The Alibaba hype has encountered a reality check as traffic on Tmall Global — the shopping platform it promised would deliver — isn't living up to expectations, The Wall Street Journal reported.
This news is potentially bad timing for the Internet giant as it prepares for its IPO of stock. Alibaba had said Tmall Global would be on the "fast track into China" for new brands on the mainland but 10 months after it launched, WSJ reported it could be "a black eye" for the e-commerce company.
"Traffic on Tmall Global is a fraction of that on Alibaba’s other marketplaces: The site ranks No. 311 out of about 3,500 in terms of popularity in China, while Alibaba’s Taobao and mainland Tmall sites rank Nos. 2 and 5 respectively, according to data provider Alexa Internet," WSJ reported. "Foreign brands on the platform say Alibaba restricts them from buying ads. Some shops are selling only a handful of products each month and are considering leaving the site."
Data gathered for the WSJ indicated about 70 percent of the stores on the site are not putting up much in terms of sales volume. Alibaba has stressed that building sites takes time to grow, but didn't elaborate on what that time frame that would be for Tmall Global.
“That platform is really going to damage [Alibaba’s] reputation,”Jacob Cooke, chief executive of Web Presence in China, a digital marketing agency, told WSJ.
Alibaba's current strategy involves extending it global presence, but its struggles with Tmall Global may set the company back. Alibaba already has a huge share of China's e-commerce business, but this particular site isn't helping the cause.
"The site’s woes are a sign of the challenges Alibaba faces as it extends its shopping empire to more overseas brands," WSJ reported. "Alibaba’s marketplaces dominate e-commerce in China, with the company’s six-year-old mainland Tmall site controlling nearly half of China’s business-to-consumer online sales and its biggest shopping site, a virtual bazaar named Taobao, grabbing a 95 percent share of online sales between Chinese consumers."
Because the results aren't what Alibaba expected, the company may soon face merchant backlash. Merchants pay annual fees of around $5,000-$10,000 annually, plus a $25,000 refundable deposit, so Alibaba must convince its customers the site is worth the investment. Alibaba is also losing out on the 3-5 percent commission it picks up on each sale.
“The results so far have been disappointing—we’re currently doing a 10th of what we had expected,” Warren Matthews told WSJ. Matthews is a health care product provider from New Zealand who uses the Tmall Global platform. “You need more like $250,000 a year to market your products to make serious headway. ...There are a number of issues right now. Unless we can get them resolved, we may even have to consider pulling out.”