A guide to Alipay, Alibaba’s cross-border payment solution
China’s fast-growing cross-border e-commerce market represents an exciting opportunity for international brands hoping to expand their businesses. And e-commerce companies have been quick to create tools to make overseas shopping more accessible to Chinese consumers. Alibaba’s Alipay ePass payment program is one tool and was once expected to be the solution to international luxury brands’ battle with counterfeiting issues and the rampant overseas daigou market. Since launching the program more than two years ago, Alipay has formed partnerships with many merchants, including luxury and fashion e-commerce sites Revolve and Gilt, to assist them in serving Chinese consumers.
Here’s an outline of what luxury brands need to know about the Alipay ePass program and where it’s headed today:
What is the Alipay ePass program?
In October 2014, when overseas shopping started to gain ground among Chinese consumers, Alibaba launched its Alipay ePass payment system with US brands on their e-commerce platform, allowing Chinese shoppers to pay for products with Chinese currency through Alipay. Merchants that join ePass have access to Alibaba’s global logistics network, according to Alizila, the news hub for the Alibaba Group. The ePass program collects commission fees from international dealers.
What problems can the ePass program solve?
The introduction of the program was a timely solution to a payment headache for international brands outside of the Chinese market that hope to establish a direct relationship with consumers. But ePass was designed to bring more than just a payment solution. Alibaba’s cross-border payment system also helps brands with logistics and marketing issues.
Foreign currency settlement
Due to factors such as government regulation over the payment industry and personal preferences, international credit cards have never been an ideal payment vehicle for Chinese consumers to make transactions online. In the beginning, this caused a hurdle for Chinese shoppers looking to buy international goods. The basic function of the ePass program is thus to act as a third-party to settle foreign transactions on behalf of consumers and merchants. Alipay works with a broad network of financial institutions around the world, which allows them to deal with major currencies and offer reasonable currency rates.
As a member of ePass, brands will automatically be allowed to use Alibaba’s global logistics network. When a Chinese consumer places an order with a brand, Alibaba’s logistics team will pick up the goods from the merchants, ship them to China, and deliver them to consumers. Buyers can keep track of the status of their delivery on Alipay.
Endorse international retailers
International brands can also gain awareness and trust from Chinese consumers if they work with ePass. People are often uncertain about the legitimacy and credibility of buying from an overseas website if they have never heard of it before. The ePass program thus can endorse international retailers, ensuring consumers the safety of their payment, as well as the authenticity of the products they purchase. It also serves as a good tool for foreign brands to test the market sentiment without establishing a physical store in China.
What has changed since its launch?
The ePass program has become more localized. When it was launched in 2014, the program did not offer the English-Chinese translation for Chinese users. Program designer Jingming Li told Chinese media that it was designed this way because he believed wealthy Chinese hoped to experience an “authentic” shopping experience online.
Users who do not read English can now use Alipay to purchase overseas goods online. For example, on US-based Gilt, shoppers need to set their country of residence as China in order to see the Alipay payment option. They can then set their language as Mandarin. It represents a step towards catering to the needs of local Chinese consumers.
Meanwhile, Alipay’s key rival, WeChat Payment, has caught up with the game by offering a similar payment service for app users to make purchases from overseas businesses. A major difference between the ePass program and the payment solution offered by WeChat is that the latter mainly targets Chinese outbound travelers, not domestic consumers who engage in overseas shopping. It demonstrates that Alibaba has an advantage with a global logistics network that can take care of the shipping process for foreign merchants.
However, Alipay ePass seems to have fallen short of its hopeful role as a groundbreaking tool to curb the daigou trade that has cast a shadow for luxury brands who want to have better control of their distribution channels. The gray zone continues to develop in 2017, leaving both international brands and Alibaba to consider why the direct-to-consumer (DTC) channel they built has not been attractive enough to Chinese consumers.
This article was originally published on Jing Daily.