Why the Australian food industry needs Alibaba

Being employee number 48 in one of the biggest online retail channels on the planet that employees more than 100,000 people worldwide, means people sit up and listen when you have something to say. And Maggie Zhou has a lot of interesting things to say when it comes to China-based Alibaba making inroads into the Australian food market.

With revenue of $57 billion and climbing, the Zhejiang-based company knows that Australia and New Zealand both play an important part in the future of Asian food supply, thus sending big hitter Zhou to set up the Australasian operation in early 2017.

Zhou is quick to point out that Alibaba has more than 654 million active consumers in China and that number is growing year by year. To put things in perspective, when current Alibaba CEO, Daniel Zhang, was running Tmall, the largest B2C platform in China, he created the 11.11 Global Shopping Festival. This annual sales event ended up having three times the gross sales of Black Friday and Cyber Monday combined.

It is these types of numbers that should make Australasian farmers, food processors, food and beverage packaging specialists, and other interested third parties stand up and take notice. While hosting a lunch table at the Global Food Forum, Zhou made it clear that Alibaba’s ambitions, along with those of the Australian food and beverage sector, are similar.

“Alibaba sees great opportunities for Australian products and food that it produces,” she said. “Events like the Global Food Forum are very important [so we can] share knowledge and work together to work out the challenges that we come across in the industry.”

The Chinese Consumer Equation
Founded in 1999 by Jack Ma and his 17 co-founders, Alibaba has transformed the way how business is conducted by empowering small to medium enterprises with the technology infrastructure and marketing reach they might not otherwise have if left to their own devices.

“Ninety-five per cent of Chinese businesses are SMEs,” said Zhou. “Our mission has never changed from the beginning, which is; to make doing business easy, anywhere. We still believe that – to make business easy anywhere – but now, over the past 10 years, this includes in the digital arena.”

So, what are Chinese consumers looking for in Australian goods when it comes to the food and beverage industry?

“Australia has a very strong image as clean and safe. When Jack (Alibaba founder Jack Ma) was in Australia and New Zealand two years ago, he mentioned the clean and green image,” said Zhou. “Clean water. Clean air and clean soil. While mining may be big business, it is those three things – the environment – that is our treasure. All the things that are related to eating, drinking, what you put on your skin – there is a huge demand for these things from the Chinese consumer. We can see big and potential growth for food. The market for baby formula and vitamins is also very strong.”

Within the beverage sector, Zhou is seeing huge growth for Chinese citizens wanting Australian wines.

“Year on year growth for wine is 33 per cent compared with the French wine,” she said. “This growth is due to the Chinese middle-class consumer, which now number more than 300 million and is still growing. It’s an amazing opportunity for Australian exporters.

Australian wine going to China has zero duty due to the International Trade Agreement between the two countries.”

Alibaba knows that the Chinese demand for such products means they have had to invest in brick and mortar stores on the Chinese mainland, as well as distribution centres. The company has also invested in the RTMart Fresh supermarket chain. As the name suggests, fresh produce is also big on the Chinese consumer’s “must-have” list. “Today, in China, many Chinese love Australian food, especially fresh food,” Zhou said.

The importance of traceability
As well as Australian food standards being a beacon of light when it comes to trustworthiness of a product, traceability is something that Chinese consumers take seriously. In March 2017, Alibaba signed an MoU with vitamin supplier Blackmores, and Australian Post, to establish a pilot program that uses blockchain technology in an attempt to curb food fraud. While visiting New Zealand and Australia in 2018, CEO Zhang announced that the world’s biggest dairy exporter, New Zealand’s Fonterra, and Blackmores and launched a pilot order through Alibaba’s Food Trust Framework. This was done via Tmall Global, a cross-border trade platform under Alibaba’s Tmall, which was sponsoring an initiative that, again, uses blockchain technology to improve supply chain traceability.

While all these initiatives put the Australian food and beverage products in a good light, there are some common mistakes made when dealing with China – easily avoidable ones. One being, that just because from an economies of scale point of view the Chinese market is huge, don’t bet on getting even a small slice of the pie if you haven’t done your homework. Because, even though a minute piece of China’s ever-increasing 300 million middle-class can have financial benefits for a SME trying to make headway, it will come to nothing if you don’t do the research.

“Some of the mistakes the brand owner might think, ‘oh, Alibaba is big enough to launch my product’. You need team work,” said Zhou. “You need that to work in China. You also need to have a strong commitment to the Chinese market. You need to find a partner in China, but you also have to have your own team to work in China as well as Alibaba.”

The other thing a potential exporter needs to realise that just because a brand is strong in Australia, doesn’t mean it will be good in China. Chinese consumers have tastes that are completely different from the mainly European-dominated taste palettes from Australia.
They need to understand the market better and decide what kind of products might be suitable for the Chinese market. Maybe find out about Chinese consumer habits before going into the market. Also, packaging is very important

“Australians sometimes think ‘I’ll send a food gift to my friend’, and give it ugly packaging,” said Zhou. “Packaging is very important. When people start working with us, they already think in terms of great packaging.”

The future of digital retail
Unsurprisingly, Alibaba takes a collective approach when it comes to measuring success.
“I was just back from our top management meeting,” said Zhou. “This year, we decided we’d go from our synergy mantra to one of unity. That we are all in it together – like one brain; thinking in terms of strategy and execution. We want to bring more power to the suppliers and producers outside of China into our ecosystem.”

Just how important can Alibaba be to the Australasian food and beverage industry? Its long-term strategic plan says it all – “Alibaba’s long-term goal is to serve two billion consumers around the world and support 10 million businesses to operate profitably”.
The company intends to do this by using three key initiatives: globalisation of its brand; giving China’s 590 million rural citizens greater access to high-quality goods; and a data strategy that incorporates data technology as opposed to information technology. In other words, embracing Big Data and cloud computing. Zhou said there is a sizable sector of Chinese consumers who are embracing prepacked meals. Besides vitamins, Chinese consumers want cereals, snacks and healthy foods, she said.

“They want to try things, so they want products in small packages initially,” said Zhou. “Chinese consumers want to experience the taste first. Many people might follow a trend, maybe they don’t know much about a particular product, but their colleague might tell them it is very good. Then the whole team will follow their advice.”

One reason Alibaba is part of a lot of Expos both in Australia and overseas is to incubate SMEs in order to get brand awareness out in the marketplace. These Expos expose the brands to Chinese merchandisers. Zhou is explicit in the term, merchandiser, not “daigou”, who are the Australian-based personal shoppers for Chinese clients.

“That is why we had expos in Melbourne and Sydney,” she said. “We had over 150 exhibitors – mainly small- to medium-sized brands. That is why expos are important. When it comes to vitamins for example, even companies like Blackmores and Suisse need to get their new products into the expo. The Chinese community that live here – we call them merchandisers, not daigou. We think of daigou as those who simply deliver products from Australia to China. A merchandiser, however, is more professional. They tell the story behind the brand and can reach the Chinese consumer better.”

Zhou believes there are still many different digital strategies that need to be explored. Its Taobao Global platform is but one.

“Taobao Global is a portal for those merchandisers who are doing live streaming and tells the story behind a brand,” she said. “One live streaming product – in just one hour – attracted 2.4 million viewers. This is very helpful in incubating the brand awareness and working in local ecosystems.” And if brands, SMEs and anybody else is trying to figure out the end-game of where Alibaba is heading, a paragraph in its corporate overview sums it up.

“The consumer retail industry is experiencing radical disruption driven by digital technology. We believe e-commerce will be replaced by New Retail where the distinction between online and offline retail becomes obsolete. We have been driving the development of New Retail with the vision of delivering true convergence of the online and offline consumer experience through mobile and enterprise technology.”

In other words, Alibaba is at the cutting edge, and not only intends on staying there, but leading the way.

Collagen drinks gaining traction in Chinese market

Tmall Global has unveiled two key initiatives that further Alibaba’s plans to bring USD$200 billion worth of international goods into China over the next five years and help businesses of all sizes enter the China market.

The initiatives – the Centralised Import Procurement (CIP) and Tmall Overseas Fulfillment (TOF) – are import solutions offered by Tmall Global to help international brands accelerate their entry into China and capitalise on hot demand for high-quality products.

As the biggest cross-border platform in China, Tmall Global, a subsidiary of Alibaba, helps brands  open up flagship stores on the platform so companies of all sizes sell into the Chinese market, in turn benefiting Chinese consumers with an expanded choice of imported products.

“These new initiatives on Tmall Global, supported by the entire Alibaba ecosystem and benefiting both current and future partners, are needed enhancements as we strive to meet the rising demand of Chinese consumers for high-quality international products,” said Alvin Liu, general manager of Tmall Import-Export, at the Tmall Global Annual Merchant Summit.

At the China International Import Expo in November last year, Alibaba pledged to bring $200 billion worth of international goods into China over the next five years through its platforms.

Alibaba unveiled the Centralised Import Procurement (CIP) program today as a key part of Alibaba’s new retail business. By leveraging the six procurement centres Alibaba has set up across the globe, the program sources imported goods for all the online and offline outlets within the Alibaba ecosystem, including technology-driven grocery chain Freshippo (also known as “Hema” in Chinese), Tmall Supermarket and Intime Department Store. The program is a quick and low-risk way for international brands to enter China allowing them to reach the nearly 700 million active users on Alibaba platforms.

Tmall Overseas Fulfillment (TOF) is a consignment solution that allows brands to place a small batch of products at one of the TOF centres to be sold on the Tmall Global platform. This gives businesses around the world a chance to try out and fine tune their product assortment before making a full entry into China. TOF centres are currently available in Japan, South Korea and the US, with plans to expand into Europe later this year.

To support these new initiatives, Alibaba’s smart logistics network, Cainiao, will continue to expand its network of bonded warehouses in China, with an aim to triple its total size to three million square meters in three years.

“Over the years, Tmall Global has added a full suite of innovative and value-added services to help overseas brands succeed in the China market, including plugging them in to the entire Alibaba economy. The consumer insight from our ecosystem provides Tmall Global partners a complete view of their customers’ engagements even if they do not have operations in China. These market entry and in-market expansion programs are our key differentiators and have created unique benefits for international brands,” said Liu.

Tmall Global data shows China’s demands for imported goods is gaining strong traction across age groups, regions and categories. Those born after 2000, or “Generation Z,” is the fastest-growing consumer group on the platform. The platform is attracting more shoppers in less developed regions, and Tmall Global has successfully propelled the growth of three categories: anti-hair loss products, beauty-from-within products such as collagen drinks and trendy footwear in 2018.

China’s “Generation Z” is also fueling demand for pet products and beauty devices. In 2018, the number of pet-related brands on Tmall Global doubled from the previous year, and sales of beauty devices on the platform also quadrupled from a year earlier.

Recognising young Chinese consumers’ love for content, Tmall Global will continue to offer brands a raft of content-generating tools to boost brand awareness. By tapping into Alibaba’s own digital-media channels, such as Taobao Livestream, brands can directly speak to Chinese consumer through multiple touchpoints, including livestream services, videos and testimonials by popular influencers and key opinion leaders.

According to Chinese data-analytics firm Analysys, Tmall Global is the biggest cross-border platform in China. The platform offers Chinese consumers over 20,000 overseas brands and over 4,000 product categories from 77 countries and regions.

Alibaba Group eCommerce expo helps businesses get a bite of the Chinese economy

Alibaba Group’s flagship eCommerce Expo helped businesses tap into the eCommerce enabled Chinese economy.

The expo, on the 21st and 22nd of September, brought thousands of visitors to the International Conference Centre in Sydney  on the 21st of September.

More than 175 exhibiting Australian and New Zealand brands and retailers took part in the two-day event focused on helping businesses tap into the eCommerce enabled Chinese economy.

Exhibitors experienced first-hand the retail technology developed by Alibaba Cloud and they were able to build valuable relationships with Alibaba and its ecosystem of partners.

READ: Countries place value on different aspects of food products, export advisor says 

Businesses could also connect with Chinese buyers and engage directly with Chinese consumers who live-streamed product demonstrations on Taobao – China’s largest mobile commerce destination.

Alibaba Australia and New Zealand managing director Maggie Zhou said the expo provided value to small and large businesses.

“The 2018 expo has been designed to engage big businesses already having great success with our online marketplaces like Tmall and Tmall Global, as well as SMEs who are looking for knowledge and support to tap into the Chinese market,” she said.

Augmented reality technology powered by Alibaba cloud was on display, including a magic mirror, through which real-time personal images can be combined with beauty product effects to drive sales conversion for brand merchants.

Artificial Intelligence on display included the cloud shelf, where Chinese retailers include virtual products on the shop shelf that are available to order online.

Alibaba Cloud general manager in Australia and New Zealand, Raymond Ma, said retail and technology trends in China are continuing to change the way consumers, sellers, service providers and producers buy and sell.

“Alibaba Cloud underpins much of this technology and we look forward to sharing it with Australian industry over the next two days,” said Ma.

Australian Post executive general manager for international services, Annette Carey, said the post was delighted to participate in the expo.

“We’re proud to use our trusted brand and international reach to help Australian businesses grow locally and overseas,” she said.

“We recognise the importance of global trade to local businesses and economies, and we’re committed to helping grow cross-border eCommerce through new international products, services and partnerships with global players like Alibaba,” said Carey.

The expo featured keynote speakers including Zhou, Ma and country manager for Australia and New Zealand, George Lawson.

The photo was sourced from www.alibabagroup.com

Australian milk featured at Alibaba’s Smart Milk Station in China

In line with Chinese internet giant Alibaba’s ongoing efforts at innovation in new retail technologies, college students enjoyed an unprecedented and new experience in how to add Australian-imported milk to one’s diet at a university in Hangzhou earlier this month.

Alibaba has not only been instrumental in creating Hangzhou’s now highly developed internet economy, but has also helped the Zhejiang provincial capital prosper in the new retail sector, a sector that is fully reliant on the internet.

The event, hosted by Tmall Juhuasuan, an Alibaba business unit, in partnership with Tmall International, the internet firm’s popular B2C platform, witnessed the creation at a university in Hangzhou of a unique smart milk station modelled on the look and feel of a conventional roadside gas station. The site, designed to heighten interest in milk as a product that should be a part of everyone’s daily diet, is the first such new retail milk station worldwide.

At the 300 sqm milk station, college students received recommendations on the type of milk that meets their requirements after taking a quick quiz to determine preferences. Brands included Nestle, Freedom, Fonterra and Tmall International’s direct-sale brands Maxigenes and Devondale.

After adding milk, students had a go at winning at the onsite hammer game, akin to those seen at fun fairs, and receive the officially certified “milk power value”. Those with the higher milk power value can upload his or her photo onto the screen, and become the spokesperson for the milk station.

The event attracted many college students and other passers-by who enjoy games of competition and are passionate about expressing themselves. “I am the best at adding milk to my diet.”

The purchase experience is fully in line with what is referred to in Chinese as the “regimen”, especially the fancy “punk regimen” popular with the country’s millennials: staying up all night, drinking the most expensive milk, eating calcium tablets while drinking cola and using the eye-protection green wallpaper available on mobile phones for playing games in the middle of the night.

According to a big data analysis by Alibaba, the millennials, and especially those of college age, prefer choosing the rich-tasting, high-nutrition and easy-to-brew Australian-imported milk powder as a dietary supplement to keep oneself feeling energised in the midst of a busy, and often nerve-racking, academic life.

Based on Alibaba’s big data analysis, the creative team behind the project first analysed the shopping behaviour among adult milk powder consumers. With an understanding of the psychology of China’s millennials, the team spread news about the event far and wide, experimenting with different approaches to what is referred to as “new retail”. Having identified dairy products imported from Australia as a good fit, Juhuasuan teamed up with Tmall International to recommend products to specific consumers using various novel approaches, kicking off a series of promotions and other types of campaigns.

The smart shelf monitors selections made by shoppers in real time, quickly processing the information in order to make on-the-spot recommendations as the shopper moves through the aisles, while perfecting the logistics of the sales process to maximise the quality of the shopping experience. These efforts allowed the Juhuasuan smart milk station marketing event to successfully complete the closed loop combining online and offline sales.