1688 also wants to be the "protagonist" in the cross-border search for growth

After being upgraded to a first-level business of Taotian Group in November last year, 1688 has been given more roles. As the cross-border business line deepens, there are more clues about how 1688's layout is different from Alibaba's overseas layout.

1688 was formerly known as Alibaba's domestic website, which mainly served Chinese suppliers and buyers, provided domestic wholesale trading services, and together with Alibaba's international website, formed Alibaba's strategic layout in the global B2B e-commerce field. After being upgraded to a first-level business of Taotian Group in November last year, 1688 was given more role positioning.

Although 1688 has been involved in cross-border transactions for a long time, it was at the end of last year that it fully upgraded its cross-border business, marked by the launch of the "Xunyuantong" plan, which mainly includes two measures. The first is to provide a cross-border version of the API interface, allowing partners to spread 1688's goods to the world and increase sales channels; the second is to provide AI technology, through the image/word/link search function, to help users quickly complete the price comparison, product selection and other processes.

In the past six months, cross-border business has continued to increase. On May 8, 1688 announced that it would start business cooperation with Mongolian e-commerce platform Shoppy. Mongolian buyers can directly purchase source goods from China through Shoppyhub. The cooperation project provides multiple purchasing methods such as Chinese, English, Mongolian and image search. After placing an order online, buyers are expected to receive the goods within 7-10 days.

At the same time, in order to improve the efficiency of cross-border direct procurement for merchants, Wanlihui (a global e-commerce cross-border payment platform under Ant International) announced that it will further upgrade its cross-border cooperation with 1688.

It is worth mentioning that Yu Chong, who took office as the president of 1688 in 2022, came from Alibaba International Station and has 14 years of cross-border experience. In January this year, Yu Chong mentioned in an interview with the media, "I think the substitute business will have a good 3-5 years, and cross-border business will also have a good 3-5 years."

As the cross-border business line deepens, 1688's layout ideas and how to distinguish them from Alibaba's overseas layout have become more clear. 1688, which has upgraded from a marginal business to a main business, seems to have begun to pursue big and comprehensive.

1. Multiple channels and multiple paths

1688 has always been known as the "source of goods for Chinese e-commerce" in the industry. It helps domestic factories, brands and first-tier wholesalers to introduce buyers. Its core advantage is to control the supply of high-quality factories. In recent years, the distance between factories and consumers has become closer and closer. Specifically, in China, Pinduoduo and live-streaming e-commerce companies have promoted white-label products to the public; abroad, full trusteeship allows factory-type sellers to bypass a series of operating barriers and sell goods overseas.

Based on this, 1688's position in the Taobao system has risen sharply, and it has begun to allow factories and merchants to directly connect with consumers through strategies such as launching 1688 Yanxuan and opening stores on Taobao. Promoting cross-border business at this time is also intended to further leverage the advantages of source supply.

Therefore, the keynote of 1688's cross-border business is not to build from scratch, but to upgrade. In the past operations of 1688, cross-border transactions have occupied a certain proportion, and there have always been cross-border dedicated channels. According to Yu Chong, the 1688 platform has 1 million source manufacturers. From January to November 2023, the number of cross-border registered buyers increased by 76% year-on-year, the number of cross-border registered buyers exceeded 5.94 million, the number of cross-border moving products exceeded 130 million, and the scale of cross-border procurement on the platform was nearly 200 billion yuan.

Another opportunity is that reverse overseas shopping has become increasingly popular in recent years. A number of new service providers have emerged on 1688 to help overseas B-type merchants purchase goods on 1688. In order to optimize the process of selling goods overseas, 1688's upgrade ideas revolve around two levels: model update and technical assistance.

Let’s first look at the overall business chain. According to the official introduction of 1688, after merchants sign up to join 1688 Global Cargo, their products will be displayed on the overseas independent station through the API interface; after overseas buyers generate purchasing needs, the purchasing agents will place orders in a unified manner; merchants will place orders and ship the products to the purchasing agent’s domestic warehouse based on the order information in the background; subsequent processes and costs such as collection, labeling, packing, and shipping are all completed by the purchasing service provider.

(Source: 1688 Cross-border Market Knowledge Base Cross-border White Paper)

The method to achieve the above process is official data open source and AI technology. On the one hand, API is used to connect cross-border cargo pallets, and the number of commodities that can be called is far greater than before. The official interface can also ensure that the buyer's information exchange and payment process are safer and smoother. On the other hand, AI technology is used to optimize translation, search, price comparison, label screening, logistics and other practical links to improve overall efficiency.

In summary, we can see that 1688's cross-border focus is to find growth for existing platform merchants by expanding overseas channels. In terms of form, it is similar to semi-hosting. Merchants only need to register, complete product information, place orders and ship goods, and acquire customers overseas without changing the original business model; in terms of effect, the platform takes the lead in improving product selection efficiency, cargo integration, and ensuring technical and process compliance.

Of course, the outside world is generally concerned about whether 1688's entry into the cross-border e-commerce market will change the existing cross-border e-commerce competition landscape. After all, the platform itself is a channel for many e-commerce merchants to obtain goods. For example, Temu buyers often use 1688 as the standard when determining prices, requiring merchants to supply goods at a price lower than 1688. However, the two are facing different markets, 2B and 2C, and there will be no direct competitive relationship in terms of positioning.

But if compared with platforms that belong to the Alibaba system and are in the same 2B track, the situation is obviously different.

2. Internal horse racing or each doing their own thing

At present, Alibaba's international digital business has a relatively complete business matrix, with Alibaba International Station for corporate customers and AliExpress, Lazada, Trendyol and other platforms for individual consumers. As mentioned above, 1688 is a domestic station corresponding to the international station. At this time, adding cross-border operations inevitably makes people wonder where its necessity lies.

In terms of past positioning alone, there is indeed a difference between 1688 Cross-border and Alibaba International Station, and the key lies in whether they directly face overseas buyers.

Alibaba International Station is a B2B model, where factories directly connect with overseas buyers, and transactions between multiple companies include bulk trade and customized services. 1688 is more like B2B2B, with procurement agents acting as matchmakers between factories and overseas buyers.

In other words, due to the existence of purchasing agents, 1688 Cross-border still competes more within the platform, while Alibaba International Station, which directly faces buyers, can obtain more first-hand market information.

However, as 1688's cross-border related gameplay is further improved, it can be seen that this distinction is not absolutely clear-cut. Take the three newly launched cross-border sourcing solutions as an example. For cross-border purchasing sellers, their purpose is to help overseas small B merchants purchase domestic sources. The platform will use the sourcing API interface to connect the platform products to the small B merchants' own independent station system for product selection.

For overseas small and medium-sized B merchants with direct purchase needs, the most important issue to be solved is the information gap, so the solution focuses on multi-language translation, base map conversion and multi-currency payment. As for the platform's own customers and brand customers, sourcing and supplying hot products may require one-to-one customization of products and negotiation of prices, which will be coordinated by the platform and will not put more operating pressure on merchants.

(Source: 1688 Super Factory Annual Innovation Summit)

First of all, it is obviously not accurate enough to distinguish the two by "the international station is aimed at large customers in traditional B2B international trade, and 1688 focuses more on small and medium-sized retailers and more flexible cross-border procurement". 1688 has also set its sights on large customers with sourcing needs.

Secondly, 1688 is also emphasizing the attractiveness of direct purchases, providing translation, and improving payment and logistics systems, all in order to facilitate overseas buyers to directly connect with 1688. In recent news, the cooperation with Mongolian e-commerce platforms is to allow its users to purchase directly from the source factory, and the upgraded cooperation with Wanlihui also mentioned improving the efficiency of cross-border direct purchases by merchants. Whether or not to purchase on behalf of others no longer seems to be the distinguishing mark between 1688's cross-border and international stations.

In addition, the upgraded purchasing model is similar to the managed model for the C-end, where merchants are only responsible for supplying goods and completing information, and the details of the operation are handled by a third party. In previous analyses of the full managed model, it was also pointed out that the full managed model is particularly beneficial to factory-type merchants. If 1688 Cross-border wants to extend its reach to the C-end, it is not without a way.

Therefore, "New Position" believes that although 1688 Cross-border has a monopoly on the B2B2B track in the past, as its business expands, as long as there is an intersection in the business chain, it has the possibility of competition and cooperation with other cross-border businesses under Alibaba. If we compare the competitiveness of 1688 Cross-border and Alibaba International Station, 1688 Cross-border's advantages in supply and source of goods are self-evident, while Alibaba International Station has been working on global services and buyer resources for a longer time. Resource sharing and business collaboration may be a decision that is more in line with the interests of both parties, but there is no sign of cooperation in the information disclosed so far.

3. Final Thoughts

CEO Yu Chong mentioned the current strategic choices and trend judgments at a summit earlier this year. "Overall, the competition in the consumer Internet is already a red ocean, and the blue ocean may be in the industrial Internet, which connects the consumer end and the industrial end, which is a greater opportunity."

The implication is that 1688, which represents the industrial Internet and source supply, will play a more important role. In the domestic e-commerce business, 1688 has found the keyword "substitute", starting from defining buyers as the first users, small B and ordinary retail buyers are included in the target user vision. Now the transformation of cross-border business has also begun to target a wider customer base and direct buyers. In order to move from behind the scenes to the front stage, 1688 is unwilling to miss any incremental space.

However, it is not a straight-forward process to transform from pure B-type e-commerce to comprehensive development. Basic skills such as how to identify buyer needs and how to allocate goods are needed. In addition, 2B and 2C have great differences in return rates and customer base maintenance methods. During the transformation process, it is also necessary to balance the differences in operating details between many models.

From a more macro perspective, Alibaba's e-commerce companies have been making saturation offensive moves from time to time. For example, with the existing AliExpress and international sites, 1688 has also begun to increase its cross-border operations. 1688 itself has begun to explore strict selection and membership businesses on its own platform, and has also settled in Taobao and opened a dedicated store.

The purpose of integrating existing resources is to form alliances, but the premise is to clarify the division of labor and positioning of each party. Just like the original idea of ​​Taobao Factory was to connect factories and consumers and provide cost-effective products, but in practice, some traditional Taobao stores lacked strong supply chain support and suffered a lot of impact.

Today, 1688 faces some questions about its positioning in its domestic and overseas strategic advancement. As its businesses become more and more overlapping, competition and cooperation may only be a fine line away.

*The title image and accompanying images in the article are from the Internet.