How Alibaba Turns Wealthy Shopaholics Into a Marketing Squad
Meng Cui Yi spent almost $90,000 at Alibaba’s online mall in the past year. The 33-year-old restaurateur buys pretty much everything there—Burberry apparel, La Mer skincare products, furniture, groceries and more. After Alibaba’s annual Singles' Day sale last year, Meng’s purchases were piled so high outside her Shanghai apartment her businessman husband could barely get in the door.
Meng’s lavish spending habits earned her an invite to Alibaba Passport, or APASS. An exclusive rewards program, APASS is a mashup of Facebook, Amazon Prime and the American Express Black Card. Its 100,000 members get the usual perks—deals, trips, personal service—but are also encouraged to join online communities of shopaholics who blog and talk up Alibaba.
Rolled out about two years ago, APASS has helped Alibaba persuade the well-heeled shoppers trolling its Tmall and Taobao shopping emporiums to keep spending. That's crucial because the Chinese economy is deteriorating and Alibaba is struggling to maintain rapid-fire growth. Just last week, Singles' Day sales grew at half the pace they did the year before. Meanwhile, the company is trying to ward off growing competition from rivals like JD.com, which is starting to attract urban big-spenders.
"Standing still is not an option because competitors are nipping at their heels," says Duncan Clark, founder of investment advisory firm BDA China and an early adviser to Alibaba. "It's very much worth their while to take care of the high rollers."
Like any premium rewards program, APASS pushes exclusivity by setting a seemingly high bar for membership. To make the cut, a customer must drop more than $15,000 a year on Alibaba’s e-commerce sites, though the company says members typically spend more than $45,000. Spending is just one criterion. Shoppers also receive a user score, based in part on the frequency and credibility of their interaction with other customers. The higher the score, the more likely they are to be invited to join APASS.
"APASS members love to share," says Hai Wang, Alibaba’s head of customer experience and innovation. "Every day in our APASS Members Zone, a lot of members are sharing their daily life stories, shopping tips, showing off their shopping lists et cetera. A good number of APASS members are verified bloggers."
Meng is Alibaba’s dream customer. "I talk to other APASS members every day," she says. "I never actually buy anything from physical stores unless I’m going out with friends or something." Meng’s loyalty got her invited to the inaugural APASS annual meeting, one of 50 members selected. Held in May at Mandarin Oriental hotel in Shanghai, the splashy event included a buffet dinner, lucky draw and an awards presentation—at which Maserati was voted Most Beloved Brand. Chief Marketing Officer Chris Tung gave a speech.
Rewards buy loyalty and then are turned into marketing opportunities. In early September, Alibaba took 10 APASS members on an all-expenses paid, nine-day vacation to Italy where they visited a Maserati factory, La Perla’s flagship lingerie store and vineyards operated by vintner Mezzacorona. Portions of the all-expenses-paid trip were streamed live on the Tmall app and Youku Tudou, a video site Alibaba Chairman Jack Ma acquired last year. The company says the vineyard tour was viewed 400,000 times and boosted sales.
Public displays of loyalty from its most elite customers also could help Alibaba buff a reputation hurt by revelations that some of the goods it sells are knockoffs. While global luxury brands like Maserati and Burberry have official storefronts on Alibaba's Tmall, the e-commerce giant also relies on fees from its Taobao platform for independent retailers, which have been known to sell counterfeit merchandise. Investors and international brands say Alibaba hasn't done enough to crack down on fakes, and a retail association recently suggested that the company be put back on a U.S. government blacklist. Getting customers to buy more upscale stuff could help persuade more luxury brands to sell on Alibaba.
Marshall Meyer, a management professor at the University of Pennsylvania’s Wharton School, says APASS is "a very clever form of sales promotion. It's a great publicity stunt."
Alibaba says it will double the number of APASS members next year. It's an audacious target but perhaps achievable given the explosion of well-heeled consumers who increasingly shun brick-and-mortar stores. While e-commerce now accounts for 15 percent of private consumption, Boston Consulting Group expects it to reach 24 percent in the next five years. APASS member Sukin Su, 27, buys everything from Chilean blueberries to Gucci handbags on Tmall—racking up as much as $50,000 a year. "I tell everyone why don't you all shop on Tmall," she says. "It's fast, and if you have any problems they can solve it for you."