AliExpress: Is Amazon under Siege in Europe?
By: Jan Dominik Gunkel
Tags: Strategy, Ecommerce, Amazon, Aliexpress, Marketing

AliExpress: Is Amazon under Siege in Europe?

AliExpress is attacking the uncontested market leader in Europe. Brands and sellers benefit by listing and advertising on the platform.

While most of the Covid-impacted Europeans have been home-shopping on Amazon, AliExpress has continued to silently yet aggressively grow into the market. AliExpress is a subsidiary of the Chinese behemoth, Alibaba Group. On the surface its marketplace allows consumers to buy mainly cheap Chinese merchandise. Its appearance is colorful and noisy to unaccustomed eyes.

There is more to the story. Up and coming Chinese brands, like Xiaomi, offer what might be called a brand experience to European taste. Products of first European brands that sell direct, like Kimbo Coffee in Italy and more than 10,000 mostly smaller Spanish companies, are selling on AliExpress. [1]

A lot seems like this is just an MVP, a minimum viable product, by a startup: Only sellers registered in Spain, Italy, France, Russia, or Turkey can list their products. Most features for merchants are still free or very cheap. Functionality is obviously not fine-tuned to the European consumer. Rather the lowest possible price is mostly the core differentiator. Consumers have to tolerate longer shipping times and the somewhat awkward user experience. Consequently, AliXBlog, features numerous articles on getting the best prices, cheapest products, and how to deal with issues of the platform. [2]

But when you hear there is a partnership with El Corte Inglés, the gigantic Spanish department store chain, this might get us thinking.

“Collaboration with AliExpress is a lever to boost online sales, and especially expansion in the international market. For its part, AliExpress will be able to take advantage of our logistics infrastructure in Spain.” — Eduardo Sotillos, Purchasing Director at El Corte Inglés [3]

More than a startup

Sales figures for AliExpress are hard to come by. Typical statistics only show Alibaba Group. This only gives a sense of the deep pockets behind AliExpress but no clue as to how big it really is.

Analysts expect AliExpress sales in Russia at $6bn in 2020. [4] It has been the number one e-commerce site in Russia for years. In November 2019, AliExpress was number two in Spain. [5] We know that compares to $2.6bn sales on amazon.es in Spain 2018. [6] Note, the two countries have about a similar GDP, although Russia has 3x more inhabitants.

In July 2019 AliExpress was already the number three marketplace in Italy — only weeks after allowing Italian companies to sell on its platform for the first time. Amazon, the number one, was almost 20 times as big. [7] Even without newer figures, it is clear AliExpress has left a considerable footprint in Italy in the meantime.

Disruption at work

Economically speaking, we are facing a disruption scenario. [8] AliExpress targets people who cannot afford to be choosy. More than 60% of its customers are under 35 years old. [9] They do not have a lot of money — a superficially unattractive target group. But these individuals will put up with long delivery times, an unknown platform, difficult search, etc. As AliExpress is gaining a foothold, it is learning about the market, improving the platform, and drawing more brands that are excited about the target group.

AliExpress has chosen the countries in Europe which are still expecting stronger e-commerce growth rather than those with a higher e-commerce penetration, such as Germany and the U.K. [10] It is always easier to grow in an expanding market. This is only the opening act.

“Given the popularity of the AliExpress marketplace in Spain, the Alibaba Group is using Spain as the jumping-off point to grow its marketplace in Western Europe.” — Peter Vahle, forecasting analyst at eMarketer. [11]

Curtains on the second act are already being lifted. E-commerce decision-makers at major European brands said that AliExpress is in talks with them to bring them onto the platform. Similarly, an AliExpress Russia spokesperson said it wanted to increase the share of local sellers to 50% by 2022–2023. And it is working to cut delivery times from China from 20 to 10 days. [4]

Initially, all this is likely not a (very) profitable endeavor for AliExpress, but the company can fight this. It has resources. Alibaba Group owns 58.2% of all retail e-commerce in China [12], contributing $49bn to its $75bn overall sales in fiscal 2020 (ending March 2020). [13] Alibaba has stated the intent to invest $15bn into its global expansion within the next 5 years. [14]

More important they are used to a competitive market, while Amazon is used to be the leader. A leader with a dent in its pride, as Amazon had to withdraw from China in 2019. [15]

“Our ambition is to always be the leader, although we do not see this as a competition. We believe the market is large enough for there to be two, three or more large companies of ecommerce.” — William Wang, CEO of AliExpress in Spain and Portugal [5]

The real play will be on sooner than we think. AliExpress has built access to a highly cost-conscious consumer base across Europe, it is adding major brands and driving higher spending to the platform. At the same time, the platform is continuously innovating and gradually gearing more towards local tastes.

Wang Mingqiang, President of AliExpress announced she intends to grow its global seller base 14fold until 2024. Expect her to follow through. [9]

The Perfect 10: AliExpress marketing

To get your products on stage and to turn the spotlights on, AliExpress offers a growing number of marketing tools. They show their heritage in Chinese e-commerce culture. Therefore, they look and feel different to Amazon and other familiar Western marketplaces. While this presents an entry barrier to some, it is also a great opportunity for everyone willing to try. It is easy.

1. Free Storefront

In China brands usually do not have their own online shops but rely on trusted marketplaces, e.g., Tmall or TaoBao. Like malls, some of those marketplaces offer individual stores.

AliExpress has a similar offering. Selling your products on AliExpress, therefore, is a lot more like creating your own website than just listing products. While this certainly means more effort, it also allows a brand to display itself. On AliExpress a brand is more than an item on a shelf. It is a message, value, content, and lastly, solution, i.e., product.