Mobile and differentiation were the key words when Alibaba Group Holding Ltd.’s top executives introduced their strategy to 800 merchant attendees last week at the annual meeting of sellers on Taobao, its largest Chinese web marketplace.
About 9 million merchants sell 1 billion items on Taobao.com, according to Alibaba.
Mobile has become the major shopping venue on Taobao.com. “Mobile is evolving at a speed that is much faster than our expectation,” says Zhang Jianfeng, president of retail marketplaces at Alibaba, “Mobile traffic now accounts for 55% of our total traffic, and that number was 25% a year ago. We anticipate it will exceed 70% by the end of this year.”
Alibaba reported that purchases from mobile devices accounted for 42% of sales on its Chinese retail marketplaces in the quarter ended Dec. 31, 2014.
Taobao.com is responding by creating new mobile services for merchants, including some that focus on social media marketing. In March, Taobao.com launched Xiaopu (which means “small booth” in Chinese), a feature in the Taobao app that enables merchants to upload product listings more quickly through mobile devices and connect more effectively with consumers through social media.
“Xiaopu simplifies the steps to manage a store and could reduce the time to upload a product listing from 20 minutes to 3 minutes. For example, merchants can scan a bar code on a product to post a product,” says Zhang Kuo, director of Alibaba’s mobile business, “Xiaopu also allows merchants to post messages on Chinese social network Weibo to reach followers based their location. Consumers could buy products that are close to them, and even get the product from a merchant in person.”
More than 2 million merchants have begun to use Xiaopu, according to Taobao.com.
The focus on social media reflects its growing role in driving traffic to Taobao merchants, and the declining traffic from mobile consumers using Taobao’s internal search engine. “The mobile traffic from searches is decreasing. Now only 50% of our mobile traffic comes from search, and more traffic is coming from recommendations in online communities and social media,” Zhang says.
Alibaba also is taking steps to promote products that are unique or novel, as it tries to move away from its reputation as a wide-open online bazaar where sellers compete solely on price. In its latest move in this direction, Taobao.com launched a promotional event in March called Week of New Forces to sell about 100,000 apparel products through banners in prominent positon on the home page of the marketplace. Almost all the products come from youthful designers or rising web-only apparel brands that target a specific group of young consumers, according to Alibaba. “We will firmly support merchants that sell differentiated products or sell products in a creative way with the consumers rather than sell only relying on low price,” Zhang says.
Zhang says Taobao.com will continue to track transaction volume as a major way it rates merchants, but it plans to introduce a much stricter enforcement policy in May designed to punish merchants who create fake orders in order to increase their ranking in Taobao search results. Taobao also plans to create a Taobao merchants association to help merchants police themselves.
Zhang Jianfeng also manages Taobao.com’s sister marketplace Tmall.com, a site for larger brands with about 50,000 storefronts. He says Tmall plans to limit the numbers of stores on Tmall.com, and aims for each store to be able to increase its sales by 100% per year.
Tmall.com’s sales increased 60.1% to 293 billion yuan ($47.26 billion) in the fourth quarter of 2014 from 183 billion yuan ($29.54 billion) a year earlier, according to Alibaba.
Sellers pay no fees or commissions on Taobao.com, though they pay to advertise in search results. Tmall.com typically charges an annual fee of 30,000 yuan ($4839) plus a 4% commission on each sale, according to Alibaba.