Cowboys at 15 cents? This is Taote, Alibaba’s weapon to revolutionize retail

“We offer jeans for one yuan (14 cents) and free shipping for the week ‘Made in China’.” In this way, Taote, a subsidiary of Alibaba announced a catalog of one hundred products during this week that they will only cost 14 cents for people living in China. This is the result of a bet that the group has been working on for more than three years and that can mark a before and after in the world of retail. Create ultra savings services that directly connect factories with consumers, eliminating any intermediary, including brands.

This trend is consolidating in China in recent months fueled by the Alibaba subsidiary, dedicated to this area. The project has shown spectacular growth in record time and is launching aggressive pricing campaigns never seen before. This phenomenon arises in the heat of the competition of the Chinese e-commerce giant with its counterpart Pinduoduo, which has recently become the number one in China by users. At Alibaba they want to avoid at all costs that the company snatches more market share in their own territory and this race has led to them looking for new formulas to offer low prices.

Taote is a project that has been active since 2018. Until 2020 it was only a very small branch within its application to connect factories with stores, Taobao. In 2020 they decided to give it a main role in their business structure and, since then, it is now, in 2021, when that effort has been translated into numbers. Last quarter it achieved 40 million new users, reaching the figure of 200 million in just one year. It has gone from being an undetectable project in the group’s accounts to being an important pillar of its results in China, where it accounts for more than a fifth of its clients (it has 912 million in total).

The mechanism is simple, users create an account in Taote and place an order. This reaches the factories directly, which send their stock directly to the customer through the infrastructure created by Alibaba. They enter more this way than with their orders from large retailers (who skip this process) or, at least, they manage to get rid of products that see complicated output and that they do not want to have in stock. For the client the benefits are obvious. Levis jeans in China cost about 410 yuan (54 euros) and with this system, this same product (not from this brand) can be obtained for only 1 yuan (14 cents).

Outside of the latter case with jeans, the annual increase in sales of wet wipes of 60% stands out. From the application they sell a large package for three yuan (40 cents). Through other platforms this product exceeds 20 euros. Regarding the sectors in which it operates, the factory direct sales firm has specialized in cleaning, small appliances, clothing and beauty. At the moment it has more than 2 million factories that sell through its website.

The growth of this business system may represent a paradigm shift in the retail sector. Although the concept already existed in the next few years, dynamics such as those seen in China could be exported to the whole world and especially to Europe and the US, where competition grows between marketplace like Amazon and more and more companies are launching into e-commerce.

You can reach Spain

Experts from the retail sector confirm that this business idea will, over time, cross the borders of the Asian market and land on European and American soil. Despite this, they believe that the entry of this factory sales model will have very different conditions to those it is presenting so far, because the Chinese market and its companies have a very different structure from that in countries like Spain.

“Without a doubt the arrival of products like Taote It will happen“explains Laureano Turienzo, president of the Spanish Retail Association (AER), which includes professionals from the sector of firms such as Fnac, Cinesa or Primor.” The question is in what dimensions it will reach us because here retailers will maintain a very large weight and brands like Nike won’t skip the current chain to sell that way. The change that they do detect in large groups such as Inditex is to create their own sales websites, at prices similar to those in the market, “which is what they are doing right now.”

“Most likely these types of formulas will apply to startups”

However, from AER they defend that “it is most likely that these formulas will be applied to new companies that want to take advantage of 100% of their production“. All this will mean that” of course it will not be replicable at the prices that are being seen there “, but a significant price improvement will be seen in the (probably near) future through M2C (Manufactory to Client) applications. .

However, Turienzo has been surprised by the rapid evolution that Taote has marked. “In a single year have passed from zero to 200 million users“He emphasizes that it is an unprecedented promotion and that it is justified because” it is the only weapon that Alibaba has to avoid retreating in China from Pinduoduo. “

In addition, he argues that the arrival of this new approach, although it will partially change the retail landscape, will not affect stores beyond the current development of online commerce. “We believe that in the coming years there will be more stores than before, but that they will be planned in a different way.” The expert defends that more than a window to the products, these will act as a place where the brand itself can be sold through experiences and that it will serve many clients for “approach the purchase in a different way“In this sense, he highlights, as an example, the rise of ultra-specialized supermarkets in organic products.

In any case, everything seems to indicate that a change is brewing in China that will shake retail from top to bottom. The Taote experience it opens the door for wholesale trade to become another option for buyers and for factories themselves to be sellers, with historic price reductions for the consumer.