at the warehouse.
Taotian also specifically mentioned that "not doing OEM" is a true design aesthetic going global. Currently, clothing is not the main category among several major overseas platforms; The main suppliers to SHEIN are also factories, still following the logic of OEM manufacturing. Taobao said that the plan to launch this time is to encourage a large number of original style businesses to go out. It will be the first time for Chinese fashion clothing to go out to sea on a large scale, creating a new model for Chinese clothing to go out to sea.
According to official confirmation, under this model, the platform will provide merchants with high overseas postage subsidies and directly offer free shipping to overseas consumers. In addition to conventional men's and women's clothing, the project has also expanded to a broad range of fashion categories in overseas markets, such as sports and outdoor apparel, shoe bags and accessories, children's clothing and shoes.
In the industry's view, this is more like Taobao's "semi custodial clothing overseas" plan initiated by leveraging its own advantages.
Despite SHEIN's previous efforts, Temu has implemented the full custody model more thoroughly, and 2023 is considered the first year of the full custody model for cross-border e-commerce. The so-called full custody model means that merchants are only responsible for receiving orders, shipping to the platform's domestic warehouse, and subsequent shipping, operation, sales, and even after-sales are all handled by the platform.
The advantage of doing this is that I only need to focus on product design and quality, and concentrate on the most essential things, "Dai Xiaoqiang (pseudonym), the first generation merchant of Temu, once told reporters." It's important to change my mindset in foreign trade. Some people think I work for the platform, but in fact, it works for me, doing customer service and after-sales, and helping me promote
In 2024, cross-border e-commerce will shift towards a semi custodial model that provides merchants with higher degrees of freedom. This time, Taobao's "Global Free Shipping Plan for Big Clothing" is launched, and compared to the platform's stronger control over the fully custodial model, Taobao merchants "have the right to set prices and goods independently".
Compared to current overseas e-commerce platforms, the advantage of Taobao's fully hosted clothing is that it is simpler, without the need to open a separate account or restock. You only need to sign a contract on the platform to sell your goods overseas, "a clothing merchant told reporters. However, whether to go overseas now is still under consideration.
For Taobao, this is more like a transplant of endogenous growth momentum to overseas markets. "Digital industry analyst Hao Zhiwei believes that the fully managed and semi managed models have a high degree of standardization. Taobao's transfer of its clothing category advantages to cross-border trade will be very efficient, but more details need to be disclosed to be more convincing to merchants and the market.
The Mystery of Profit in 'Clothing Going Global'
It is worth noting that Taobao has not responded positively to the specific commission and operational details that the outside world is concerned about.
There are currently two theories about commission: one is that the commission is around 15%; Another type is revealed in the Q&A section of the promotional post on Qianniu platform (Alibaba's official seller platform) that the commission for the "Global Free Shipping Plan for Big Clothing" is about 20%. Regarding whether a 20% commission would be too expensive, the Q&A post called it "great value" because "this commission includes all return and exchange costs and overseas marketing resources".
Zero returns, zero refunds, zero shipping insurance, all return and exchange costs are covered by the platform. Merchants only need to ship to the domestic consolidation warehouse. In addition, marketing expenses such as user outreach, resource BD, and efficient flow in overseas markets are also borne by the platform. Therefore, for merchants, it is a particularly simple and effective wholesale business. "The Q&A post further explains.
The commission should include relevant logistics fees. It is said that cross-border logistics does not need to be considered, but in fact, it is a logistics cost buyout mechanism. Merchants do not need to consider the uncertainty of logistics. If the 20% commission includes logistics and other expenses, it is still reasonable, "analyzed Pan Helin, a member of the Information and Communication Economy Expert Committee of the Ministry of Industry and Information Technology.
From the common deduction points on various platforms such as food delivery and travel, a commission deduction of 20% is normal, especially for the clothing category, which is not high. "Hao Zhiwei told reporters," In the clothing industry, some brands that are light cost and heavy in operation have production costs that are even 1/9-18/8 of the tag price, and the huge price difference is eaten up by retail channels, advertising, and operating costs. If clothing can simplify channels and improve conversion rates when going global, a commission of 20% is not much
However, when calculating the commission and profit considerations for clothing going global, another aspect worth paying attention to is the new battle that cross-border e-commerce will open up next.
Taobao's business is actually reducing the cost of cross-border logistics through consolidation warehouses, which is conducive to the development of cross-border e-commerce and effectively promotes the export of Chinese clothing and textile products. It is also aimed at directly challenging competitors Temu and SHEIN. "Pan Helin believes that" the domestic e-commerce field has entered the era of stock competition, and competition among e-commerce platforms is fierce but has little effect. To expand the incremental market, it is necessary to make achievements in the field of cross-border e-commerce. Various e-commerce platforms have begun to compete in cross-border logistics, cross-border after-sales services, and other services, in order to gain higher market share in cross-border e-commerce or overseas e-commerce markets
From the current perspective, this project is a win-win situation for both merchants and consumers, "said Zheng Lei, Chief Economist of Samoyed Cloud Technology Group." For merchants, providing high postage subsidies and directly offering free shipping to overseas consumers eliminates the problem of cross-border logistics. Merchants have the autonomy to set prices and purchase goods, without the need to open separate stores or consider logistics advantages, allowing them to focus more on product development and market expansion. For consumers, they can also enjoy a more convenient and affordable shopping experience.
However, angel investor Guo Tao told reporters that Taobao's move is clearly aimed at competing with e-commerce platforms such as SHEIN and Temu that have already gained some influence internationally in the overseas market. By subsidizing postage and simplifying cross-border transaction processes for merchants, Taobao is attempting to enhance its platform competitiveness and attract more overseas consumers. This may trigger more intense market competition and encourage platforms to increase their marketing efforts, improve service quality, and thus promote the development of the entire industry.