Alibaba wants its 693 million users to become dropshippers

Alibaba has rolled out a new function in its Taobao app called Taoxiaopu, allowing its 693 million annual active users to set up stores that list other merchants’ goods, with sales yielding commission fees, 36Kr reported on Thursday.

Photo credit: claudiodivizia / 123RF

At the moment, there are no fees for using Taoxiaopu. Alibaba sources merchandise from suppliers, placing goods made by brands like L’Oreal and Estée Lauder on marketplaces like Tmall. The company is also responsible for shipments of goods placed via Taoxiaopu. In essence, Taoxiaopu enables dropshipping, a practice where retailers keep no physical stock and transfer orders to manufacturers or wholesalers.

Through Taoxiaopu, Alibaba is leveraging users’ social contacts to boost transactions. People who set up their own stores through the new feature first select goods sourced by Alibaba, then recommend them to contacts through social media channels like WeChat. Commission payout varies. For example, a 5 kilogram box of apples priced at 28.90 yuan (US$4) yields a cut of 5.20 yuan (less than a dollar).

Taoxiaopu is gamified, with sellers separated into tiers. New sellers start by being on a “trial” basis, and have 30 products to stock their online shops with, ranging from fruits to cosmetics. If they secure five transactions, then they become an “L1” seller and gain access to more than 10,000 products.

Taobao initiated a trial run for Taoxiaopu in April 2019, testing the feature with a small group of users. It now has a standalone app that has acquired nearly 1 million users, half of which are from China’s smaller cities, according to Chinese media outlet E-commerce Online. Taoxiaopu’s introductory text says that its platform empowers average people in entrepreneurship and helps suppliers cut their operational costs.

Though Taoxiaopu is a new feature in Alibaba’s ecommerce network, it is similar to existing social ecommerce players such as Yunji and Beidian, both of which are membership-based social commerce companies based in Hangzhou, which is also home to Alibaba. Yunji and Beidian reward users who facilitate new sign-ups.

Aside from maintaining the group-buying feature Juhuasuan, Alibaba is utilizing its massive user count to fend off social ecommerce player Pinduoduo, which has 536.3 million annual active buyers, according to Li Chengdong, a Dolphin Thinktank ecommerce analyst who spoke to KrAsia on Thursday. However, Li pointed out that Taoxiaopu may have come too late to be effective.

This report was first published on KrAsia.