Alibaba, as the largest e-commerce platform in China, has huge data base of customer behavior patterns. In addition to providing e-platform service as its core business, Alibaba put its attention into becoming an advanced “data and insights provider”, not only via its Alibaba Cloud computing services, but also through data applications on Taobao, Tmall, AliPay and all other subsidiaries of Alibaba Group. To get there, an essential step is to collect as much valuable data as possible from each individual consumer.
Services from Alibaba and its affiliate companies cover almost every part of people’s lifestyles. Take a look at these subsidiary companies:
Core commerce: Taobao, Tmall, Alibaba, Alimama
Payment: AliPay
Media: Alibaba Music, Alisports, UC browser, Youku (video hosting service)
Local services: Ele.me (food delivery App), Fliggy (online travel platform) TaoPiaoPiao (ticketing App), Amap (map App), Koubei (Chinese-version Yelp), AliHealth (online healthcare service)
Logistics: CaiNiao
Others: DingTalk (office tool, Zoom+WhatsApp)
So how Alibaba actually plays around with data? It all starts with its 88 VIP membership program since 2018, which redefines customer loyalty by offering top-tier consumers a yearly membership with only 88 rmb (11 euro) annual fee. 88 VIP customers are able to enjoy discounts, monthly coupons, premium services across Alibaba’s ecosystem covering commerce, entertainment and local services. Obviously, the annual fee is definitely too little to cover the benefits offered to its consumers. However, the real secret behind 88 VIP membership is to interconnect the client data between platforms and be able to identify the same customer ID within different platforms.
For example, a consumer who purchased 88 VIP membership on Taobao, wants to enjoy his/her monthly 20 rmb coupon on Ele.me while ordering food deliveries, or view premium videos on Youku. Instead of purchasing memberships separately on each platform, a 88 VIP consumer can enjoy all equivalent benefits by simply connecting his/her account on Ele and Youku to the account on Taobao.
Alibaba makes great efforts to encourage consumers to do so, especially during its 11.11 Singles Day propaganda. By visiting up to 15 apps affiliated to Alibaba and completing different tasks daily during the half month before 11.11, consumers can earn around 3-10 rmb vouchers everyday, which can be counted up and used on any purchase on 11.11 Singles Day. Alibaba adds a lot of fun into these activities and makes sure the consumers who want to save money and bear time-consuming activities will spend the most of time in its ecosystem. In order to earn more vouchers, a number of consumers will download all these apps, and connect their accounts to the Taobao accounts.
Afterwards, Alibaba could easily distinguish the behavior patterns of a specific consumer across each subsidiary platform it owns, and additionally use the data to predict future behaviors. If you purchased a flight ticket from Shanghai to Amsterdam on Fliggy, an online travel platform launched by Alibaba, you would probably find advertisements recommending international call and wifi packages shown on your Taobao homepage or encouraging you to use AliPay for discounted Euro exchange rate shown on your AliPay App.
As a data analyst myself, I think it is an incredible innovation of Ailbaba to generate value with data, but as an online consumer, it also brings huge concerns for privacy and data security. When the choice between privacy and convenience is put on the table, what will be your choice?
Reference:
1. Here’s How Alibaba Is Leveraging Its Data
https://www.forbes.com/sites/greatspeculations/2017/05/16/heres-how-alibaba-is-leveraging-its-data/#594ca5f33292
2. Alibaba’s data-driven “uni marketing” engine rewrites the rules of brand marketing
https://www.thegeniusworks.com/2017/06/alibabas-data-driven-uni-marketing-engine-rewrites-rules-brand-marketing/
3. Alibaba Launches Top-tier “88 VIP” Membership
4. How Alibaba uses big data to understand Chinas shoppers
Click to access How_Alibaba_uses_big_data_to_understand_Chinas_shoppers.pdf
Hi there Nicole,
Thank you for this interesting article. As a Dutch online customer, I mostly make use of the services of Dutch/European e-commerce companies. I am not familiar with Alibaba myself (as a customer), but of course very interested as a BA/BIM-student. Especially Alibaba’s strategy of expanding their ecosystem to all aspects of life I find fascinating.
I agree with you that it is very interesting from a data science perspective, but also concerning from a consumer stance. In my personal life, I pick privacy over convenience. Partly, because I find unrequested advertisement and unexpected pop-ups annoying. However, also because I dont want all my data being freely available to any company that wants to use it. I make use of a lot of adblockers and anti-cookie applications, in an attempt to browse in peace. Understandably, when I make a purchase, the company I purchased from still receives some of my data, but atleast then I know I consended and it is my own choice to share.
I find this more important than some extra convenience. To atleast have the perception that I am still in control of certain parts of my data.
Tim, thank you for your comment! I highly agree with your opinion about privacy over convenience, but unfortunately people in China have little alternative choices and at the same time do not care that much about privacy for many reasons. For example, a family of 5 people in HongKong may live in a 40-square-meter apartment during their entire life because the house is too expensive to afford in HK. People who grow up under this kind of situation will definitely have less sense about privacy than others.
Hi Jiahe,
Thank you for writing this interesting peace on how Alibaba generates value with its data. As a young consumer and student, I use online shopping more often and have come across Alibaba a lot. Therefore I found your article very refreshing in gaining more insight on how Alibaba uses or could use the data I provide for them.
The way this article is written is very well structured and covers depth on the gains and insights several aspects of data may provide to organizations as Alibaba. Personally, I am a little worried about my privacy when it comes to leaving certain information in the hands of large companies. Especially with the availability of recommendation systems and even automated decision making, there could be a lot of concerns on how customer data is being used and how future offerings, rules and algorithms will be established. No matter how large the training data sets are, with supervised machine learning (which is used mostly for giving accurate recommendations), there is always a chance on error. This can be through hidden biases and low interpretability of certain complex machine learning outcomes. I believe it is important that there are regulations that allow data to be used but with much more control and consent from the customer’s point of view. Like in Europe, the implementation of the GDPR makes sure that the data that is used always has a legitimate aim and forces organizations to be careful in processing personal data.
There should always be a balance in extra convenience versus privacy. The most important thing is that the consumer should always be able to control what data is being stored and used and that it is clear why it is being used that way.
Hi Jiahe,
Thank you for this extremely interesting post, which is also very relevant to our BIM studies.
In fact, I believe this particular blog could be used as a ‘case in point’ for almost every session of our course. For instance, when it comes to the power of business analytics, Alibaba seems to be a state-of-the-art example, since every data asset appears to produce astounding value. I believe this lies not only on their artificial intelligence capabilities but also on the digitization of their business, making it possible (as you have mentioned in your post) to accurately pinpoint and own all the interaction with the customer.
Nevertheless, I believe your post also touches upon an important point – also extensively discussed in class – which is very relevant for this discussion, namely, the degree to which Alibaba platform has turned into a giant ‘hub’ firm. It’s increased return to scale and network effects, make it difficult to predict how big and powerful this company can still get. Although Alibaba mostly plays the role of intermediary between buyers and sellers, it is clear that it has tremendous power in much of the decision making of the consumer. This can have undeniable consequences for market competition, making sellers undeniably dependent on Alibaba. It is unquestionable that Alibaba has generated incredible value for society, making it possible for millions of small vendors to be able to have a national (if not global reach) of their goods. Nevertheless, its sheer size will continue to reshape market dynamics and exert influence in further industries.