For American retailers, striking the right chord with customers in China is more involved than finding the right vendor partner. In general, products are smaller, and pricing structure varies. On packaging labels and in marketing campaigns, customers want to see tag lines like “made in California” on American products. Snack flavor preferences are different, too. A Snickers bar might sell OK in China, but a spicy, chili-flavored bar will fly off the shelves.
Alibaba wants to help. Through the Tmall Innovation Center, Alibaba shares data like search terms, price performance and return rates with international retailers. With this insight, brands can cut down time spent on research and development and bring better products to market, faster. For instance, that chili-flavored Snickers went from idea to Tmall product in about half the time it typically takes for the brand to launch a new product. (The chili Snickers bar was exclusive to Tmall for six months.)
Now, TMIC, located at Alibaba’s Hangzhou headquarters, is broadening its reach. To open up Chinese customer insights to a bigger pool of brands, it’s partnering with 10 analytics firms, including Euromonitor, Nielsen, Ipsos, Kantar and GFK, to work with brand clients, using aggregated, anonymized data to generate insights.
“Product development is critical for the consumer goods sector, where the success of a new product can mean a greater win for the respective brand or category. For most leaders in the field, when it comes to their annual strategic product launches, failure is not an option. They need to hit targets,” said Liu Bo, president of Tmall marketing and operations, in a statement.
After launching last year, 81 companies, including Unilever, Samsung, Mars, L’Oréal and Mattel, have worked with TMIC on research and development to launch new items unique to Chinese audiences, or tweak existing ones. It’s part of Alibaba’s ongoing effort to be the go-to resource for international consumer companies selling in China, where industry nuances make it more difficult to get traction for foreigners. For instance, Alibaba already connects companies with local agencies in order to design campaigns geared toward Chinese customers, and it has a built-in logistics center to help sellers deliver orders to both local stores and customer addresses.
When it comes to data sharing and acting as a brand resource, Alibaba has positioned itself as the antithesis to Amazon. While brands selling on Amazon have to swallow concerns that Amazon can process their customer data in order to launch its own private-label products, Alibaba is a vendor, not a retailer. It doesn’t design or sell its own products.
With TMIC, however, Alibaba does benefit. Products that come out of the innovation center are sold exclusively on Tmall for an initial six-month period. In turn, the customer data — including what people are searching for, what searches lead to what purchases, return rates and common selling prices for products — is being shared across the board with sellers. TMIC clients in competing categories, like Unilever and Johnson & Johnson, are working off of the same sets of data insights.
“This is like Alibaba’s answer to Amazon Basics, except it’s getting outside brands to create the products from Alibaba data on its behalf,” said Humphrey Ho, the U.S. managing director of Hylink Digital, a Chinese digital advertising agency. “They’re encouraging other brands, who are good at what they do, to make products for Tmall that are more sellable, using their data. So in this case, it’s more of a win-win than a cannibalization.”
Rather than competing alongside the brands it sells, Alibaba is competing with other marketplaces, such as JD.com, to get exclusive product on its platform. By partnering with analytics firms, a much bigger pool of brands will be incentivized to launch products on Alibaba, rather than JD.com.
It will also mean that brands can move faster into China more confidently. Ho added that speed is critical for selling on a massive-volume marketplace like Alibaba, and that’s why TMIC is engineered more to benefit packaging, pricing and marketing development, rather than more timely product formulas (save the chili-flavored Snickers bar). Knowing how to properly size products and price them is another key advantage.
“Brands without a long history of selling a certain product in China, or even those who just want to improve performance, often don’t have a complete picture of who that customer is,” said Ho. “And that makes it harder to take the leap. This goes beyond the typical focus group, and backs up ideas with hard data.”