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Why Alibaba wants to conquer Europe from Spain

The Dutch summer is nearing its end. We’ve returned to one final week of hot weather and sunny days before we will inevitably roll into the autumn season. I am sent away to sunny Spain – lucky person that I am! – on my final trip for Locatus this year, in order to draw up an inventory of the last remaining piece of shopping area that we don’t have records on yet.

While packing my bags I spot an interesting piece of news: Alibaba is opening its first physical ‘AliExpress Experience Store’ in the shopping mall Xanadú in Madrid. At 760 m2 retail floor surface it will offer for sale about 1,000 items (mostly electronics). Happy coincidence – my trip starts and ends in the capital, so I’ll be sure to spare an hour or so to visit the AliExpress Plaza myself.

Alibaba and the 40 thieves

Whenever I hear the word ‘Alibaba’ I always have to think about the fairy tale of the same name, where Alibaba becomes magnificently wealthy by duping a gang of 40 thieves. And this may be due to my professional background, but I can’t escape the comparison between the thieves and physical retail…

Gateway to Europe

My curiosity is truly sparked when I read that Spain is destined to act as Alibaba’s gateway to the rest of Europe. This is because Spain (after China, the US, and Russia) is Alibaba’s fourth largest market when measured in turnover.

All the more remarkable because the online shopping market share in Spain is relatively small – less than 5% where the rest of Europe averages at 8-9% (source: Statista 2018). That must mean that Alibaba has a significant share of the Spanish market. Over the course of 2019 the number of Spanish companies that offer products via AliExpress has increased from 3,000 to 10,000. The iconic Spanish department store El Corte Inglès has been active on the platform for a while now, and had the honour to be the first store in Spain to accommodate an AliExpress pop-up within its doors.

What do the Spanish see in China?

In Spain, going to the Chinese (‘ir a los chinos’) has nothing to do with take-away meals, but rather refers to the true explosion of Chinese stores that have opened in Spain since the crisis of 2008. The number of stores (ca. 16,000 in 2012) is so big that a new industrial terrain called Cobo Calleja has sprung into being near Madrid. In this industrial/retail area of almost 20 million m2 you can only find Chinese wholesale businesses, and more than 10,000 Asian employees (source: El Economista).

China is wrestling with tremendous overproduction. To get rid of all these excess products, China desperately needs the rest of the world. Logistical routes over land and water are crucial. In this context, the Chinese ‘Belt and Road Initiative’, better known as the New Silk Road, is absolutely fascinating.

The economic crisis of 2008 and monetary deficits of southern Europe were the ideal prelude for Chinese expansion. After investing in Greek, Italian, and Portuguese ports, it has now also booked its first successes in Spain by buying into the largest container ports of the country (Valencia and Algeciras). China now owns almost 15% of the European port business, and thus has a huge influence over the southern European infrastructure.

Alibaba versus Amazon

E-commerce plays an important role in China’s attempts to sell off the fruits of overproduction. Now that Alibaba has made its European intentions clear by entering the Spanish market with its first real-life store, the titanic battle between Amazon and Alibaba appears to enter into a new stage. At the moment, Amazon, and to a lesser extent Ebay, are still the largest platforms in Europe. But by opening its new store in Spain, Alibaba definitely shows itself to be on the offence!

(source: European Ecommerce Report 2018)

The AliExpress Plaza in Xanadú Madrid

Back to the store. Full of expectations, I hope to be dazzled and amazed by the ultimate shopping experience, like one of my own 1001-night fairy tales.

The store front looks promising. The mass of people does, too. Around 250 visitors gather on a Friday afternoon between 12:00 and 13:00, out of which about 10-15% is waiting in the queue. After that, though, I’m mostly just disappointed. The store sells mainly electronics: laptops, tablets, mobile phones, robot hoovers, and other gadgets which can be found in any other, less hyped-up electronic store. It’s all regular brands at regular prices. There is just one Chinese exception to the rule: the brand Oppo, which even has its own employee.

On top of that, none of the products actually work in this store. There is no WiFi connection, either. Which part of this represents the shopping ‘experience’, then? I can touch things, but not try any of it out? I try my luck with the super-friendly store assistant to get some product information. ‘Sorry, sir, I really don’t know,’ he says. Huh?

Because the supply is so limited, I try to order alternatives online. ‘Sorry, sir, there is no screen available to order.’ I’m stunned to silence for a few moments, and try something else: ‘Can you deliver to my home address?’ Apparently not. How do you mean, ‘omnichannel’?

Finally, up to the check out points. ‘You are the 15th person in the queue,’ drones a small voice in my head. ‘Can I maybe pay via a tablet from one of your employees?’ You guessed it: the answer is No. Am I that demanding?

With this awful trial finally behind me, I make my way to the Apple store one floor up. What a relief. A confused-looking but very helpful and knowledgeable nerd with a goatee is able to tell me absolutely everything about the product he’s selling. Every product is available on- and off-line. Home delivery? Not a problem. Check-outs? Nah, we can arrange that via the goatee’s iPad.

2019 – here we are! The same principle goes for the PhoneHouse store also in Xanadú, or the beautiful Huawei store on the Gran Vía in downtown Madrid.

Final judgement of this consumer? You can guess!

Rob Muetstege (guest blog)

Guest blogger Rob Muetstege has mapped out the retail parks in Spain for Locatus. After 41 years at Hema - for the most part - as Head of Site Analysis and Strategy, he is starting his own company: RM Retail Advice.