Unilever to stem China losses with sweeping Alibaba partnership

The partnership, announced today, is seen as a significant expansion of cooperation between the two companies. Unilever first opened a virtual store on Alibaba’s Tmall.com online shopping website in 2011 and added a Tmall Global flagship store in 2014. The agreement also appears to be a response to retailers reducing their stocks of the FMCG giant's products in response to a slowing economy in 2014.

Unilever's North Asia president, Marijn Van Tiggelen, said in a press statement that Unilever chose Alibaba over other internet firms in China, as it is the "leading internet company" with "not only an online store, but also a solution platform for online payment, e-finance, and ecommerce logistics". 

Daniel Zhang, chief executive officer of Alibaba Group, stressed that the Unilever collaboration will go beyond product sales. The companies "will jointly innovate in big data analytics application, cross-border ecommerce, consumer protection and supply-chain management," said Zhang in a statement.

More specifically, the duo said they would work together to:

• Expand Unilever's distribution channels with an emphasis on giving rural consumers in the country's less-developed regions more convenient access to Unilever products through Alibaba's 1,000 county-level and 100,000 village-level Taobao Rural Service Centers and Alibaba's logistics affiliate, Cainiao.
• Develop cross-border ecommerce cooperation on Tmall Global that allows Unilever merchandising through government-backed free trade zones and bonded warehouses in China.
• Optimise Unilever’s digital advertising strategy through Alimama (Alibaba's marketing technology platform) and reach more consumers through online-offline retail integration.
• Combat counterfeiting of Unilever's brands by stepping up the company's participation in Alibaba’s Blue Stars program, in which each product is tagged with a unique QR code that allows the consumer to verify its authenticity and origin.

To mark the beginning of the new partnership, Tmall will host a promotion from 22 through 24 July featuring flash sales with 50 per cent discounts on popular Unilever products. 

Alibaba's vision to build the "future infrastructure of commerce" meets Unilever’s development needs in China, added Van Tiggelen.

Ecommerce accounted for 10.7 per cent of total retail sales in China in 2014, according to China’s National Bureau of Statistics, with ecommerce set to grow faster than the overall retail market. 

However, despite Unilever's online storefront presence on Tmall, as well as on Alibaba rival JD.com, it still felt the pain of the slowdown in China last year when sales for two consecutive quarters were down by 20 per cent. This led to bricks-and-mortar retailers and distributors destocking Unilever products. James Allison, Unilever’s head of corporate strategy, described product visibility at the time as "not that great". Unilever will issue its second-quarter and half-year results Thursday.