By Declan Kearney, APAC MD and VP, Edge by Ascential

Single’s Day, the November 11th online discount sales phenomenon that began in China, this year for certain achieved the biggest sales ever in a single day anywhere in the world. During the 24-hour shopping bonanza (preceded by a 3-week pre-sales period), sales recorded through Alibaba’s ecommerce platform alone amounted to over US$30 billion, 27% up on last year – and that doesn’t take into account all of the other parallel promotions staged by online operators such as JD.com and bricks-and-mortar vendors both in China and increasingly in other parts of the world.

China’s economy may be slowing and the trade war with the U.S. is casting an ever-longer shadow, but the desire of China’s growing middle class to consume and improve the quality of their lives through product purchases of all kinds continues to expand. Particularly striking this year was the increasingly global nature of the Single’s Day consumer retail event, which far outpaces similar long-running sales blitz events such as Black Friday or Cyber Monday. Sales to Chinese consumers of a wide range of foreign products rose sharply, including luxury goods and travel packages and a range of imported goods. Research firm Oliver Wyman found in a recent survey that 57% of Chinese consumers expected to buy overseas goods during Single’s Day.

Understanding Gen-Z

The event has become of critical importance for brands targeting Chinese consumers – analysing the Single’s Day sales data has become essential for brands. The data clearly reveals the importance of Generation Z, young consumers born after 1990, and the consumption upgrade process in progress – the trend of Chinese middle-class consumers to aspire to better quality versions of products.

The top-selling mobile phone brand on the Alibaba platform on the day was also the most expensive – Apple’s iPhone. Dyson’s premium hair dryer ranked third in its category, and Alibaba reported that 33 brands had pre-sales in excess of RMB 100 million (US$14.4 million), including foreign cosmetics brands Estée Lauder, Lancôme, Olay, SK-II, L’Oréal, Snow Show, Elizabeth Arden and Shiseido.

Overshadowing this year’s event was the impending promulgation of China’s ecommerce law coming into effect on January 1st, 2019, that is expected to dramatically cut the bulk purchasing and importation of products by agents – in Chinese known as daigou or tuangou – which has been such a huge trend in recent years. The impact is already being seen in a sharp increase in direct online sales by luxury brands, as witnessed during the Single’s Day period.

Engaging the Consumer

Effectively targeting Gen-Z consumers means leveraging celebrities and Key Opinion Leaders (‘KOLs’), and using story-telling videos and innovative products to take the lead with brand buzz in the marketplace. The social influence of these ecommerce platforms is huge and participating actively and effectively in Single’s Day is now essential not only in terms of sales on the day, but also long-term brand-building across the whole year.

This year’s event highlighted the importance of brands taking an omnichannel approach to gain a strong competitive edge in the market – that is, considering the entire consumer journey, identifying all touch points and ensuring brand presence at all of them, both offline and online.

A great example of this is the fresh food operator Hema, a subsidiary of Alibaba, that has built a very successful business by engaging with consumers both online and offline, and offering a combination of purchasing options including in-store experiences that have increased the average spend of consumers. The sales data indicates that Hema consumers shopping both online and offline spend an average of RMB 575 monthly, compared to less than RMB 300 shopping only online or in-store.

Attracting customers leveraging data

Single’s Day is not all good news for brands – it requires them to offer discounts, cut margins and raise client acquisition costs. Uniqlo successfully re-directed online sales to its 500 bricks-and-mortar stores in China. The brand combined online and offline location data and purchase behaviour, consumer insights and category understanding to segment consumers and push relevant messages to different audiences to maximise foot traffic to its stores, according to media insights provider, WARC (also an Ascential company).

The result – Uniqlo was not only the first brand to cross the Single’s Day RMB100 million mark in less than one minute, but it was also able to siphon traffic from Alibaba’s platform to its own offline platform. Foot traffic to Uniqlo’s stores increased tenfold compared to Singles’ Day last year, and each offline Singles’ Day order had a 34% higher value compared to online orders.

About Edge by Ascential™

Formerly Brand View, Clavis Insight, One Click Retail and PlanetRetail RNG, Edge by Ascential™ delivers some of the industry’s most accurate and actionable sales-driving data, insights and advisory solutions for global brands and retailers looking to win in today’s ecommerce-driven world. Our solutions enable the world’s top brands and retailers to implement strategies that help maximize revenue growth; optimize product listings; increase sales faster than the category and the competition; and drive margin growth with pricing and promotions. Our weekly, daily and real-time data-driven insights (including online Sales and Share measurement, Digital Shelf performance, Price & Promotions monitoring and Retail Insights intelligence), coupled with a wide range of customized advisory and education services, give our clients a comprehensive and competitive advantage across the entire landscape online and around the globe.

For more information about how your company can gain the advantage, visit www.ascentialedge.com.

China’s private sector has received a lot of attention lately. The government is filling the airwaves with official statements of support for private businesses, and many consider proper financial nourishment of the sector key to a soft landing from the developing economic slowdown.

For China’s entrepreneurs, however, a group responsible for 60% of the Chinese economy, these encouraging noises may not brighten up an otherwise gloomy outlook for the coming quarters. Despite clear shows from the supreme court and market regulators to bolster private business, there are creeping signs that the country’s bloated state sector is once again expanding at the expense of the private.

Government-linked bodies are increasingly gaining major stakes of listed companies as financial strains from months of deleveraging force firms to look to local authorities for investment. So far in 2018, over 50 listed Chinese companies have received Rmb 30 billion ($4.3 billion) in financial backing from local governments, according to official data. In about half of the cases, the government bodies went on to become top shareholders.

Private firms have traditionally been overlooked for new credit in favour of those in the public sector in China. According to DBS bank, SOEs held 60% of total corporate debt at the end of 2017, despite being significantly less profitable than privately-owned businesses. Beijing’s crackdown on off-balance sheet ‘shadow banking’, although intended to address China’s growing pile of risky debt, has nevertheless left entrepreneurs looking for handouts.

“For those companies that lack cash, it seems there is no other way than to go back to the government,” said Raymond Yeung, chief economist of Greater China at ANZ. “If they can get it from an established market channel such as through stock or bond issuance, they would, but the medium-sized firms don’t have this luxury.”

Despite state media’s portrayal as Beijing providing a safety net for troubled companies, others argue that low stock prices following a recent market rout have given the government an opportunity to aggressively acquire vulnerable firms, building on a comeback trend for SOEs starting in the wake of the global financial crisis. Reporters are making good use of the Chinese axiom guo jin min tui, or “the state advances, the private sector retreats.”

Officials have denied claims of any ulterior motive from the central government. Vice premier and economic guru Liu He labelled such talk as “one-sided” and “wrong”, and that state banks were working hard to restructure private firms in dire straits.

A full roster have since come out to flaunt their backing for the private sector. In an emphatic interview with state media, head of China’s banking regulator, Guo Shuming recently instructed banks to extend at least half of new loans over the next three years to private firms. His remarks came just days after central bank governor Yi Gang laid out his strategy to funnel cash to the private sector via the “three arrows” of debt, bank loans, and a new equity financing programme.

“The fact that the CBIRC [China Banking and Regulatory Commission] feel the need to set quotas likely tells the market just how bad the situation is for financing,” said Yeung.

President Xi Jinping exemplified the recent pro-private push when he chaired an unprecedented ‘symposium’ with the nation’s leading businessmen late October, during which he acknowledged that although progress has not been as smooth as hoped, private companies should nevertheless have full confidence of the government’s support.

“Supporting the development of private companies has been the consistent stance of the Party center,” said Xi in his address. “This will not change one bit.”

While Xi laid out some of the more market-friendly policies the government will leverage to prop up the private sector, his address also tried to reassure business of the growing state presence in Chinese companies.

“Some people say that strengthening Party building and trade union work in enterprises is to control private enterprises,” said the President. “These statements are completely wrong and do not conform to the Party’s major policies.”

But whether Xi’s plans for stronger businesses amount to true market liberalisation is not fully clear. In a front-page op-ed in the state-run Study Times the morning after the symposium, senior Communist Party official Xu Lejiang suggested that a flourishing private sector will be instrumental in realising Beijing’s wider goals.

Private businesses should “ensure that the central government’s policy of stabilising employment, finance, foreign trade, foreign investment, investment, and expectations is implemented,” wrote Xu, who acts as Party secretary of the All-China Federation of Industry and Commerce, China’s largest private industry society.

“Strengthening and improving the Party building work of private enterprises…is also an important guarantee for promoting the healthy development of the non-public economy,” Xu added.

By Timothy Ang

After years of consistent growth, the wheels are beginning to creak on the world’s largest car market.

The three months from June to September of 2018 were the worst quarter in a decade for China’s auto industry, according to the latest figures from the government-backed China Association of Automobile Manufacturers (CAAM).

Wholesale delivery of passenger vehicles fell 7.7% year-on-year (y/y) during the quarter, dragged down by a crippling 12% decline in September. The situation was even worse in China’s showrooms, with sales down 9.1% in the quarter compared with a year ago. Dealerships are now looking for spaces to park their growing inventories.

This is a U-turn compared to the roaring growth enjoyed in recent years. In the years from 2008-17, year-on-year passenger vehicle sales rose at an average of 14%, according to data from Statista.

China’s auto industry, along with other key sectors, is suffering from the gloomy atmosphere lingering over the country’s economy. Last week, official data said China’s gross domestic product grew 6.5% in the third quarter, the lowest figure in a decade, all but confirming the feeling of many that the next few months are going to present challenges. Signals of strain are flashing across the board, from cooling house prices to a sinking currency and plunging stock markets.

“The automotive industry has been a driver of China’s economic growth for years. Now it is pulling back,” said Xu Haidong, assistant secretary general at CAAM, said late last month.

Many see this bumpy patch stretching out until year end, with the risk that sales growth will even turn negative for the first time in twenty years. If this happens, market confidence could plunge.

“It’s very alarming and is even causing panic among some automakers and suppliers,” Yale Zhang, head of Shanghai-based consultancy Automotive Foresight, told Reuters. “That’s because the market has been growing non-stop every year for more than twenty years, and those companies make plans based on growth.”

A general sense of caution may well be weighing on the minds of prospective car owners. One of the most popular – and expensive – vehicle types among Chinese buyers in past years, SUVs, are struggling the hardest, according to the CAAM. Sales of SUVs were down 7.8% in 3Q18 compared with a year before, removing a large chunk from China’s traditional auto demand.

Car prices are yet to take a dive in response to the weaker demand, but this could be just round the corner, according to Jing Yang, auto industry analyst at ratings agency Fitch.

“In early stage of downward car price trends, consumers will wait and see if more price cuts/discounts would be offered,” Jing told China Economic Review. “So historically brands tend not to cut MSRP (Manufacturer’s Suggested Retail Price) sharply, as anticipation of further price cuts will worsen the sales in the short run.”

The auto industry is also feeling the effects of Beijing’s crackdown on consumer lending. Online and peer-to-peer lending platforms have grown to be a key source of new-vehicle loans in China in recent years. Investment bank Sanford C. Bernstein estimates that around one-in-ten Chinese P2P borrowers in 2017 were car buyers, many of them young, which made up 9% of new car sales last year. Other analysts’ estimates put the contribution at up to 15%.

The central government’s no-tolerance campaign to rein in the relatively under-regulated P2P market decimated the number of lenders, pushing auto loans in June down almost 30% from a year earlier, according to P2P data-tracking site wdjz.com.

While the sector as a whole appears to be entering a rough patch, some groups are expanding their market share. French, American and domestic brands have lost ground with double-digit declines to Japanese and German car brands, which saw strong quarterly sales growth after flooding into China on the back of Beijing’s decision to slash auto tariffs this summer.

These high-end vehicle segments have also benefitted from the slowdown being more confined to China’s smaller third- and fourth-tier cities, where mean incomes are lower and buyers will more readily look for affordable, local alternatives, according to Fitch

With the exception of Beijing Benz, BrillianceBMW and GAC-Honda, all major joint-ventures posted lower Q3 sales from a year before. Other Chinese companies such as Chang’an Group – one of China’s ‘big five’ automakers – were badly hurt by their partner Ford’s 60% decline in the quarter.

US car companies are particularly vulnerable to any losses of momentum in the industry. In August, American cars and motorcycles were subject to fresh 25% levies as part of a $16 billion package of tit-for-tat tariffs imposed by Beijing. Ford has said this week that it plans to taper production in the next quarter to keep costs in line with weaker demand. GM, facing a steady stream of obstacles this year, posted a 15% quarterly drop in its China sales from a year ago.

New energy vehicles (NEV) – a market Beijing has donated significant energy to nurturing – also offered some positive notes. NEV sales shot up by 52.5% y/y last quarter, showing resilience following Beijing’s withdrawal of generous subsidies for smaller NEV companies back in June. Plug-in hybrid vehicles, in particular, posted an impressive 121.1% growth in the period.

As for when the decline will bottom-out, analysts are wary of speculating. “It’s hard to say, depending on the economic outlook and if the Chinese government will introduce consumption stimulus policies next year,” said Jing at Fitch. “1H19 is likely to be very difficult for the industry, while recovery could take place in 2H19 due to low-base-effect and a higher chance of policy support.”

Chinese e-commerce giant Alibaba has dominated headlines in the tech world over the past fortnight following Jack Ma’s ceremonious departure as the company’s executive chairman. But the company also made a second, potentially historic move that same week that didn’t create quite the same splash in the media.

Last week, the Chinese firm signed a landmark deal with Mail.ru—one of Russia’s leading tech and media conglomerates that some have described as “the Russian Alibaba.” The two companies have agreed to form a joint venture named AliExpress Russia that aims to build a Chinese-style e-commerce ecosystem in the country of 144 million people.

Fittingly announced on the sidelines of the Eastern Economic Forum, an annual trade summit attended this year by Presidents Vladimir Putin and Xi Jinping, the agreement marks the arrival of Alibaba as a major player in Russia as the e-commerce giant looks to extend its reach across Asia.

The JV will give Alibaba access to Mail.ru’s 100 million-strong customer base across the former Soviet region and will help the company localize its operations in Russia. AliExpress and Tmall are already popular e-commerce platforms in Russia, but deliveries are shipped internationally from China.

One of Russia’s major telecoms providers, Megafon, will also be involved in the new entity in an as-yet unspecified capacity, as will the Russian Direct Investment Fund, Russia’s sovereign wealth fund. Megafon is selling its 10% stake in Mail.ru to Alibaba for $500 million, though the sum of its investment into the venture has not been disclosed.

Russia hopes that the creation of AliExpress Russia, which has an estimated valuation of up to $2 billion, will be a turning-point for the country’s digital economy and its reputation as a destination for foreign investment.

E-commerce penetration is currently at only 3%, compared to 15% in China, and Moscow sees the industry as a key driver of growth for an economy that is still struggling following the imposition of Western sanctions in 2014.

“We see this is as definitely, both for the Russian and the global technological market, a truly historic deal,” Mail.ru CEO Boris Dobrodeev told Russian business publication Kommersant.

Global Ambitions

For Alibaba, which will take a 48% stake in the JV, the deal marks a new stage in its bid to conquer the Russian market. These Russian ambitions are far from a recent whim.

AliExpress and Tmall have been delivering to Russian homes since 2015 and 2017, respectively. The former is a popular household brand name in Russia’s larger cities, although few are aware of the company’s Chinese management.

Alibaba has been looking for ways to increase its presence in Russia further for a while. It abandoned a potential deal with Russia’s largest retail bank, Sberbank, which would have allowed the company to leverage the bank’s vast customer database, last year.

The deal with Mail.ru could prove to be even more valuable given the Russian tech firm’s broad online-service provision. Like Alibaba, Mail.ru has cultivated an ecosystem that means most online activity in Russia can be traced back to one of its platforms.

The group dominates Russia’s email domain, and owns two of the country’s most popular social media platforms, Facebook-like Vkontakte and reunion site Odnoklassniky. Other ventures include Delivery Club, a massively popular food-delivery app, ride-hailing app Citimobil, Netflix-style streaming site Kino, as well as online medical advice services.

The move into Russia fits Alibaba’s wider strategy of moving into underdeveloped consumer markets where the American e-commerce giants have yet to plant their flag.

Alibaba has invested more than $4 billion in Southeast Asian e-commerce group Lazada and other leading tech players in recent years. In June, the company posted that it had bought a stake in Turkey’s local leader Trendyol, while Amazon is still fumbling with the launch of a Turkish service. In India, Alibaba recently invested in digital payments platform Paytm, granting in exchange access to its cloud infrastructure.

Alibaba’s experience building China’s e-commerce market effectively from scratch makes it uniquely suited to entering these markets, according to Ashley Dudarenok, a Chinese digital marketing consultant who is herself a Russian national.

“They are aware that there is not much infrastructure in markets like India and Turkey, and they know exactly how to deal with this sort of aspirational consumer base,” says Dudarenok. “Along with countries in Southeast Asia, Russia is one such market.”

It may be still be poor by Western standards, but Russia has the largest population in Europe and an emerging middle class that offers significant growth potential. As elsewhere, Alibaba is planting its seeds early, ready to reap the rewards when the consumer market matures.

Open the Russian Doll

Alibaba has also received a warm reception in Russia, which has been undertaking a “pivot to Asia” strategy since the Crimean annexation. Increasing trade with Vietnam, India and China is designed to offset the losses from Europe, though these attempts have only been partially successful so far.

The timely arrival of Alibaba offers a stamp of legitimacy to Russia’s status as a developing economy with potential, rather than just the world’s gas station.

“As you know, Alibaba’s market cap is more than $420 billion,” said CEO Dobredeev. “So, a partnership with such a powerful player on the world stage is, of course, important and will help Russia achieve the breakthrough it plans in building its digital economy.”

In particular, the core technologies that Alibaba has developed back home in China will help propel the Russian e-commerce system towards world-class status.

“All the data Alibaba is going to use will be processed and stored on Russian soil, and the JV is going to use homegrown payment systems,” Dobrodeev added. “We will also be working with partners in the deal to build large centers for the development of AI and data processing in Russia.”

Russian suppliers will also hope to cash in as their goods are added to Alibaba’s delivery network that spans many fast-growing Asian economies.

“The Russian e-commerce market has huge potential. Furthermore, the partnership will open up to Russian producers opportunities to export to new markets,” said Alisher Usmanov, founder of USM, the operating company behind Megafon, in a recent interview.

The restless appetite for Russian producers to increase exports to China recently inspired the rolling-out of Dakaitaowa (a transliteration of 打开套娃, or “Open the Russian doll”), a state-backed initiative set up with the mission of promoting the “import of high-quality Russian food products,” such as beer, coffee, caviar, and honey. It also counts Mail.ru among its backers.

The agreement may have coincided with the loud noises of war games and grand reciprocal endorsements by the Chinese and Russian leadership, leading some to think this was just another excuse for the two countries to parade their deepening friendship. But geopolitics aside, in Mail.ru, Alibaba may just be on to a winner.

This article was kindly contributed by TechNode. For the original article, click here.

By Emma Lee

Deng Shuang, a 34-year-old mother of one, wants to share baby shoes she found on Taobao to a mom friend via WeChat. Instead of sharing it directly from Taobao to Wechat, Deng has to go through a very clumsy process: she has to copy an auto-generated Taobao link for the item and then paste it in WeChat before she can send it.

A small sharing barrier between two of China’s giant apps is no small deal, especially when millions of users go through this every day. But this is more than a technical loophole that can be fixed easily with updates: This is just one of the walls China’s internet giants construct to guard their self-sustained gardens.

Most people believe the Chinese internet is one world unto itself, but few realize there are multiple separate, loosely connected ecosystems in China’s cyberspace. Competition in China’s internet world is not about individual tech companies anymore, it’s increasingly a contest among ecosystems.  

Superapps and ecosystems

“US and European internet companies usually focus on one sector and try to be the best at it. Chinese companies, however, start by focusing and solving one problem, but over time they start to attack all the problems,” William Bao Bean, managing director of Chinaccelerator, told TechNode in a previous interview.

Chinese tech firms, especially early tech incumbents like BAT (Baidu, Alibaba, and Tencent), started from a vertical but with a vision to grow very big. This approach gradually developed into the “super app + ecosystem” model, where Chinese tech firms try to create expanded online platforms by leveraging the dominant status of their super apps.

Super apps, usually where the giants first started, serve as anchors to drive user engagement. Tencent, the parent of China’s former default messaging app QQ, continues its dominance in social networking with WeChat. Alibaba has its old turf in e-commerce with Taobao and Baidu in its search engine app.

The ecosystem surrounding a tech firm takes shape as its businesses grow; whenever a new trendy area develops, the ecosystem takes hold. Of course, the expansions still begin from the related business. Alibaba, for example, established Alipay to solve the payment problem of Taobao marketplace and Cainiao to tackle logistics issues.

Since each of the tech giants got their own areas in the early days, they were more or less out of each other’s way. Yet, as they’ve grown, their business inevitably started overlapping in a grab for new emerging markets until finally what we see is comprehensive competition on each others’ home turf.

When ride-hailing first boomed in 2013, Alibaba and Tencent invested in Kuaidi and Didi, two fastest growing companies in the area, respectively to set their food into the emerging market. Baidu entered the battlefield by investing in Uber. The head-on competition gradually shifted from markets like ride-hailing—which at the time was more about getting users onboard their payment platforms—to their cornerstone businesses in social networking, payment, gaming, and mobile e-commerce. While the tech powerhouses are turning competition in China’s tech world to their proxy wars, they also build an ecosystem to lock-in users.

Behind the Great Firewall, China has its own equivalents of services that are blocked in the country. Similarly, Chinese tech firms have gathered complete sets of proprietary apps and services under their wings to cover every aspect of users’ daily lives so that they can have their demands met without leaving the ecosystem: e-commerce, content, payment, social networking, gaming, education.

Empire formation

The expansion of ecosystems is either achieved by investment, acquisition, or inside the company. Chinese tech tycoons have earned a bad reputation in the early days for copying ideas from startups and crushing them with their vast amounts of resources, experience, and users. Tencent bears the brunt of this criticism and casts a shadow among China’s entrepreneurs who face the “what if Tencent copies me” dilemma.

Given the fast growth of China’s internet space where trends come and go almost overnight, it is an increasingly daunting task for a single company to catch up with every emerging “whirlwind”, even for the BAT trio. On top of that, diving deep with a homegrown project may leave the company vulnerable to the instabilities of market trends. Thus acquiring or investing in upcoming verticals or startups with a ready team and product has become a more favorable choice with the extra benefit of shaking off the copycat image.

Alibaba and Tencent are two of the most assiduous dealmakers in recent years, even more active than most of the angel investors, venture capitalists, and private equity. Data from ITJuzi shows that Tencent topped the venture capital list with 125 deals in 2017, while Alibaba took the fourth spot with 77 deals. Compared with Alibaba and Tencent, Baidu is conservative.

The effect of these large-scale land-grabs effectively split China’s tech world into different camps. Over half of China’s unicorns are either founded or invested by BAT, and north of 90% of the companies with a market cap of $5 billion or more are related to the trio, according to data from Ctoutiao.

But companies may have their own investment styles. Alibaba tends to take large or controlling shares and get deeply involved in the operations of these companies. Tencent takes a hands-off approach, only investing a minor stake. This explains why Tencent has more deals. But the approach also puts the social and gaming titan land in trouble. A WeChat post went viral earlier this year, criticizing Tencent for “losing its dream” and spending its time seeking investment-worthy apps instead of working on its own products.

The benefits for startups

The power of a super app and the importance of being a member of the ecosystem is best exemplified in the case of the incredible rise of Pinduoduo, which achieved RMB 100 billion gross merchandise volume milestone less than 3 years after its inception, a benchmark that took Taobao five years and JD ten years to achieve. Pinduoduo’s viral growth is deeply ingrained in the WeChat ecosystem, which offers a whole set of resources for user engagement, cloud service, as well as payment solutions for buyers to complete the purchase circle.

“If services provided by Tencent to us become limited, compromised, restricted, curtailed or less effective or become more expensive or unavailable to us for any reason, including the availability of our mini-program within Weixin (the Chinese version of WeChat), our business may be materially and adversely affected. Failure to maintain our relationship with Tencent could materially and adversely affect our business and results of operations,” the company admitted in its prospectus.

The loss of a giant backer could be detrimental. Shares of Chinese micro-lender Qudian plunged to their lowest price since its listing over concerns that Ant Financial will not renew its strategic partnership with the cash lender when their deal ends by August.

Higher walls

As competition tightens, China’s tech behemoths are raising the ecosystem wall by blocking services from outsiders or offering more benefits to guarantee user fidelity. In May, WeChat rolled out tightened restrictions on sharing external audiovisual links in its Moment feed, which practically banned links from all the popular streaming sites like Douyin, Kuaishou, Ximalaya, with the exception of those backed or developed by Tencent. Although the ban was removed three days later, the underlying principle for granting access to its most valuable traffic source is pretty clear—Tencent allies only.

Alibaba announced its all-in-one 88VIP paid membership plan in August. Alibaba users with a Taoqi Value—a scoring system calculating purchasing history and individual credit— higher than 1,000 can purchase an RMB 88 annual membership for Tmall Supermarket, Tmall Global, Youku, Ele.me, Xiami Music, and Taopiaopiao. Users with a Taoqi Value lower than 1,000 have to pay RMB 888 for the membership. The over 1,000% difference between the 2 membership fees implies thatthe key is to have those top buyers and frequent lifestyle services users locked in.

“Alibaba’s mission makes it impossible for us to become an empire-like business. We believe that only by creating an open, collaborative and prosperous ecosystem that enables its constituents to fully participate can we truly help our small business and consumer customers. As stewards of this ecosystem, we spend our focus, effort, time and energy on initiatives that will benefit the greater good of the ecosystem and its various participants,” said Alibaba chairman Jack Ma in an open letter before the company’s 2014 IPO.

Ma’s philosophy speaks of how all of the tech giants navigate their businesses. Tencent and Alibaba’s ecosystems are still the most developed, with Baidu’s following closely behind. Upcoming tech firms like Xiaomi, Didi Chuxing, ByteDance, and Meituan are forging their own ecosystems in the fields of smart hardware, mobility, content, and O2O. But still, they are playing catch-up. Didi and Meituan, although already unicorns by themselves, are related to Alibaba and Tencent through investments.