Kaola, Alibaba’s cross-border e-commerce platform, is undergoing a major shift to a membership-based model as it seeks to become China’s Costco for online buyers.

Why it matters: Kaola’s move to adopt a membership-based model is aimed at driving user engagement and retention. The company faced slow growth before being aquired by Alibaba.

  • The upgrade also highlights Alibaba’s efforts to explore varied business models and differentiate product lines in the same sector.
  • Kaola, along with its Alibaba-owned Taobao Global, is a source of stiff competition for other platforms in the cross-border e-commerce sector, including JD’s cross-border e-commerce unit, VIP.com, and Suning Global.
  • Kaola’s focus on membership will heat up its rivalry with foreign counterparts like the US’ Costco and Sam’s Club, which are also building their online presence to attract affluent Chinese shoppers. 

Details: Kaola will continue to focus on cross-border e-commerce, but adopt a membership model similar to Costco, the company announced on Tuesday.

  • Priced at RMB 279 per year (around $40), Kaola’s members will gain access to premium discounts, lower delivery fees, and support from multilingual shopping assistants.
  • Regular buyers can still purchase goods on the platform but will be unable to access the premium features.
  • Kaola has been preparing for the shift since the end of April, when it began trial operations of the new membership feature.
  • After the change, Kaola will refocus its product listings, supply chain, and merchant selection based on the demands of members to offer more cost-effective and exclusive products, the company said.

Context: Alibaba’s Tmall Global and Kaola controlled more than half of China’s cross-border e-commerce market in the first quarter of 2019, according to data from research firm Analysys.

  • Alibaba became a principal player in the country’s cross-border market after acquiring Kaola from gaming giant NetEase for $2 billion in September last year.
  • China’s cross-border e-commerce sales are expected to drop 4.6% year on year to RMB 10.3 trillion ($1.5 trillion) form RMB 10.8 trillion in 2019 as a result of the Covid-19 pandemic, according to report from research institute Iresearch.
  • During the 2018 China Import Expo, Alibaba pledged to import $200 billion of foreign goods by 2023. At the same event, Kaola, which was still owned by NetEase, said it would import RMB 20 billion worth of overseas products.

Emma Lee

Emma Lee is Shanghai-based tech writer, covering startups and tech happenings in China and Asia in general. We are looking for stories related to tech and China. Reach her at lixin@technode.com.