guo xiaojing, author of tencent technology

editor zheng kejun

just before national day, on september 26, alibaba announced that it would invest 1 billion yuan to transform hong kong into a free shipping area for taobao. starting from october 1st, hong kong consumers can enjoy free shipping when shopping over 99 yuan on taobao.

according to taobao official data, 92% of products on taobao support official direct mail to hong kong, and the delivery time has been shortened to 3-4 days. the project is attracted by taobao and tmall, and alibaba international is responsible for overseas logistics and user operations. the platform provides overseas postage subsidies.

in order to cope with the upcoming peak sales season, including the national day, double eleven, and double twelve, the number of self-pickup points in hong kong will be increased from 800 to 1,000. basically, there will be a self-pickup point 300 meters away.

previously, in mid-july, taobao launched the "big apparel global free shipping plan" mainly for sellers. with the apparel industry as the core, it provides merchants with high overseas postage subsidies and provides free shipping directly to overseas consumers.

in september, taobao officially announced that this plan will be upgraded to the "taobao tmall overseas growth plan" to expand the apparel industry to the entire industry.

so far, from july to september, with the main goal of "growing overseas", taotian has successively launched a series of measures, starting with the large clothing category, "one-click overseas" for platform sellers, and "global free shipping" for platform buyers. become the most prominent publicity point.

this time hong kong invested 1 billion yuan, almost all of the goods, and provided free shipping subsidies for hong kong users. invited to participate in the "taobao hong kong business" press conference, tencent technology also had some exchanges with taobao-related business leaders, merchants, industry experts, etc. on this free shipping plan during the on-site and subsequent visits. this article will focus on sort out the following questions:

1. why did you choose to invest 1 billion in hong kong station and turn it into a free shipping area?

2. is "free shipping" a pain point for consumers, and can it bring new user increases?

3. "free shipping overseas" is not a new growth method. does taobao have any advantages?

1. why did you invest 1 billion to provide free shipping for all shipments?

taobao hong kong website was established as early as 2016. it can be said that hong kong, china is a market that taobao has been deeply cultivating for many years. why invest in subsidies in an "old market"? is it also subject to greater competitive pressure?

chen zijian, head of taobao and tmall’s hong kong and macau business department, said in response to media questions: “the difference between hong kong and the mainland is that the e-commerce penetration rate and online penetration rate are already very high. overall, hong kong’s total retail sales are still online. relatively low. so we are not paying attention to the competition yet. every industry player comes in to make the pie bigger and increase the penetration rate of e-commerce.”

based on this, taobao’s goal in hong kong is growth. at present, hong kong's e-commerce is mainly divided into three categories: the first category is local e-commerce platforms, such as hktvmall. the second category is e-commerce platforms, such as taobao, pinduoduo, amazon, etc. the third category is the shopping websites operated by retailers themselves, such as parknshop and uniqlo.

however, over the years, offline shopping in hong kong has matured, and the free shipping and returns experiences that e-commerce platforms can provide are not good, mainly due to high costs and poor timeliness. the development of e-commerce in hong kong is not ideal.

therefore, under the current circumstances, "working together to make the industry pie bigger, rather than focusing on competitors, is our current greater focus." ye jianqiu, general manager of taobao and tmall’s overseas business unit, told the media.

affected by the epidemic, residents in hong kong have gradually begun to develop the habit of online shopping. moreover, e-commerce platforms are cheap and have many categories, providing more choices.

according to a research report from the university of hong kong, it is estimated that the number of online consumers in hong kong is expected to reach 6.6 million in 2027, with a coverage rate of 88.2% of the population, and total revenue reaching us$35.22 billion. the annual compound growth rate of e-commerce revenue in the next four years is 10%.

it can be seen that hong kong is indeed a potential market worthy of heavy subsidies. however, is free shipping the best way to attract new customers?

2. is “free shipping” a pain point for consumers, and can it bring new user increases?

"free shipping" is a common norm for domestic consumers. if it is used as a selling point, can it really bring about growth?

in a behavioral survey on hong kong e-commerce conducted by the university of hong kong, providing free shipping services became the number one “purchase motivation”.

source: university of hong kong e-commerce behavior report

in the absence of free shipping, we try to place an order with a local address in hong kong. the shipping fee will be divided into two parts: the mainland section and the cross-border section. many merchants may provide free shipping services for domestic segments, while the cross-border shipping fee for home delivery within 1 kg is rmb 17.5 for the first weight and rmb 4.3 for additional weights/0.5 kg; the price for delivery to a self-pickup point is rmb 17.5 for the additional weight. 10.5 yuan, additional weight 3.8 yuan/0.5 kg.

this means that even for light and small items within 1kg, the lowest shipping fee is 17.5 yuan. obviously, the freight cost will be much higher than that in the mainland.

the launch of "free shipping service" is equivalent to the platform subsidy and discount to consumers. it is indeed not difficult to understand its appeal to users.

in addition, the commodity supply chain in mainland china is stronger, the categories are richer, and the prices are cheaper. these have provided new impetus for hong kong citizens to purchase goods on e-commerce platforms.

picture: on-site experience of taobao’s free global shipping for purchases over nt$99. the signed seller will display a free shipping label of hk$99.

3. “free shipping overseas” is not a new growth tool. does taobao have any advantages?

if the free shipping strategy is effective, will it attract many competitors to follow suit in the short term? the essence of free shipping is a low-price strategy. however, there is a whole set of logistics-related user experiences behind free shipping.

when tencent technology visited the local cainiao station, it discovered that the current free shipping policy has not yet officially taken effect (starting on october 1st). most of the goods stored in the station are large packages of goods waiting to be picked up. in order to save logistics costs, hong kong residents generally first choose to store the goods at a collection point (free storage for three months). after purchasing a few more products, they can then be taken to a pick-up point (free storage for three days) for pickup.

zhao yiliang, general manager of the hong kong station of cainiao group's overseas shopping export logistics department, explained that hong kong residents are generally accustomed to placing their purchases at self-pickup points instead of sending them directly to their homes. this has a lot to do with living habits and other factors.

this means that e-commerce platforms need to have enough coverage and a sufficient number of self-pickup points, as well as relatively strong service capabilities to cope with sudden surges in demand during double eleven promotions and other activities. moreover, the land price in hong kong is relatively high, so the cost of a self-pickup point will also be quite high.

picture: in the cainiao station, most of the goods are large packages.

picture: a rookie station near times square in hong kong covers an area of ​​about 70 square meters. according to the staff, it has become the largest self-pickup point in the area.

currently, taobao has about 800 self-pickup points in the local area, which means that in densely populated areas of hong kong, there will be a self-pickup point within a radius of 300 meters. in order to cope with the soon-to-be-implemented global free shipping and double eleven and double twelve, the number of self-pickup points will also be increased to about 1,000.

in addition, ms. li (pseudonym), who came to pick up goods at the inn, told tencent news that it used to be very troublesome for local residents to return goods when buying goods, especially when they had to pay a tax. convenient returns will also be her most important consideration when buying things online. this time taobao also supports users to pay a certain shipping fee and only need to return it to the local logistics outlet.

the dense collection of self-pickup points, coupled with cainiao logistics’ cross-border logistics experience, can establish a certain moat for taobao’s implementation of the “global free shipping” strategy in hong kong.

tencent technology also asked industry experts for their views on this "global free shipping" strategy: "taobao has a large number of suppliers. if it provides global free shipping activities, it will definitely have an impact on other e-commerce companies. cainiao's comprehensive service capabilities are stronger than peers, but they need to match their own needs with foreign resource construction.”

hong kong is a market that taobao has been cultivating for many years and has sufficient resource advantages. however, the final effect and whether it can be successfully promoted in other regions around the world still need to be continuously observed.

figure: research report of the university of hong kong - how often hong kong residents use cross-border e-commerce in the past 12 months

is "global free shipping" really the trump card for cross-border e-commerce?

in addition to taobao, tiktok is also currently launching a free shipping plan - a jointly funded free shipping plan. "cofunded" means that the freight in this plan is jointly funded by the platform and the merchants. starting from august 26, 2024, the jointly funded free shipping plan will be applied to all eligible free shipping orders from cross-border self-operated merchants in the us region of tiktok shop. consumers can enjoy full free shipping after purchasing products worth us$30 or more in the store.

the platform subsidizes part of the shipping costs, and the merchants bear the remaining shipping costs. for example, cross-border merchants that adopt the fulfilled by tiktok logistics model will receive up to 70% of the platform's freight subsidies, and the freight for the first 1,000 standard orders in 2024 will be fully reimbursed; adopting tiktok shipping and seller shipping (merchants self-delivery) cross-border merchants using the logistics model will receive a platform freight subsidy of $2/order. at the same time, the freight for the first 500 standard orders in 2024 will be fully reimbursed (with a maximum limit of $6/order).

in august and september 2023, temu entered malaysia and the philippines, and provided benefits such as free shipping, 90-day free returns, and up to 90% discounts as soon as it went online. in thailand, temu also provides free shipping, 90-day free return guarantee and even discounts of up to 90%.

providing free shipping subsidies to users is a common growth strategy for platforms, but it is also often used in conjunction with discounts and other activities. therefore, it is impossible to accurately calculate how much user growth the free shipping plan has brought to the platform.

however, the free shipping subsidy is a disguised discount for users, reducing the total purchase price of goods; for sellers, whether the platform bears the freight in full or partially, it also reduces logistics costs and helps attract more merchants. settled in.

however, behind global free shipping, the platform’s comprehensive logistics capabilities, supply chain capabilities, financial strength, etc. are also tested. if this is not possible, global free shipping is just a gimmick.

4. write at the end

in the official announcements of the "big clothing global free shipping plan", "taobao tmall's overseas growth plan", and "investing 1 billion to transform hong kong into a free shipping area", there is a sentence, "this project is sponsored by taobao maolai attracts investment, and alibaba international is responsible for overseas logistics and user operations. the platform provides overseas postage subsidies.”

this means that the three major business groups, taotian group, aidc (alibaba international digital commerce) group, and cainiao group, are jointly launching an offensive with the goal of "overseas growth."

taotian is responsible for bringing high-quality domestic seller resources to the world. aidc integrates aliexpress, lazada, etc. and is responsible for the growth of overseas users. cainiao group provides logistics support to comprehensively cope with the fierce competition in overseas markets from competitors such as temu and shein.

however, free shipping and subsidies are essentially low-price strategies, which have a certain effect on quickly occupying the market. “we cooperate with foreign brands, and foreign users pay more attention to brand awareness, objective descriptions of the true effects of products, etc. low prices and methods that are very effective in china, such as expert recommendations, may not be very effective with foreign users," wang junhua, chairman of wantong group, who has been operating in the e-commerce industry for many years, told tencent technology.

in the long run, how to let brands go overseas and make foreign consumers more recognized as made in china may be the next difficult problem facing cross-border e-commerce platforms.

in taobao's large-scale clothing overseas plan, it emphasizes that "sellers have the right to sell goods and pricing" and "encourage true design aesthetics" to go overseas, which may imply that taobao hopes to find a path that is not just equivalent to low-price subsidies.

"global free shipping" may be just one of the growth points, but the global growth plan has just begun.