Journalist: Teresa Wang | Editor: April Cho
As with many holidays, every Singles' Day has marked record highs in profits for Chinese e-commerce giants. This year was no exception. On Singles' Day this year, customers spent $30.8 billion on TMall, Alibaba’s widly popular online shopping platform. As a result, Alibaba beat its record for 10-year straight and grew 27% from last year.
However, there are more than enough articles about the profitability of Singles’ Day (and other similar commercial holidays like Valentine’s Day). Instead, this article looks at how Chinese e-commerce giants like Alibaba are increasingly using blockchain technology to win consumer trust. A large part of Alipay’s success can be credited to its ability to identify and solve this “trust” issue.
The importance of consumer trust for Chinese consumers has long been a topic of concern for Chinese retailers. Case in point, e-commerce giant Alipay became popular by solving this trust issue between buyers and sellers. Alipay’s innovative platform, which would only release payments to the seller after the buyer confirmed the receipt of product, helped Taobao overtake EBay China and afterwards dominated consumer to consumer (C2C) ecommerce platforms in China.
Although the trust issues between buyers and sellers have been resolved with respect to payment, Chinese companies have continued to struggle to gain consumers’ trust in signaling product authenticity and food safety. To date, there had not been a good mechanism to improve food safety and product authentication.
Now, Alibaba is turning to blockchain technology to further improve its credibility with consumers. In February of 2018, Alibaba announced “Traceability for TMG”, an ambitious product traceability consortium blockchain connecting 63 countries, covering 3,700 types of goods and 14,500 brands. The system collects data for each item at every step of the product processing- from production, shipping, custom clearance and inspection. As a result, customers are able to access their products’ journey simply by scanning the QR code on the package.
Alipay implemented this system for the first time on Singles’ Day with 1.5 billion imported and high-end products sold on TMall. Each product—including diamonds, alcohol, honey, cosmetics-- was stamped with its own unique blockchain ID.
The incorporation of identification through blockchain technology has important implications particularly for products that Chinese consumers would want to track. TMall collaborated with a Belgium diamond company so that consumers could identify the origins of each diamond on the blockchain technology. In the future, blockchain technology’s tracking system has the potential to reverse Chinese consumers’ unwillingness to buy domestic products that have faced consumer lash back (like milk formula).
The willingness to adopt blockchain technology is not limited to industry leader Alibaba, and seems to be a broader trend in the industry. JD.com and Suning, two other major ecommerce platforms also adopted blockchain to provide product traceability. On Singles' Day, JD.com also registered over 1.4 billion products on the chain
Blockchain technology is certainly not a cure all for existing problems. Indeed, the technology’s efficacy has been questioned by local media. For example, blockchain technology could not stop people from adulterating food at the source, entering false information or swapping genuine products with counterfeits.
Whether blockchain technology can in fact combat counterfeit claims to improve food safety remains to be seen. However, by making data traceable and improving stakeholders’ accountability, the technology definitely has the potential to drastically improve supply chain data quality. This Singles' Day demonstrated a distinctly Chinese perspective on the potential of blockchain technology: to bridge the trust issue between corporations and consumers.
