The latest news shows that Alibaba's 1688 has opened offline physical stores by investing in industrial belts to establish product selection centers, selling white label products from source factories, benchmarking against Sam's Club and Costco (opening customers), and focusing on investing in 177 industrial belts in 40 cities, including 68 industrial belts worth billions of yuan.
Under the internal competition of e-commerce, "refund only" and "lower price" have become the two major weapons for e-commerce sellers to acquire customers. However, this approach has led to tremendous pressure on the source manufacturers, especially factories, and profits have been repeatedly suppressed. The price war in e-commerce has already transmitted pressure to the source industry belt, and all e-commerce sellers are forcing source manufacturers to offer lower prices, resulting in a chaotic situation where many inferior products, such as cutting corners and reducing quality, drive out good products.
As one of the Four Little Dragons of Alibaba and the source of wholesale e-commerce purchases across the entire network, 1688 has been implementing a series of anti internal competition measures since August. On August 12th, the "Efficiency Improvement and Income Increase Plan" was released, promising that merchants will receive a certain number of orders, customers, and reasonable profits. At the same time, we will launch a free AI business assistant and make all AI products on the platform free of charge. In September, the company continued to crack down on businesses' roast such as malicious refund only and malicious wool collection.
Recently, 1688 has been leveraging the capabilities and resources of the entire Alibaba Group to develop offline, relying on offline product selection centers to invest heavily in industrial belts, with a focus on 177 industrial belts in 40 cities, including 68 industrial belts worth billions of yuan. There are three largest clusters on China's industrial belt, namely Yiwu Small Commodity Market, Canton Fair, and 1688. These three supply centers represent the largest gathering of Chinese manufacturing. The Canton Fair is the largest gathering of Chinese manufacturing in terms of time, the Yiwu Small Commodity Market is the largest gathering of Chinese manufacturing in terms of geography, and 1688 is the largest gathering of Chinese manufacturing in terms of digitization.
The goal of 1688 is to create a "white label supply chain driven global membership store" that provides services to members through all channels, both online and offline. Sam's Club and Costco (Open Market) membership white label supply chain supermarkets below the standard line. The product selection center focuses on essential consumer categories such as food, entertainment, daily use, and fashion, such as food in Zhengzhou, toys in Shantou, storage in Taizhou, Ribai in Yiwu, beauty in Guangzhou, digital in Shenzhen, and home appliances in Jieyang, which are all core categories of the industrial belt.
Data shows that the current number of paid members on 1688 has reached nearly ten million, surpassing Sam's Club's paid membership scale in China. The number of members has increased by over 400% year-on-year in the past year. 1688 has deployed over 1000 employees in 1000 industrial belts in China, and 16000 full-time employees are also stationed in the industrial belts behind the service provider group. There are 2 million factories above designated size in China, of which over 600000 are on the 1688 platform.
1688 Yanxuan will also rely on some product selection centers, collaborate with major Chinese brand OEM factories and factories with strong R&D and manufacturing capabilities, to launch 1688 Yanxuan's OEM products, further leveraging the advantages of a large-scale supply chain, allowing 1688 members to enjoy more differentiated quality substitutes. It is reported that the Product Selection Center is a strategic level project within 1688, with a focus on serving the business scenarios of small shop owners purchasing goods and influencers distributing products.
The operation mode of the product selection center is "four in one": government provides platform and guidance, 1688 provides technology, sales channels, and digital capabilities, local industry chain owners are responsible for daily operations, and local source factories settle in. Through the "four in one" online and offline operation model jointly constructed by the government, chain owners, 1688, and source manufacturers of the industrial belt, we aim to jointly create a commercial ecosystem for the digital supply chain of the industrial belt.
As of September 2024, there are 12 product selection centers that have signed cooperation agreements for construction, of which 4 have already opened, mainly concentrated in the two major industrial belts of the Yangtze River Delta and the Pearl River Delta. Six more are expected to open in September, mainly concentrated in Taizhou, Yiwu, Yongkang, and Jiaxing in Zhejiang, Shenzhen, Guangzhou, Shantou, and Jieyang in Guangdong, and Zhengzhou in Henan. The first product selection center in Zhejiang has opened in Taizhou.
(Zhou Songqing, Time Finance reporter, comprehensive from Alibaba, 1688, Taizhou Municipal Bureau of Commerce)