Alibaba aims to slash wine prices
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Online retailer Alibaba believes it has found a way to cut the retail prices of wine in China.
Using its business to business website 1688.com Alibaba has commenced selling wine direct to retailers, short-circuiting a raft of middlemen currently adding margins yet no value to the supply chain.
Buyers from 1688.com are negotiating to buy wine in bulk direct from Spanish exporters which it then sells online to retailers.
According to China news service Xinhua, in an article published on Alibaba’s own news website, a bottle of wine sold for 10 euros (68.54 yuan) in Spain can cost more than 240 yuan in China. That’s because the wine is often sold and on sold exporters to general agents, regional agencies and wholesalers before it finally reaches the retail shelf for consumers to buy. Each time the wine changes hands some 15 per cent margin is added to the price, along with additional freight charges and duties.
Alibaba estimates that using 1688.com to link exporter and retailer, the same 10 euro bottle of wine in Spain could be retailed in China at just 116 yuan – that’s less than a half of the price traded through traditional channels, according to Liu Fei, a department manager at 1688.com.
Questions & Answers
Q.How does Alibaba intend to lower the retail price of wine in China?
How does Alibaba intend to lower the retail price of wine in China?
Alibaba plans to sell wine direct to retailers through its business-to-business website 1688.com. This approach bypasses several middlemen who currently add margins without contributing value to the supply chain.
Q.Why is the price difference between Spanish and Chinese wine so significant currently?
Why is the price difference between Spanish and Chinese wine so significant currently?
A bottle of wine that costs 10 euros in Spain can reach over 240 yuan in China. This is because the wine typically passes through multiple hands, including general agents, regional agencies, and wholesalers, each adding a 15% margin plus charges.
Q.What is the estimated retail price reduction for wine achieved through Alibaba's new method?
What is the estimated retail price reduction for wine achieved through Alibaba's new method?
Alibaba estimates that a 10 euro bottle of wine could retail in China for approximately 116 yuan using its new method. This represents a saving of more than half the price compared to traditional distribution channels.
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