Text | City Elephant Author | Wen Changlong, Editor | Ming Fei
“The Ali campus is full of posters.”
“S-level project, everyone is all in.”
In early August, some social platforms sparked a heated discussion about Taobao’s move. This plan is actually the “Global Free Shipping Plan for Large Clothing” recently launched by Taobao and Alibaba International, a cross-border service specially customized for clothing merchants.
According to the plan, participating merchants can not only sell to overseas Taobao users through Taobao Overseas Edition, but also sell to multiple markets around the world through AliExpress and Lazada. Merchants not only retain the right to set prices and goods, but also do not need to deal with cumbersome cross-border logistics. After the order is generated, merchants only need to send the goods to the domestic shipping warehouse and receive payment upon arrival.
The core highlight of the project is “0 returns, 0 refunds, and 0 shipping insurance”.
The clothing industry is plagued by high return rates, and Taobao’s “zero return” policy immediately attracted widespread attention. Although this new channel is full of opportunities, it has not made all merchants willing to pay for it.
The commission rate of up to 20% is like walking a tightrope for some clothing merchants. From the perspective of customer unit price, if the profit is not about 3 times, then there may not be much benefit in this activity.
In addition, although the large-scale apparel overseas project has a high weight within Taobao, many merchants do not understand the rights and details of the policy, and even some information within Taobao has not yet been aligned. Behind this is the haste and chaos of the new project.
01Taobao enters the “semi-hosting” market?
The promise of “0 returns, 0 refunds” seems very attractive to merchants at first glance.
But there is a price to pay for the benefits. The project currently has no deposit requirements, but a 20% technical service fee (i.e. commission) will be charged for each overseas order, including a 15% cross-border value-added service fee and a 5% basic service fee.
For example, suppose a product is sold for 100 yuan and costs 50 yuan. After participating in Taobao’s apparel overseas expansion plan, the product is sold for 100 yuan, and the platform will charge a 20% commission, and the merchant’s actual income is 80 yuan. After deducting the cost, the merchant makes a net profit of 30 yuan. If a return occurs, the platform will compensate 80% of the product price, or 80 yuan, through the “local return service” and the cooperating insurance company (that is, 0 returns and 0 refunds). Since the commission is not refunded, the merchant still receives 80 yuan in compensation, and after deducting the cost, it still makes a net profit of 30 yuan.
in other words,Merchants who join the “Global Free Shipping Plan for Large Clothing” actually “entrust” the goods to Taobao at 80% of the selling price.At the same time, the subsequent risks and management responsibilities are transferred to the platform.
At present, with the rise of cross-border e-commerce, models such as full trusteeship and semi-trusteeship are gradually becoming well-known. The common point of full trusteeship and semi-trusteeship is that they can solve the pain points of some non-e-commerce companies that have no experience in e-commerce operations and cannot participate in the cross-border e-commerce industry chain, and can help cross-border e-commerce platforms improve their ecological system.
The difference is that in the full-hosting model, merchants are only responsible for the supply of products, and the platform will help sellers solve problems such as promotion, warehousing, traffic, logistics fulfillment, customer service, traffic investment, and after-sales service; the semi-hosting model gives merchants more autonomy.
Taobao’s “Global Free Shipping Plan for Large Clothing” retains merchants’ pricing power and goods rights, and merchants do not need to deal with cumbersome cross-border logistics. This is similar to AliExpress’s semi-hosting model (semi-hosting requires sellers to have inventory locally overseas, so Taobao’s clothing overseas expansion is actually a JIT model).
Going overseas and semi-hosting, is Taobao trying to steal the business of its own brother?In fact, this is not the case. It is understood that in terms of the division of labor for clothing exports, Taobao is responsible for attracting merchants, while Alibaba International E-commerce is responsible for overseas logistics and user operations.
This year, the “semi-custodial” model has sprung up like mushrooms after a rain. AliExpress was the first to try it out, followed by Temu and SHEIN, which also started trial operations in the United States.
Although AliExpress started early, it was Temu that really invested heavily. According to Wandian.com, only three months after Temu went online, its semi-managed investment promotion team has expanded to thousands of people, with members from multiple teams such as full-managed investment promotion, Duoduo Maicai and public relations, showing Temu’s determination in this model.
On the other hand, on August 15, Alibaba released its second quarter financial report for 2024. Taotian Group achieved revenue of 113.373 billion yuan, a year-on-year decrease of 1%. It is the only group among the six major business groups with negative revenue growth.
Against the backdrop of increasing domestic business pressure and strong foreign demand, it is not ruled out that higher-level forces within Alibaba will come forward to coordinate and promote cooperation between Taobao Tmall and AIDC (Ali International E-Commerce) to integrate global resources and explore new growth points.
“Taobao’s large-scale clothing overseas expansion, to some extent, is to make Taobao clothing merchants choose AliExpress’s semi-hosting model.”An industry expert in the e-commerce field told “Shi Xiang”.
02 Clothing merchants’ “profit concerns”
Taobao has created a new model for going global with low thresholds and low costs, but some merchants have concerns about the “Global Free Shipping Plan for Large Clothing Products”. The key reason is the commission rate of up to 20%.
From the platform’s perspective, this commission actually covers all the costs of returns and exchanges as well as the investment in overseas marketing resources. However, for some merchants, this 20% commission is a chasm that is difficult to cross.
A clothing merchant told “Shi Xiang” that “those of us who make clothes often rely on discount activities to boost sales. If we don’t participate in activities on weekdays, sales will be very flat. If the store also sets up store coupons and participates in large-scale promotional activities such as 618, after joining the global free shipping plan for clothing, these discounts will also apply to overseas orders.In other words, a discount is given first, and then a 20% commission is taken. As a result, the profit is likely to be squeezed to very little, or even result in a loss.”
Some merchants are more concerned about the comparison of profits before and after participating in the event, especially the balance of interests between “old customers” and “new customers.” The “Global Free Shipping Plan for Large Apparel” emphasizes the commission for new foreign customers, but this policy ignores the impact of old customers.
Some merchants expressed their dissatisfaction to “Shi Xiang”: “We have spent several years maintaining old customers who have long been accustomed to placing orders on Taobao. The original intention of opening a cross-border hosting service was to increase new overseas traffic. As a result, not only did it not bring the expected traffic and orders, but the orders of old customers were deducted crazily.”
In fact, Taobao’s previously launched “Cross-border Worry-free Custody Service” was once the first choice for many cross-border sellers. The plan was suspended during the period when the “Big Clothing Global Free Shipping Plan” was in effect, but many merchants still miss it. Compared with the “Big Clothing Global Free Shipping Plan”, the commission rate of the “Cross-border Worry-free Custody Service” is not as high as 20%, and the rights and interests provided are relatively limited, but this low commission rate is more in line with their interests.
Data from August 5 showed that the growth rate of overseas transaction volume in Taobao’s clothing industry was nearly 40%, and the overseas sales of merchants participating in free shipping for clothing increased even more significantly, up nearly 90% year-on-year. Among them, the growth of shoes, bags, clothing and accessories merchants was the most obvious, with overseas transaction volume surging 114% year-on-year.
This shows that although some merchants chose to refuse to participate in the campaign based on their own circumstances, quite a few merchants achieved performance growth through the program.
He Fang, a clothing merchant specializing in niche American-style designs, said: “Our overseas orders this month have increased by about 30%, which is indeed an increase compared to before we participated in the ‘Global Free Shipping Plan for Large Clothing’. The current advantage is that there are basically no after-sales problems, but the premise is that the profit is sufficient, otherwise it is just working for the platform.”
Duo Xin, a women’s clothing merchant who has been operating on Taobao for many years, believes that for clothing to be exported, first of all, the styles must be compatible with the foreign market, and secondly, the profits must be high enough, so that people will feel relaxed and comfortable.From the perspective of average order value, if the profit does not reach about 3 times, then there may not be much profit in this activity.
In addition, as Hefang is concerned about commissions and rebates, although the “Global Free Shipping Plan for Large Apparel” has a commission rate of up to 20%, it actually includes a rebate policy. Specifically, if the merchant’s monthly overseas order payment GMV accounts for more than 5%, the excess cross-border value-added service fee (i.e. 15%) will be collected first and then returned.
Although the rebate policy is attractive, the longer payment period and uncertainty about the long-term effectiveness of the project are one of the reasons why the above-mentioned wait-and-see merchants are hesitant.
For those merchants who have participated in the “Big Clothing Global Free Shipping Plan”, the rebate rules are particularly important.
A Taobao merchant admitted, “Our average profit is about 30%, and the promotion fee may account for 12-15%. If we deduct the 20% commission from this basis, the overseas part may be a loss. In order to make up for this loss, we can only rely on the profit of the domestic market.If cashback is included, the loss can be made up, so the overseas part mainly relies on commissions to maintain profitability.”
03 Platform education has a long way to go
“The New Force Week has always been our most important promotional event. Now we cannot participate because we have not signed an overseas expansion agreement. This is difficult for me to understand.” A clothing merchant told “Shi Xiang”.
“New Power Week” is Taobao’s most important annual promotional event for clothing, scheduled from August 20 to August 23. This year, the event has been upgraded to “Global New Power Week”. According to the screenshots she showed, sellers whose main secondary category is clothing must first sign up for the global free shipping plan for clothing and complete the contract if they want to participate in this Global New Power Week.
This requirement clearly reveals Taobao’s intention to accelerate the promotion of large-scale clothing global free shipping plan investment. According to “Shi Xiang”,The waiter had informed the merchants that if they did not join the global free shipping plan for large clothing brands, they would no longer be able to participate in the core activities of the Taobao platform, including big sales, daily small promotions, new product projects, and freight insurance subsidies.
This mandatory requirement triggered a strong backlash from merchants, and Taobao subsequently made adjustments.
In addition, although Taobao has made great efforts to attract investors for the “Global Free Shipping Plan for Large Apparel”, some merchants have reported that the platform’s preparation work in actual operation is still insufficient.
A merchant who just participated in the project told “Shi Xiang”: “I recently participated in this activity. The deduction items in the background are disorganized and I can’t understand them at all. When I asked the customer service, they themselves couldn’t explain the situation clearly.”
This is not an isolated phenomenon. Another merchant showed screenshots of his communication with customer service, further reflecting the universality of the problem.
The merchant’s question is that if the clothing category participates in promotional activities, such as a 10% discount, the platform will first deduct a 20% commission from the 10% discount price. If there is a local return, another 20% will be deducted, which means that if the product is returned after participating in a promotion, the merchant will only receive about 50% of the payment.
In response to this, the platform customer service replied: “Yes, you can understand it this way.”
However, according to the rules of Qianniu Seller Workstation, local return service is a guarantee provided by the “Global Free Shipping Plan for Large Apparel” and no additional commission will be charged. In other words, the platform charges a uniform 20% commission under this plan, which will not be increased to 40%. When encountering local returns, merchants can still receive 80% of the actual payment.
In addition, some merchants are unaware of the project’s core commission rebate aspect.
According to a survey by “Shi Xiang”, some merchants said that they did not know that the “Global Free Shipping Plan for Large Clothing” included a commission rebate policy. This not only caused many merchants to worry about the high commission, but also directly gave up participating in the event.
Considering the importance and high weight of the clothing overseas project within the company, this phenomenon of poor information transmission seems somewhat unexpected.
It was previously reported that only three days after the launch of the overseas investment promotion plan for large apparel companies, the signing conversion rate on Qianniu had exceeded 70%. It is reported that the number of merchants signing up for the plan far exceeded expectations. As the project progresses, some merchants reported to “Shi Xiang”: “Some merchants around me have already withdrawn.”
It has been more than a month since the launch of the “Global Free Shipping Plan for Large Clothing Products”, and the project is still being optimized and improved. “Shi Xiang” will continue to pay attention to the subsequent progress of the plan.
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