Head of Alibaba Germany Terry von Bibra on their online expansion plans
BY SANDY STRASSER
The Chinese online merchant Alibaba has arrived in Germany. The huge demand for international brands in China has triggered a veritable battle for access to coveted goods. We talked to Germany boss Terry von Bibra about Alibaba’s plans to achieve its new operation in Germany.
Mister von Bibra, what is Alibaba’s business model and which audience is being targeted?
Alibaba is a broadly-based trading company with a large range of platforms and services targeting various groups: B2B-, B2C- and C2C platforms, along with cloud and financial services. Our aim is to make business simpler throughout the world and we have very long-term plans at Alibaba. Importing global goods, promoting e-commerce in China’s rural regions and developing China’s major cities are the three primary focus topics for Alibaba in 2016.
The company was founded by Jack Ma in China back in 1999 and optimises its customers’ everyday lives with the aim of enabling access to products, services and experiences at all times and in all places. It encompasses numerous platforms, including offerings for shopping (Taobao), finance (Alipay) all the way through to travel (Alitrip).
What strategy does the German Alibaba offshoot pursue and what are you focusing on?
Our task is to find out which of the many Alibaba services are of interest to German companies: for example, cross-border sales to China through TMall Global, the IT solution Alibaba Cloud or our payment system Alipay. The focus of the Munich-based team has initially been on bringing German quality brands to Chinese consumers, as demand for “Made in Germany” products is extremely high. The rapidly-growing Chinese market is fairly complicated and the Alibaba Group is hugely complex. For this reason, the team is heavily focused on reducing this complexity with the purpose of winning over potential collaborators in Germany, Austria and Switzerland. Some of these enterprises are already selling their products and services in China – just not through us. Others still have no business dealings with China, but are considering expanding into the country. Or they are already working on a platform with us in China and wish to expand into other areas and segments. For these busines-ses, we create a better overview of the Alibaba B2B, B2C and C2C platforms, as well as cloud and financial services.
What are the expected personnel expenses to position the company in Germany?
We do not publish employee figures. However, our staff is currently still relatively limited. I was the only employee back in November of last year. We regard ourselves as a kind of start-up with a huge corporation and an enormous wealth of data in the background. The big challenge is how we will cope with cooperating with hundreds of small and medium-sized companies.
Over the coming years, you anticipate increasing demand for German products in China. What is particularly coveted there?
Everyday consumer products that are of interest to families and their well-being are especially sought after. Baby food is the absolute number one, followed by food supplements and beauty and health products. But electronics and technology are also among the top-sellers from Germany.
Why is it that German brands guarantee sales in the People’s Republic of China?
While fashion and luxury goods are imported from France and Italy, Germany’s exports focus above all on foods, drug store products and food supplements. The interest in German products is huge among the affluent, growing Chinese middle class, because Germany still stands for quality. This applies above all to products associated with family life. For this reason, Alibaba wants to expand its offering of German products considerably, as “Made in Germany” remains a seal of quality, decisive for purchasing among customers in China. Baby products are the most popular category, but consumers in China will also spend substantial amounts on clothing, pots and pans and everything that serves family well-being. The products must be authentic and have been manufactured in Germany. The Chinese do not want German goods produced in China.
What role does e-commerce play in China? What language does the local market speak?
E-commerce in China is growing at breakneck speed and has huge potential – above all due to the fact that not all rural regions in China have access to the Internet. By 2020, the country will develop into the largest market for imported products available online. From payment all the way through to social shopping – Chinese consumers rely on their mobile devices and expect the brands they are focusing on to provide a seamless mobile experience. E-commerce growth in China has changed the entire Chinese economy. In 2010, online transactions accounted for a mere three percent of all private consumption. Since then, the number of Chinese online shoppers has almost trebled to 410 million. Currently, e-commerce is concentrated on between one and three top cities, but this is changing fast. In China, only half of the total population has access to the Internet, but half of these – so, 361 million people – are using the Internet to shop online.
What significant differences can be observed compared to the European and American markets?
In addition to the obvious cultural differences, what strikes me in particular are the product descriptions provided by online shops. These look completely different to American and European product sites. While we like clearly-designed and well-structured pages with a few stand-out product details, Chinese customers demand as much information as possible. For this reason, a product presentation on TMall includes not only numerous pictures of the product, but frequently also a complete list of all ingredients all the way through to pictures that document the product’s manufacturing process. In this way, Chinese consumers try to inform themselves extensively on the quality of the product and ensure that they are in fact purchasing the original goods.
Your company now has over 400 million active users in B2B and retail. Every day, you send approximately 30 million packages around the world. What gigantic process chain lurks behind this number to keep the wheels turning? What are the specific challenges?
Alibaba works with big data, through which it coordinates all the processes of the various platforms and services. Our focus is to be the enabler. In logistics, we collaborate with various partners. In China, Cainiao is Alibaba’s logistics service provider: Cainiao is a kind of algorithm for logistics, providing us with transparency on our partners and the processes. In Germany, it is not necessary for us to own assets ourselves. For example, the Hermes Group with its subsidiary BorderGuru has been Alibaba’s official contract partner since March of this year. Cainiao and Hermes manage the entire logistics chain – the goods are collected from the merchant’s warehouse in Germany and – to use the technical jargon – delivered to the very remotest places in the People’s Republic of China.
Why has European shopping behaviour been lagging behind until now? What should companies do in order to generate more online traffic?
China is far removed from the physical shopping infrastructure familiar to consumers in Europe. Major Chinese cities are home to numerous shopping centres, while rural areas and regions have remained virtually untapped to date. For this reason, China and Europe have developed different traditions with regards to their shopping habits, which is why e-commerce is so successful in China. Thanks to the Internet, Chinese consumers in rural areas today have the same access to brands and products as their counterparts in the major cities.
What would you personally like to achieve with Alibaba over the next five years and how much will your many years of expertise in Amazon and Yahoo help to achieve this?
In Germany, our benchmark is whether we succeed in building trust. In China, our success is based on the faith that big and small companies, consumers and the government have placed in us. We have to build a similar level of trust in Germany and have already proven our ability to do this with such enterprises as Metro, Henkel, Beiersdorf, Nestlé, which all sell their products on TMall Global in China.
Terry von Bibra
Terry von Bibra is an American national with German roots. The former Head of the online platform karstadt.de has been in charge of the newly-established German Alibaba offshoot since November last year. The manager has a virtually peerless knowledge of the German retail landscape. Prior to working for Karstadt, he was Head of Strategy at Amazon Europe and Managing Director at Yahoo Germany.
This article was published in The Produktkulturmagazin, issue Q3 2016. Picture credit © Fotosearch / Getty Images