Q&A with Alibaba and Tmall Executive John Connelly
Alibaba has long dominated the world of e-commerce in China. Recently, having noted the phenomenon of new players struggling with the costs of doing business, Alibaba created Mr. Fresh, a service that helps foreign food companies sell to Chinese consumers on Tmall.com, China’s leading business to consumer (B2C) e-commerce site.
SeafoodSource recently interviewed John Connelly, an executive with Alibaba’s Tmall, discussing the new service in detail and its goals in the marketplace. To address the costs foreign food companies face, Mr. Fresh “takes care of customs, marketing, sales, logistics, and customer service,” Connelly explained. He also told SeafoodSource how Mr. Fresh offers a “low-investment channel” to enter the market, meaning foreign seafood firms avoid the cost of formally opening a store on Tmall.
[Editor's note: John Connelly of Tmall is not the president of the National Fisheries Institute, also named John Connelly]
SeafoodSource: What are the best-selling species in the seafood category on your site?
Connelly: Chinese consumers simply cannot get enough shrimp in their lives. This comes in all shapes and sizes, from two-kilogram boxes of frozen whole Argentinean shrimp to de-headed and peeled shrimp that Western consumers are more accustomed to. Salmon is another popular item, in both smoked and frozen forms. The better SKUs [stock keeping units] sell a couple thousand units every month, while frozen Canadian shrimp on Tmall Supermarket sell more than 10,000 units per month.
SeafoodSource: A unit means a single item or does it have weight connotation?
Connelly: A unit means a single item, no weight connotation.
SeafoodSource: Which countries are most of the products coming from?
Connelly: There is a healthy variety of countries represented. Shrimp from South America, cod and sole from Alaska, lobsters from Canada, black tiger shrimp from Vietnam, scallops from Japan, and crabs from Ireland are all found on Tmall and Mr. Fresh. A simple search for seafood (海鲜) on Tmall.com gives a pretty good snapshot of the prevalence of foreign seafood on Tmall, stressing how much demand there is here for the safety that foreign seafood brings.
SeafoodSource: How do you gauge and respond to Chinese consumers preferences in terms of seafood demand?
Connelly: Alibaba has invested heavily into data and data services, so we have a lot of data to work with. We monitor current trends and overall sales, and then calculate how much of a market there is. However, while numbers don't lie, sometimes we don't use them correctly and have to adjust one way or another. Thankfully, by the time it comes to adjust we have more data and can make better choices, promoting to a more specific group as necessary. For higher-end products like original packaging imported products, we promote to those that spend more than a certain threshold on Tmall each year.
Once we know the demographics and spending habits (things like buying preferences such as whether they’re buying all at once or one-by-one for every holiday, or whether they also bought children's toys within in the past three months, etc.) of the consumer, we can target that group with more focus. The general thought process is the same as how you would normally gauge consumer preferences, we just have access to much more detailed data to direct and guide us.
SeafoodSource: Can you give a concrete example of how this happened on a particular seafood product recently?
Connelly: An example for adjusting by the stats: for Double 11 [November 11, i.e. Chinese Singles Day] in 2014, after the pre-sales started for lobsters, we noticed that the amount prepared by the merchants would not be sufficient. Since these orders were prepared before-hand, we had time to alert the merchants to prepare more materials.
SeafoodSource: What is the fee structure for foreign suppliers using Mr. Fresh and what is the typical margin for Mr. Fresh?
Connelly: Currently, our suppliers are mostly Chinese companies that have already imported seafood, and we work on a consignment basis with them. Consignment is hardly ideal for foreign companies so we are working to set up the internal systems necessary to make international trade more feasible. While much is different about Tmall and online retail in general, the typical margins are similar to offline retailers' margins, but with the key difference being our desire for the merchant to eventually be in a position to open an independent store on Tmall. With traditional retailers, there may be a rough idea who is buying your product, but on Tmall Fresh we give that feedback straight to the suppliers, so they can know who, when, where and what the customers are buying instead of deducing it from imprecise sales numbers. Armed with this knowledge, companies can adjust their plan accordingly. [Editor’s note: Tmall declined to offer a specific example of a transaction with cost breakdown.]
SeafoodSource: Is there a charge for the marketing which you provide to sell the products?
Connelly: There is no charge for our marketing, but any advertisements beyond what we provide the merchants need to pay for themselves.
SeafoodSource: Can you share an example of how you conducted a campaign to market particular products?
Connelly: We did a promotion with the New Zealand trade office. We have also worked with MSC [Marine Stewardship Council] and ASMI [Alaskan Seafood Marketing Institute] to hold promotions for their respective products.