NetEase Kaola to open first factory store as it pushes further offline

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NetEase Kaola’s “factory store” in China’s eastern city of Hangzhou (Image credit: NetEase).

E-commerce platform NetEase Kaola on Friday announced that it will open its first factory-to-consumer (F2C) store in Hangzhou over the weekend, underscoring the online retailer’s push into offline.

Kaola had initially launched the F2C initiative in September 2017 on its cross-border e-commerce platform under the same name, offering goods direct from factories to consumers. The factory store will sell more than 20,000 lifestyle products from 400 global manufacturers.

It plans to open 12 brick-and-mortar factory stores in major Chinese cities including Shenzhen and Wuhan within the year, said the company. In January, it announced that it would open 15 flagship stores featuring imported cosmetics at competitive prices by end-year.

“A physical shop is a showcase for manufacturers to enhance the image of their brands with a live experience for the consumer,” (our translation) Hu Ran, head of Kaola’s F2C business said in an announcement sent to TechNode. So far it has formed partnerships with more than 400 factories from China and around the world, selling products from Australian cooking oil to shampoo from Israel, said the company.

NetEase’s cross-border e-commerce platform is betting on the offline retail market with its dual-store strategy. Flagship stores will sell higher-end imported goods at lower prices including children’s products and cosmetics from notable brands such as Estee Lauder and Lancome. The new factory stores, however, are more comparable to the lifestyle retailer Miniso, targeting consumers with lower price-point goods.

Kaola is not the only online retailer that is betting on the price-competitive direct sales model by allying with less-recognized brands. Tmall aims to incubate 100 new brands with the goal of RMB 1 billion ($149 million) sales revenue each over the next three years, said Jiang Fan, the new president of the Alibaba’s Tmall business-to-consumer (B2C) marketplace on Thursday.

Pinduoduo said in December it plans to support 1,000 small- and medium-sized local manufacturers to market their products, reported Tencent Tech. Xinbao, a Guangdong-based original equipment manufacturer (OEM) sold 11,000 units of its new electric meat grinder in the first 24 hours, and 110,000 users watched the manufacturing process using a live-streaming function on Pinduoduo, according to the company.