Former Alibaba P8 reveals the past of Taobao Private Domain

From "omni-channel platform" to "smart store" and "flagship store 2.0", what changes has Alibaba's private domain strategy undergone? This article reviews Alibaba's early attempts and explorations in the private domain field, as well as the in-depth revelation of this history by Siyuan (pseudonym), a former Alibaba P8 employee.

Some time ago, the news that Taobao teamed up with DingTalk to develop private domains caused heated discussions in the industry.

Nowadays, when we talk about private domain, many people may not know that the term private domain first came from Alibaba, and many of the private domain concepts and gameplay that we are familiar with now have actually been tried by Alibaba a long time ago.

Alibaba’s private domain began as early as 2016. From the early “omni-channel platform” to the later “smart stores” and “flagship store 2.0”, Alibaba has been trying to help brands break through the barriers between online and offline and realize true public and private domain linkage.

As for why Qiwei rose later, an important reason was due to the external environment challenges that Alibaba faced at the time, especially the rapid growth of Pinduoduo, which directly threatened the basic foundation of the Taobao system, causing a change in the attitude of senior management towards new retail, which ultimately led to the suspension of Tmall's new retail project and ultimately prevented these advanced attempts from continuing.

"If we had persisted then, we would probably have no business now. Today, when Taobao and DingTalk try to enter the private domain market again, it seems that they have missed the best opportunity." said Siyuan (a pseudonym to protect the other party's privacy), a former Alibaba P8.

He was deeply involved in the construction of Alibaba's public and private domains, and still remembers the past vividly, so Jianshi simply made an appointment with him and asked him to talk about this story with us.

01 The reason for the team’s disbandment

Jianshi: The last time we talked about DingTalk and Tmall joining forces to do private domain, you said that many of the things that Qiwei is doing have already been tried by Alibaba?

Siyuan: Yes, I have done all of them.

We called it the new retail platform at that time. The core of the private domain was the current SCRM shopping guide assistant and store live broadcast. Moreover, SCRM and the brand merchants' online CRM and offline CRM can be connected based on mobile phone numbers.

DingTalk is equivalent to the current corporate WeChat. We push DingTalk and SCRM shopping guide assistant to merchants for free. As of the beginning of 2019, we have promoted it to more than 200,000 stores in five major industries on Tmall, and completed the flow of millions of users to DingTalk. On average, each store, including the store manager, has at least several employees who have installed DingTalk shopping guides. At the same time, the brand side, including sales communities, regions, headquarters marketing and sales departments, and direct-operated or brand franchise channel stores are all fully involved.

The only regret is that Tmall New Retail was not connected with the anchor side of Taobao Live at that time. New Retail is based on the decentralized store broadcast model of brand stores, rather than brand-centralized live broadcast. Decentralized store broadcast does not have as much traffic as centralized platforms such as Taobao Live, Douyin, and Video Account, and Taobao Live mainly supports top KOLs across multiple categories, not just single-brand KOLs or brand IPs.

Jianshi: It’s actually quite interesting that the term “private domain” also originated from Alibaba.

Siyuan: I came from Alibaba, and the concept of omni-domain was proposed in 2017. Real omni-domain marketing also started from Alibaba.

In 2018, we had the flagship store 2.0 model of the brand official flag, which opened up the global membership operation link between the public domain of e-commerce and the private domain of stores. In addition to selling goods or services in the flagship store, every merchant participating in the new retail can also use the Taobao applet and Alipay applet based on the flagship store as the store landing page and use the LBS near-field gameplay to sell goods.

When users open the store H5 page at the banner location in Flagship Store 2.0, they can see the store LBS, store shopping guide and store location nearest to them. This is already the logic of the private domain.

The merchants and stores used DingTalk and SCRM shopping guide assistant. After users joined the brand membership, DingTalk could match the nearest store to the new members based on LBS, and add them to DingTalk and SCRM shopping guide assistant. This closed loop was already very mature at the time, and there were many brand merchants and stores that had been opened, so it was common for us to work until the early morning.

Jianshi: Then why did Tencent succeed in this regard later?

Siyuan: Our team was later disbanded and the new retail project was stopped because the decision-makers lacked confidence at the time. The reason behind this was that after June 18, 2019, Pinduoduo's rapid growth directly threatened the basic foundation of the Taotian system.

They were worried that Taobao and Tmall would be overtaken in terms of traffic. With traffic, Pinduoduo could start brand upgrades, directly threatening Tmall's base. Alibaba's core business is e-commerce, and it is Tmall's merchant brand investment that is the top management's biggest worry. Therefore, they decided to shift their focus, merge Taobao and Tmall, and focus on online, especially Taobao Factory, Tiantian Specials, and Juhuasuan. But doing so would give up the right to coordinate new retail. From the perspective of new retail, online e-commerce is indeed more efficient.

So later we focused our energy on fighting against Taobao’s competitors. Alibaba has different competitors every year. In 2017, it was JD.com, and in 2018 it was the WeChat system, especially WeChat for Business, service accounts, subscription accounts, mini programs, WeChat Pay, etc. At that time, WeChat for Business was still in version 2.0, and the traffic of service accounts was also very large, and it had not been folded like it is now; in 2019, the competitor was Pinduoduo.

Jianshi: Why did you consider WeChat for Business as a competitor in 2017 and 2018?

Siyuan: Because of the natural connection between WeChat and WeChat for Business, we are worried that WeChat for Business will have a huge traffic pool and will realize large-scale commercial scenarios in the future. At that time, WeChat's micro-business had a trough period. Although the marketing volume based on individual WeChat groups and mini-programs was a bit shallow at that time, we expected that the current private domain e-commerce operation scenario might appear in the future.

Jianshi: Private domain operation scenarios based on enterprise WeChat?

Siyuan: Yes. Because WeChat has a huge amount of traffic, with 1.2 billion DAU, which is larger than Alipay’s traffic. These are two different ecosystems.

When WeChat QR code scanning payment was introduced in stores, it had a huge impact on Alipay. When we were discussing cooperation with Alipay, their offline market share was declining. Alipay's online traffic was still very strong at the time, because the entire Taobao ecosystem only allowed Alipay payments, but in the offline payment system, WeChat's offline payment share was close to Alipay, so we were able to reach a cross-group cooperation at the time because Alipay also faced this problem.

02 Ali’s Private Domain History

Jianshi: Can you review the story of when your team first started working in the private domain?

Siyuan: Tmall Private Domain actually existed before I joined Alibaba, starting in 2016. At first, it was the brand “Weitao”, which was at the center of the Taobao mobile app, but due to the low opening rate, it was taken offline after 618 in 2017.

In 2017, unlike the original three-way business of the merchant platform, namely Membership, Product and Order, Tmall fully promoted the OMO omni-channel business for brands and channel merchants (customized the OMS order system on the Tmall platform and promoted the current Alibaba Cloud Jushita business, one of Alibaba Cloud's first truly profitable businesses).

Our core strategy at the time was to enable brand stores to sell goods, whether directly sold or distributed through channels, and transform online and offline store delivery and store pickup to store and home delivery business scenarios. The platform fully promoted omni-channel business, mainly to solve the anxiety of competition with JD.com, especially the problem of delivery timeliness, but it did not help much in enabling the brand's full-domain operations.

In addition, the Tmall merchants originally used the "Qianniu" APP, but it was essentially just an e-commerce customer service chat tool, and could not be divided according to the brand's actual offline retail system, causing great inconvenience. Later, the Qianniu team moved to Taobao as a whole, and DingTalk also had its own needs at the time. As a B-side chat tool, it needed more application scenarios to promote it. Therefore, the cooperation with DingTalk was based on the fact that DingTalk could be divided according to the actual offline organization of retail enterprises. Therefore, brand merchants later also embraced the switch to the new retail platform.

So in 2017, we hit it off with DingTalk and decided to replace Qianniu with DingTalk and integrate DingTalk with Taobao and Alipay. Since Taobao and Alipay are two different systems, we implemented a dual-card membership system to solve the problems of different membership levels and points systems under different systems.

Jianshi: What else did you do after that?

Siyuan: In fact, the real new retail started in the second half of 2017. We call it the digital solution of brand smart stores, that is, the operation of the new retail platform. At that time, the Tmall private domain project was still confidential internally, and it was called "Tian Di Hui" (because Alibaba has a knight culture).

The core strategy is to establish a brand-based global (public-private domain linkage) operating system, set up brand accounts in both Taobao and Alipay, and completely replace the previous “Weitao” logic based on brand customer service, similar to WeChat’s service account and subscription account. A special position is set up in the upper right corner of Taobao Mobile to display brand accounts (now removed).

We have connected the brand code, payment code and merchant membership code, realizing the integration of three codes. Merchants can connect the Taobao platform and their own membership system (online e-commerce CRM, or two sets of online and offline CEM). For merchants who have connected the global CRM membership system, the key is whether their stores can identify and implement changes in membership rights through the POS system (the POS system has multiple functions, in addition to product selection, price and coupon selection, and payment functions, the more critical one is the identification of the membership system).

The core of the new retail business is to achieve the linkage between the public and private domains of the brand. At that time, Alibaba Taobao's online retail reached 3 trillion yuan, and the entire domestic retail system had reached a scale of 30 trillion yuan.

For the public domain of the platform, Alibaba's core demand is how to achieve penetration into the entire domestic retail system and increase the GMV of digital transactions, so that consumers can experience and consume in any scenario, whether online or offline, on public platforms or in the private domain of brand merchants. Therefore, the Taotian platform needs brands or channel distributors to actively reach consumers (mobile merchants rather than sedentary merchants) through brand multi-level membership operations and store shopping guides, so that consumers can consume after experiencing in any venue, and recall and repurchase after leaving the store after a single purchase. At the same time, the offline user consumption habit data is combined with the online to realize an omni-channel membership system and operation.

During the Double 11 Shopping Festival in 2017, we only conducted small-scale trials with some leading brands that were willing to cooperate. Starting in April 2018, Tmall New Retail began to replicate and operate on a large scale. During the 618 Shopping Festival and Double 11 Shopping Festival in 2018, the platform invested a lot, and A100 star brand Starbucks also joined at that time. At that time, we cooperated very closely with merchants and often worked together until late at night.

Jianshi: What are the results of the trial with leading brands?

Siyuan: The brand has achieved very good results through full-area operation and exposure on the new retail platform.

Here are a few examples:

The first one is Lin Qingxuan. During the Double Eleven period in 2017, an ordinary store in Shanghai restocked its stock three times in one day, and the entire shelf was sold out. The shopping guide girl later cried with excitement.

The second one is the Laiyifen store in the Alibaba Orange Club. Because most Alibaba employees and residents in the surrounding communities like to eat nuts and snacks, the sales of this store on Double Eleven increased more than 60 times. The shelves were sold out several times because customers waited in long lines only to be told that the products were out of stock and the coupons could not be redeemed. As a result, our team received many customer complaints.

The third is Starbucks. Due to the launch of the quick ordering scenario before arriving at the store, the new retail's after-store redemption of Taotian coupons, Alipay red envelopes, and brand merchants' own coupons and gifts and discounts, as well as home delivery of Ele.me Fengniao delivery and Hema delivery, the average store traffic transaction on Double Eleven that year increased by nearly 3 times.

Jianshi: So your experimental results are quite good.

Siyuan: Yes. But the problem is that this sales surge is only limited to large-scale promotional activities, because large-scale promotions have a water storage effect. During normal non-promotional periods, the effect is not so obvious.

The actual operating results of the stores are extremely dependent on the operating capabilities of the brand or channel distributors. Since private domain operations had not yet taken shape at the time and online e-commerce was still the mainstream, the data after the big promotion was ugly and no sustained explosive growth was achieved.

Jianshi: When did your team disband?

Siyuan: After Double Eleven in 2019, in fact, after June 18 in 2019, our R&D and technical teams were transferred away, and all our Double Eleven product plans for that year were postponed. After Double Eleven in 2019, we really could not continue.

Because the senior management at that time was mainly focused on pure online operation systems and corresponding scenarios such as Taobao Live, Taobao Specials and Taobao Factory, and considering that the efficiency of online e-commerce is indeed high, Alibaba overturned the entire operation system of Taobao New Retail.

Now, unless the online e-commerce operation of your category is weak, you may rely more on the brand's own private domain operation. However, for apparel, FMCG fast-moving consumer goods, including durable consumer goods such as consumer electronics, home furnishings and automobiles, the largest online base is still on the third-party public domain e-commerce platform, because it has a higher conversion efficiency in achieving consumer purchases and repeat purchases.

03 Taobao DingTalk has missed the private domain bonus

Jianshi: Taobao DingTalk is now doing private domain business. Has it missed the bonus period?

Siyuan: I think we missed it. First of all, after reviewing with merchants after Double Eleven in 2019, many merchants said that our model was very good and hoped to continue to iterate more scenarios and digital marketing methods based on industry categories, so it was indeed a bonus period, but now brand private domain operations based on WeChat have become mainstream.

Jianshi: Looking at what you have done before, can you be considered a veteran in private domain operations such as WeMall and Youzan?

Siyuan: Of course, because they basically copied the digital SaaS products and operating methodology of Taobao New Retail. The workload we put in at Alibaba in half a year was almost equivalent to the workload of external service providers in one to one and a half years now. This was because Alibaba did not consider the cost of investment at that time, and just spent money first and then worked on it. Ordinary SaaS vendors could not do that.

However, when I reviewed Tmall's new retail operations and product system over the past three years, I found that three aspects were not done well.

First, a complex membership and operation system based on multiple brands has not been established. Most brands have few directly-operated stores or the proportion is very low. Most of them are channel distributors or brand-authorized stores, and these channel stores often operate multiple brands in the form of collection stores.

In this business model, the store represents multiple brands and forms regional agencies. This involves a question, namely how to convert C-end users into fans and members of this type of multi-brand collection store, and after facilitating the first order of a single brand, realize cross-selling conversion of related multiple brands, and how to achieve repurchase of multiple brands, and the fees and commission systems involved are different.

Secondly, there are two ways to share commissions between brand channels and shopping guides. One way is for the brand to collect all payments first, and then share the commissions and accounts to the benefits of each channel; the other way requires that after the C-end transaction is completed, the commission and accounts to the store end should be calculated and realized immediately on T+1 or even T+0. The platform-side product development workload of this operating system is very large, so it was not finally realized. However, except for the commission and accounts sharing system that has not been fully completed, we have established the points system and incentive system for shopping guides, and the effect was still good during the Double Eleven period in 2019.

Third, the cloud store system based on store private transactions was established too late and was not really put into operation. Cloud stores only invested a dozen pilot brand merchants during the Double Eleven period in 2019, which ultimately led to a short-lived success. It is a product developed after 618 in 2019. Based on the store's own product system, in addition to the pallet structure put on the shelves by the brand, it also allows stores to set up single store SKUs and prices according to their own needs. This scenario is particularly suitable for the collection store model because their marketing is global and not limited to specific brands.

From an operational perspective, it is definitely the brand that actively promotes channel distributors, rather than channel collection stores. We don’t have that much manpower to conduct business development store by store. Large brand collection stores like Sephora and Watsons are still a minority, and most, such as maternal and child stores, are regional chain collection stores.

Jianshi: Among the things that service providers are currently doing, what are some of the things that you had already done at that time?

Siyuan: For example, CDP, which we called Data Bank at the time, was divided into two versions: pure e-commerce and new retail. It is the predecessor of Antelope’s core product. There is also SCRM, which is similar to our new retail workbench product at the time.

If we had continued, there would be no place for WeChat Enterprise. At that time, Alibaba gave away everything for free, including DingTalk and SCRM smart shopping guide. If we had continued, WeChat Enterprise would not have been able to "get off the ground". Moreover, Alibaba also developed in-depth in the industry, such as Taobao New Manufacturing (now Xunxi or Rhino Cloud Manufacturing), began to focus on the efficiency of the supply chain, and matched people with goods (such as live proofing by KOL or Internet celebrity designers to pre-sale bulk delivery), realizing C2M in the non-haute couture industry, and connecting the design and production and sales collaboration of the supply chain backend and the marketing end through DingTalk. The entire industry chain is on DingTalk and it is free.

Jianshi: How many years have you been at Alibaba?

Siyuan: Three and a half years were the most glorious four years at Alibaba. During the less than four years I was at Alibaba, I felt very tired every day. One year at Alibaba was really like three years in the real world (996 or even 907, lol).

Jianshi: The matter ended just like that at that time. Was there any other reason?

Siyuan: If Alibaba had retained Tmall's new retail business and integrated various business lines to focus on core scenarios, it wouldn't have ended up like this. Previously, Alibaba's overall new retail business was too extensive, with ten armies rushing forward together without focusing. Nothing of real value was left, which is the most regrettable thing.

Jianshi: You said earlier that if you had persisted, Qiwei would have no chance, but Qiwei has indeed grown rapidly with the support of WeChat. Even if you had continued at that time, it would have been difficult for DingTalk to reach the size of Qiwei?

Siyuan: From 2017 to now, the biggest difference between the public and private domain operations of the Tencent system and the Alibaba system is that the huge traffic is not a field with direct closed-loop transactions with brands as the main goal, but more of an indirect related transaction generated on the basis of emotions and trust between people.

By 2019, Taotian Group's new retail people, goods and places had evolved into a three-dimensional brand marketing with flagship store 2.0 in the entire domain (Taotian public domain + LBS cloud store private domain) and omni-channel (online and offline home and store). During its heyday, the purchase decision-making chain of Taotian for C-end users was shorter, and the data from both the public domain centralized and private domain decentralized fields provided a more accurate portrait of C-end users.

Jianshi: You mentioned before that Taotian basically has a competitor every year. Who do you think is your competitor this year?

Siyuan: I think Alibaba’s core competitor is itself. As Mr. Ma (Jack Ma) said, external competitors are not real rivals. I am still optimistic about Alibaba’s future.