Alibaba Aims to Capitalize on China’s Growing Middle Class


Feb. 11 2019, Updated 3:15 p.m. ET

China’s strong appetite for imported brands

Demand for imported goods is growing in China as living standards improve in the country, according to a report from People’s Daily, citing a government survey. Higher product quality is one of the factors fueling demand for imported consumer brands in China, particularly in categories such as food, clothing, and cosmetics.

At a recent investor briefing, Alibaba (BABA) executive vice chair Joseph Tsai cited OECD’s projection showing that China’s rich population is expanding steadily, which should continue to drive demand for imported brands. China is expected to have 850 million middle-class consumers by 2030, up from around 300 million today, according to projections.

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Alibaba to drive $200 billion in China imports

To capitalize on China’s strong demand for import brands, last year, Alibaba unveiled a plan to help bring $200 billion worth of imported goods from around the world into China over the next five years. To this end, Alibaba intends to make a significant investment in supporting its overseas supplier and strengthening its supply chain.

Race for China’s retail yuan

JD.com (JD) is also pursuing rich Chinese consumers’ spending on imported goods. The company credited strong sales of imported brands for its success during the Singles Day shopping festival last year. JD generated $23 billion in Singles Day sales, an increase of 27% from the previous year’s sales.

In the race for retail yuan in China, Alibaba’s advantages include that it has a consumer base that is two times larger than that of JD. But JD has made deals with Walmart (WMT) and Tencent (TCEHY) to extend its reach, giving it access to about a billion consumers across China. Outside China, JD last year partnered with Google (GOOGL) to support its global expansion.

Alibaba’s revenue from commerce-related operations increased 40% YoY to $15 billion in the December quarter.


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