Brands spend hundreds of millions of dollars each year trying to figure out what consumers want. Now Alibaba (BABA) is offering to help by vacuuming data up from the legions of people shopping, searching and sharing on its various platforms and providing it to companies eager to create products that will resonate with Chinese consumers.
In recent months, Alibaba has helped Mars Inc. create a candy bar and given Unilever NV (UL) valuable data for a new line of pollution-fighting cosmetics; then the e-commerce giant advised both companies how to market the products. It’s all part of Executive Chairman Jack Ma’s “New Manufacturing” strategy, which he hopes will help define the future of the Chinese economy and cement Alibaba’s place in it.
“Nobody else has this ecosystem where one player has all the pieces together and can put together a single profile of you,” says e-commerce industry expert Ken Leaver. “Alibaba has the ability to use this to get their seller base to create their product, which is a holy grail in e-commerce.”
It’s helpful to think of Alibaba Group Holding Ltd. as Google, Netflix and Amazon all rolled into one—and then some. The Chinese behemoth operates the world’s biggest e-commerce platform with 600 million monthly active users and the country’s biggest online ads business, and hosts a financial transactions platform called Alipay. It also controls the Chinese versions of YouTube and Netflix (Youku) and even a supermarket chain and department store franchise. Alipay’s dominance in mobile payment systems and Alibaba’s retail software also means it can track consumer behavior offline in brick-and-mortar retail locations.
Alibaba’s market research arm, Tmall Innovation Center, can crunch data and show companies what Chinese consumers are seeking but can’t find. “We can see where there are blank spaces and unmet needs in the market,” says Duan Ling, Tmall’s director of brand marketing, who heads the innovation center. Alibaba can also test products in consumers’ newsfeeds and search results, based on their profiles and real-time purchase behavior. It’s like the world’s biggest focus group.
For now, Alibaba is able to sell user data with relative impunity because privacy is less of an issue in China than elsewhere. While the data is anonymous, users can’t opt out if they want to use the company’s platforms and agree to terms and conditions, much the way people using Facebook or Amazon do. Still, Chinese consumers are starting to wake up to—and even resent—Alibaba’s omnipresence.
“The Internet boom reached China later, yet Chinese consumers have embraced it at a faster pace than anyone else,” says Pedro Yip, a retail and consumer goods partner at consultancy Oliver Wyman. “This means that consciousness of digital privacy issues are only just now starting to grow.”
Alibaba’s dominance is also giving some consumer products companies pause. Earlier this year, the Associated Press reported complaints from five major brands that Alibaba had made it harder to find their online storefronts after they refused to sign exclusive partnerships. Unilever and Mars both say Alibaba hasn’t insisted that they cease partnerships with rival JD.com.
Earlier this year, Alibaba data researchers noticed growing demand from urbanites for pollution-fighting, “deep-cleansing” personal care products. Some premium brands already sold cleansers and shampoos designed to strip off pollutants, but there weren’t many mid-priced options.
Unilever acted on this insight and came up with a line of affordable anti-pollution products, starting with a skin cleanser. Its researchers and designers developed 48 different prototypes of the cleaners at different price ranges.
These were shown to users, such as young mothers, on Alibaba’s online malls Taobao and Tmall. When someone tried to buy a prototype, a pop-up message informed them that they were participating in a consumer testing exercise and offered them a voucher for taking part.
Last month, Unilever launched the Purifi line, starting with a skin cleanser based on the purchasing decisions of tens of thousands of those young mothers. A bath gel, wipes and face masks will follow. The entire process of conception, design and testing took Unilever just 6 months with Alibaba’s help, down from the usual 18 months to two years for a new product, says the consumer products giant’s director of data and digital development Susan Ren.
“Alibaba gives us a real environment to test new products,” she says. “Because consumers have no idea that they are taking part in a survey or study, their reactions and purchasing decisions are real. It makes the feedback real, which is a huge advantage in an industry where product innovation is essential, but costly and risky.”
Alibaba’s data trove held revelations for Mars, as well. Turns out the same people who buy a lot of chocolate also like spicy snacks. That prompted the creation of the Spicy Snickers candy bar, which incorporates the Sichuan peppercorn, the source of China’s famous “mala” (numb and spicy) taste. Typically Mars spends two to three years developing a new product; the Spicy Snickers came together in less than one. Even better, the launch helped the China division meet its goal of having new products account for more than 10% of revenue, says Ian Burton, China president of Mars Wrigley Confectionary.
“The age-old tradition is that 90% of innovation fails,” Burton says. “This helps us bring the rate of failure down.”
Burton also says Alibaba’s cross-platform harvesting of data takes some of the guesswork out of marketing. Since a big chunk of shopping will always happen offline, the company is using Alipay and its retail-management software Ling Shou Tong to ferret out insights from the brick-and-mortar world.
“I believe that within 12 months we will be able to see not just by consumer, but by store type and location, what is the perfect product mix for any one store to stock,” Burton says. “This is not a level of consumer insight we can get anywhere else because it does not exist anywhere else.”
Of course, all the consumer insights in the world don’t guarantee a blockbuster. Consumer products that have changed the world are often the result of intuition. “No one told Steve Jobs they need an iPhone,” Yip says. “Consumers can only tell you their problems and needs, but you still need creativity.”