Alibaba’s e-commerce marketplace Taobao is aggressively expanding its direct-to-customer selling platform for bargain-seeking consumers, further escalating its already contentious competition with rival Pinduoduo.
Why it matters: The business model known as customer-to-manufacturer (C2M) powered Pinduoduo’s meteoric rise and has been adopted by rivals like JD.com and Netease’s Yanxuan. Alibaba’s move will further fan the inferno that China’s e-commerce industry has become.
- The defining feature of a C2M model is highly competitive pricing brought about by connecting factories with consumer insights, such as preferences, location, and behaviors. The model has become popular in China, particularly in lower-tier cities, where buyers tend to be more price sensitive.
- Lower-tier cities are winning attention from e-commerce giants, in seek of growth as higher-tier urban markets grow increasingly saturated.
“Stepping up our made-to-order strategy is an ongoing Taobao initiative to diversify product supplies across its ecosystem to meet demand from our consumers and help manufacturers lagging in the digital race use technology to transform their processes.“
—Wang Hai, general manager of Taobao’s C2M Business Unit, in an emailed statement
Details: Alibaba plans over the next three years to transform 1,000 manufacturers into “Super Factories” to reach annual output exceeding RMB 100 million ($14 million) each. It also plans to drive productivity at 10 factory clusters in China to reach at least RMB 10 billion each per year within the same time period.
- To support the sales channel, Taobao formally launched its Taobao Special Offer Edition app. The app, which the company soft-launched in 2018, topped the rankings for the most-downloaded free app on Apple’s China App Store as of publication on Friday.
- Buyers can purchase directly from manufacturers unbranded items from TVs to cookware which are produced to fit consumer preference.
- The C2M model passes consumer data, collected from existing purchases, to upstream manufacturers in real-time, thus accelerating the product development timeline and boosting efficiency.
- In addition to improving flexibility and adaptability in conventional manufacturing, the initiative helps manufacturers to digitize as part of the process, according to Alibaba.
- The initiative will bring 10 billion new orders to factories across China over the three-year time period, according to the statement.
- Alibaba’s financial units will provide capital and liquidity to manufacturers.
Context: Alibaba has implemented a series of structural changes in December in preparation for the ramp-up of the C2M initiative.
- Taobao‘s C2M initiative spans the entire industrial chain from offering consumer insights and research and development suggestions for product development, coordinating raw materials and product inventory management based on precise consumer distribution and preferences, to product marketing.
- JD.com rolled out its C2M unit Jingzao in 2018. The platform now offers products including custom shirts, luggage, towels, and bedding.
- Pinduoduo accused Alibaba of blocking employees’ personal Taobao accounts as competitions between the two e-commerce giants escalate.
Read more: China’s data-based C2M model to drive e-commerce forward