1、Taobao’s Advantages in Global Expansion

Merchant and SKU Advantage:

Taobao has long had a strong presence in the apparel category, offering affordable prices and a wide variety of SKUs. Given the current state of domestic e-commerce platforms, Taobao stands out with its vast number of SKUs and merchants, providing a significant advantage in the apparel category.

Demand from Overseas Chinese and Mature Consolidation Model:

Taobao has been implementing a globalization strategy for some time, including plans for Taobao and Tmall to expand internationally, attracting many overseas Chinese to shop on Taobao. In this process, Taobao uses official and third-party logistics companies for export consolidation, grouping parcels together and then shipping them overseas via air or sea, followed by last-mile delivery services.

Support from Cainiao's Global Logistics Network:

Cainiao has established cross-border logistics infrastructure in many countries, including trunk transportation, customs clearance, warehousing, and last-mile delivery, providing a robust global logistics network to support Taobao's global free shipping plan.

2、Target Customer Groups for Taobao’s Global Expansion

The primary target for Taobao's "Global Free Shipping Plan for Apparel" is the overseas Chinese community. According to incomplete statistics, there are over 65 million overseas Chinese working and living abroad. With the backdrop of China's global expansion, various industries are going abroad, and the first step is for people to go out. Thus, as more Chinese industries expand overseas, Taobao's strategy to cater to the growing online shopping needs of overseas Chinese is timely and appropriate. The large and substantial overseas Chinese community is an ideal initial target customer group

In addition to serving overseas Chinese, if Taobao aims to serve more other international users, it may face several challenges. For instance, clothing sizes in China differ from those overseas, which could involve issues with styles and sizes. Furthermore, while the global free shipping plan for apparel is the first step, Taobao might later expand to other categories, which could present additional challenges for products without significant size or style differences

Taobao's "Global Free Shipping Plan for Apparel" leverages its extensive SKU advantage and low-cost strategy, maximizing the benefits of China's supply chain. This move can be seen as a direct competition with Pinduoduo and TEMU. Thus, the second phase of cross-border e-commerce expansion will likely involve Chinese e-commerce platforms collectively going abroad, engaging in direct competition with global cross-border e-commerce platforms, and heralding a new era of global expansion for China's logistics industry.

3、Opportunities Brought by Taobao’s Global Expansion

From a Merchant Perspective:

The domestic e-commerce and courier markets are saturated, with about 300 million parcels generated daily by major e-commerce platforms and handled by major courier companies. This is already a mature market with intense price wars driving prices down. In this context, Taobao's overseas plan offers merchants a new opportunity to enter the international market with low barriers and costs.

Why is it considered a low-barrier, low-cost, light overseas expansion model? Firstly, merchants are not responsible for logistics, shipping, fulfillment, or after-sales, as Taobao handles all these aspects. Additionally, Taobao offers zero-refund and zero-shipping insurance services, meaning even if returns occur overseas, Taobao will handle them, significantly freeing merchants from after-sales concerns.

Effectively, Taobao is introducing a fully managed model. However, unlike other platforms' fully managed models, Taobao’s most crucial aspect is that it retains merchants' autonomy in pricing, allowing them to choose products and set prices freely, ensuring a certain profit margin.

According to Taobao’s official announcement, starting in August, Taobao will invest heavily in traffic, advertising subsidies, shipping, and order subsidies to promote the "Global Free Shipping Plan for Apparel." This initiative will likely lead to a wave of Taobao merchants and industrial belt factories entering the cross-border e-commerce track quickly. Therefore, merchants will see a wave of dividends in the short term.

From a Logistics Perspective:

Logistics service providers will also see opportunities. Although Taobao and Cainiao, part of the Alibaba ecosystem, have always maintained a deep partnership, Taobao has also been actively collaborating with other third-party logistics service providers since last year. For example, Taobao plans to initially focus on Southeast Asia, Japan, South Korea, and Hong Kong and Macau, where transportation capacity is relatively sufficient, and fulfillment times are fast. As the plan expands to Europe, America, and Australia, it will need to integrate and coordinate with socialized logistics resources. Consequently, a phenomenon may arise: in regions where Cainiao has an advantage, Taobao will continue using Cainiao's services; in areas with fewer orders or where compliance needs improvement, socialized logistics resources will be used, providing opportunities for third-party logistics companies.

Additionally, under Taobao’s fully managed model, merchants only need to ship orders to Taobao's domestic fulfillment warehouses, where Taobao’s official logistics handles subsequent order processing, such as labeling, consolidating shipments, and arranging international shipping. Thus, Taobao’s fully managed fulfillment warehouses will proliferate domestically.

For instance, shipments to Japan and South Korea might have fully managed warehouses in Shandong Province for quick sea shipping. For shipments to Taiwan, fully managed warehouses might be established in Fujian Province. For Southeast Asia, the layout might be in Guangdong Province. For Central Asia, Xinjiang might be chosen for fully managed warehouses, facilitating land transportation to Central Asian countries.

Consequently, the layout of fully managed warehouses, combined with regional advantages and logistics port resources, will boost the demand for logistics real estate and warehousing in various regions nationwide.

4、Challenges Taobao’s Global Expansion Might Face

Speaking of the fully managed model, it inevitably involves the use of trunk transportation resources. If Taobao uses dedicated air routes to ship parcels overseas, the first bottleneck it will encounter is insufficient air freight capacity and a shortage of full cargo planes.

Currently, large cross-border e-commerce platforms like SHEIN and TEMU are already facing constraints due to limited air freight capacity, hindering the further development of the fully managed model. If Taobao intends to implement a similar plan, it will face the same difficulties and challenges.

For neighboring countries and regions around China, sea or land transportation can be used. However, for regions like Europe and America, direct shipping primarily relies on air transport. With a global shortage of full cargo planes for goods transportation, the bottleneck in upstream capacity supply will limit the development of the global free shipping model for small items, posing the biggest challenge to Taobao’s further global expansion.

In this scenario, many platforms are turning to semi-fulfillment, pre-stocking goods in overseas warehouses. If Taobao's global free shipping plan aims to scale up, it will need to revert to the "sea freight + overseas warehouse" or "sea freight to door" model. Taobao can still offer a fully managed model but via sea freight. For instance, large items like furniture and appliances that cannot be shipped by air can be sent through sea freight, increasing the volume of sea freight door-to-door services.

Discussing fully managed models, let’s finally consider semi-managed models. If Taobao adopts a semi-managed model, it might also face the issue of insufficient overseas warehouse capacity. Currently, TEMU's semi-managed model has already strained the industry's overseas warehouse resources. If Taobao opts for this model, it needs to address the following questions:

Who will build the warehouses? Will it be Cainiao, Taobao itself, or socialized warehouse resources?

Can the value of Taobao's current product categories support the overseas warehouse fulfillment model? This is a crucial calculation.

With all Chinese e-commerce platforms expanding globally, the consensus is that the surge in order volumes and increased logistics demand require attention to building robust logistics infrastructure.

For Taobao’s "Global Free Shipping Plan for Apparel," if you have more thoughts, please share them in the comments section!

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WeChat Official Account: Cross-Border E-commerce Logistics Baixiaosheng