Online Retail Chinese E-Commerce Giants Woo German Brands

Chinese online retailers are in talks with top German brands which are highly sought after in China. Market leader Alibaba and its domestic rivals are focusing on international expansion, partly to offer an alternative to the barrage counterfeit goods.
Alibaba looks abroad.

The new head of German operations for Chinese e-commerce giant Alibaba, Terry von Bibra, is a man with a mission. “It’s my task to help German companies implement their strategy in China,” he told Handelsblatt, adding that his main goal is luring German brands on to the Tmall marketplace, Alibaba’s retail platform.

It’s a challenge because Alibaba is up against stiff competition. JD.com, China’s number two online shopping company, has just signed a strategic partnership with six European makers of kitchenware including German brands WMF, Fissler and Zwilling.

Lijun Xin, head of JD.com’s apparel and home furnishing division, said his new partners made the “world best products” and promised them easy access to 132 million customers.

“We know how important sales experience is for our customers so we’re pleased to be working with JD.com,” said the managing director of Fissler, Markus H. Kepka.

Counterfeit goods are omnipresent in Chinese online retail.

China’s big online retailers are aggressively wooing the manufacturers of well-known German brands. “Our market research shows that German brands are very popular in China,” said Doug Gurr, the head of U.S. retail giant Amazon's Chinese operations.

High quality product segments, including kitchen equipment, baby products, car components and shoes, were in strong demand, he said.

Amazon has a market share of just 1 percent but sees itself as the natural partner for Western firms trying to break into the Chinese market. Amazon, Mr. Gurr claimed confidently, could “offer a service that no other provider in China can offer.”

Amazon could profit from widespread fear of counterfeit goods which are omnipresent in Chinese online retail. The U.S. retailer has been advertising with a guarantee that the products it sells are genuine because it obtains them directly from manufacturers in Europe and the United States.

Its Chinese competitors are following suit. JD was networking at the Ambiente consumer goods fair in Frankfurt last month to negotiate direct distribution channels with firms exhibiting there.

And Alibaba recently opened an office in Munich. “I’m Alibaba’s ambassador in Germany,” said Mr. von Bibra. “International expansion is one of the biggest priorities for Alibaba this year.”

Figures for 2015 underscore Alibaba’s strategy. Last year some 5,400 foreign brands offered their wares on Tmall, of which 80 percent weren’t represented in the Chinese market before.

Consumers have a good sense of whether a brand is relevant in Europe. Serge Hoffmann, Retail expert at consultancy Bain & Company

German retail giant Metro last September opened a flagship store on Tmall which quickly mushroomed into one of the top 15 retailers on the platform. Groceries, and long-life milk in particular, are the top sellers for Metro, which has the advantage of already being known in China because it runs 80 stores there.

“We see great potential in Chinese e-commerce and want to further expand our cooperation with Alibaba,” said a Metro spokesman.

Working with platforms like Alibaba or JD offers a number of advantages for German manufacturers and traders because it’s hard to break into the Chinese market.

“Doing business in China has become more complicated,” said Serge Hoffmann, a retail expert at consultancy Bain & Company who spent seven years working in China.

Chinese customers had become more discerning and self-confident, he said. “Consumers have a good sense of whether a brand is relevant in Europe — and only then will it be attractive for the Chinese as well.”

He said it’s important for firms to conduct targeted marketing that focuses on consumer habits. “For example, social media in China are far more important than in Germany for boosting brand recognition.”

He added that companies must have a precise understanding of customer expectations — and these aren’t only very different from those in Europe, but also vary within China’s gigantic market.

“One has to take a very close look at the market: what can I offer customers that local companies can’t?” said Mr. Burr, the Amazon executive. In e-commerce in particular, there are increasing numbers of fast-growing Chinese brands that are overtaking Western companies in the race for young consumers.

 

Florian Kolf leads a team of reporters covering the retail, consumer goods, luxury and fashion markets. To contact the author: [email protected]