Here’s How Alibaba Can Benefit From Its Partnership With Mattel – Forbes
Recently, Alibaba and Mattel entered into a strategic partnership which will allow the latter both to sell toys in China via Alibaba’s marketplace and to use its data and insights on the Chinese consumers to develop new toy products specifically targeting the Chinese market. This deal not only furthers Alibaba’s goal to bring foreign brands to China via its marketplace, but also allows the company to monetize its huge data mine around consumer preferences and habits. Mattel will leverage this data to make its brand more relevant to Chinese parents. Alibaba is the largest e-commerce platform in China and its annual transaction volume crossed 3 trillion yuan ($463 billion) last year. Foreign players selling on its platform are the key catalysts for this growth. However, these large volumes also result into vast amounts of data around consumer purchase patterns, which Alibaba is now looking to monetize. We believe the partnership with Mattel will enable Alibaba to use its consumer data more effectively leading to a mutual benefit for both companies.
Customizing Foreign Products To Meet Chinese Consumer Preferences
While several foreign brands are looking to enter the high potential Chinese market, their products might not always appeal to the Chinese consumers. Cultural differences between the West and China make certain products nonviable in the region. However, customizations and minor modifications in these products to suit Chinese needs can help these players grow in the region. While Alibaba has been providing a platform for foreign players to sell their products in China, the company is now looking to do more in terms of providing data and insights to make the products more relevant to the region. For instance, Chinese parents prefer to invest surplus funds towards educational pursuits for their children rather than buying expensive toys. This insight has encouraged Mattel to develop educational content based toys which can persuade Chinese parents to buy its products. Alibaba’s data can help Mattel get specific insights on its products and the company can then customize them according to the needs of the consumers. The toy market in China is highly fragmented and much smaller in size compared to the U.S., given that Chinese parents believe that toys can impact the academic performance of their children negatively. If Alibaba is able to help Mattel in developing the toy industry in the region, it can also benefit from the higher volumes of toys sold on its platform.
We believe Alibaba’s strategy of allowing brands to leverage its data on consumer spending habits can benefit the company in the long term. As it looks to grow volumes rapidly in the next five years, products tailor-made for the Chinese market can lead to higher sales for these brands. Furthermore, a strategic partnership of this nature also allows Alibaba to monetize the huge data mine it creates through the millions of transactions on its platform every year.
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