• Chinese company Alibaba has been in Australia for 3 years and now plans to add thousands of retailers to its online stores.
• Expert says the mismatch between Australia and China in payments technology make Alibaba’s penetration of the consumer market difficult.
• Ultra-fast deliveries are unlikely to take off in Australia, like they have in China, due to high labour costs.

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Alibaba has been in Australia since 2016, but you may not have noticed as it’s not at all interested in attracting Australian consumers. Instead, its focus is on providing a platform for Australian businesses to reach Chinese consumers.

Alibaba Australia and New Zealand managing director Maggie Zhou told Business Insider Australia the retail giant is in Australia to “help local businesses access the China market” and to “help Chinese visitors who come here”.

Zhou, who has been with Alibaba for more than 19 years, built the Australian team from scratch after launching in 2016. She said the company’s Australian strategy has been consistent for the last three years and is focused on local retailers selling their products in China.

“We’re here to be closer to Australian [businesses], we want to work with them closely and understand their demands better,” Zhou said.

There are currently 1996 Australian brands on Alibaba’s e-commerce platforms, Tmall and Tmall Global, with another 700 brands from New Zealand. A spokesperson for Alibaba told Business Insider Australia it expects to add another 1000 brands over the next three years.

Australia also ranked as the third most-purchased-from country on Tmall Global in 2017, up from fourth place in 2016.

University of Sydney Business School Associate Professor Barney Tan told Business Insider Australia that Alibaba was being smart in its approach to Australia and aligning itself closely with the Daigou personal shopper market and the wider China-Australia import-export market.

“I can see why they’re interested in Australian producers,” he said. “If you look at the Daigou market as an analogy for the demand for foreign products, it’s huge. Nielsen estimated that there are 100,000 to 200,000 Daigou in Australia.”

Cultural and technical difficulties a barrier to Alibaba in Australia

Tan, an expert in business information systems, has studied Alibaba extensively and said Australia and China are different in a few key areas — such as its high adoption of credit cards and the wide use of US platforms — that made introducing their products to an Australian customer difficult.

He said, in regards to Alibaba’s e-commerce platforms, the Australian market is largely locked up by US companies like Amazon and eBay, which made it difficult for a Chinese competitor to enter the market.

“The market is already attuned to US offerings and there are less cost advantages to serving the Australian market,” he said. “If you asked a typical Australian consumer, the chances are they’d say they go to eBay and Amazon rather than Taobao or Tmall.”

Alibaba’s payment system, Alipay — which can be used for anything from ordering goods, paying for things, sending friends money, or reviewing products — has also not been widely adopted by Australian consumers.

He said China had “never really adopted the credit card” so Alipay had easily filled that void, whereas Australians are both willing to use credit cards and unwilling to use ecosystems like WeChat or Alipay.

“They’re pushing for Alipay and WeChat pay in China but I don’t see that taking off in Australia,” he said. “It would mean we would have to get rid of existing standards to adopt a new system.”

Tan said Alibaba’s strategy in Australia takes this into account. Alipay’s introduction in Australia isn’t about grabbing new business but it is instead about being available where its user base is — in this case, Chinese citizens living in or visiting Australia.

“There is a sizeable Chinese diaspora population. We have a lot of tourists and international students and people who’ve come from China,” he said. “It’s just extending services to this group of people they’ve always been serving.”

Zhou acknowledges the disconnect, saying the Chinese and Australian markets are “largely different” and the company is focused on helping Chinese residents in Australia.

“Many of the taxis in Australia use Alipay for Chinese visitors. In Melbourne, we work with the city council to enable street performers to accept money from Chinese visitors. Many restaurants can use Alipay,” Zhou said.

“Some of the attractions [are] also using this technology to assist more Chinese residents and visitors.”

In a statement, an Alibaba spokesperson told Business Insider Australia there were now more than 10,000 Australian merchants who accepted Alipay. To use Alipay one must have a bank account in China to send funds from.

Alibaba’s magic depends on cheap labour and won’t work in Australia

Zhou said one of the company’s big achievements in the last few years was quick response delivery systems being rolled out in China, which means customers can get their orders in half an hour.

“We’re starting from the new retail model in China, combining both the in-shop and online experience,” she said.

“60 per cent of [new retail consumers in China] shop online using the ‘Freshable’ app that enables those products be delivered within 30 minutes to their door.”

Zhou said Australian products were in high demand in the 140 Freshable stores in China, but there was no plan to roll out “instant retailers” in Australia anytime soon.

“They are just starting. We will explore the opportunity [of an Australian instant retailer] in the future,” she said. “The Australian market is small, many of the retailers are looking outside Australia.”

There’s another reason Alibaba’s success story in China is not going to work in Australia: our wages are just too high and logistics is too expensive.

“There is something underpinning the Chinese e-commerce sector that is absent in Australia: A very affordable logistics network,” Tan said. “They have an army of people delivering packages at an extraordinary low price. Labour laws in Australia make that impossible. They cannot replicate what they’re doing in China in Australia.”

But he said that might not matter if you’re Alibaba anyway, Australia is just too small for the beast of a company to care about too much.

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