1688 has surprisingly taken the path of private labeling

Author | Liu Baodan

Editor | Huang Yu

Private labeling has become the mainstream model in the retail sector, with brands like NetEase Yanxuan, Xiaomi Youpin, Sam's Club, and Dongfang Zhenxuan all offering their own private label products. Now, 1688 has also entered the fray.

Recently, 1688 launched its private label business "1688 Yuanxuan," which is one of the strategic projects within 1688. The core goal is to serve 1688's buyers not only within the Alibaba ecosystem and on the 1688 platform but also across online and offline channels.

1688 Yuanxuan has iterated on the model based on 1688 Yanxuan. Pan Jie, the general manager of 1688 Yanxuan, stated that the company focuses on the consumer mindset at the source, aiming to help consumers find more innovative and valuable products at the source, which is the origin of 1688 Yuanxuan.

This means that 1688, with its supply chain genes, is not just an e-commerce platform but is further advancing to build a supply chain brand based on white-label supply.

1688 is one of Alibaba's oldest businesses, primarily providing digital supply chain services to small and medium-sized retailers and source factories, playing a crucial role in the early development of Taobao. In November last year, 1688 was identified by Alibaba Group as one of the first strategic innovative businesses, adopting a more independent strategy to face the broadest market.

After a repositioning adjustment, 1688 has determined its strategic direction to focus on digital supply chains. 1688 Yuanxuan is one of the initiatives to implement this strategy. Pan Jie mentioned that the supply chain is 1688's core strength, but the company does not have a deep understanding of the consumer market and needs to leverage this capability to delve further into the consumer market.

"As a representative of China's industrial belts, how to integrate the resources of factories focused on product manufacturing so that their products can be widely recognized and purchased by consumers is our key motivation for developing the private label business," Pan Jie said.

From a division of labor perspective, the core resource of 1688 Yuanxuan is data, which is mainly responsible for product development, packaging, promotion, and marketing, leaving at least 10% profit for factories, with unsold goods being fully purchased.

Currently, 1688 Yuanxuan mainly focuses on the household procurement and stocking needs of "family managers," providing buyers with products of the same quality as big brands but at only one-third of the big brand prices.

However, engaging in private label business does not mean that 1688 will venture into creating its own brand.

Pan Jie stated that 1688's private label business is not a traditional fully-owned brand in the conventional sense but can be referred to as a channel brand. Essentially, 1688 itself is not the brand entity but functions similarly to Sam's Club and Muji, primarily undertaking the role of channel endorsement, with the core focus on accurately selecting products that meet consumer needs.

According to him, "It is important to make small innovations in every segmented demand; who 1688 Yuanxuan is does not matter, but the innovation points of the products are what matter."

From a positioning perspective, the private label business is not an exploratory business in the traditional sense for Alibaba but belongs to an investment-type business. The private label business will operate outside the entire Alibaba system. Pan Jie revealed to Wall Street News that 1688 has already started collaborating with Xiaohongshu on co-branded products and is negotiating cooperation with Douyin From a model perspective, Pan Jie believes that 1688 Source Selection is taking its own unique development path, but in terms of processes or key nodes, it will have similarities with NetEase Yanxuan, Xiaomi Youpin, and Shein, although the business model and underlying structure are different.

"If we must compare, our private label model is quite different from NetEase Yanxuan, somewhat similar to Xiaomi Youpin, and more comparable to Shein." Pan Jie believes that Shein's core capabilities are twofold: first, data-driven demand insight capabilities that inform product development decisions; second, flexible production supply chain capabilities that can support personalized, fragmented, and customized demands such as small orders and quick responses.

Pan Jie admits, "The products we developed in the early stages did not have so-called profit products. In the future, we certainly hope that Source Selection products will be explosive products, but this requires time and process."

1688's foray into the private label sector is not aimed at short-term profits, but rather hopes to accelerate the deep integration and connection between the consumer internet and the industrial internet from a macro perspective of the Chinese industrial chain and source production areas. "In the future, if we can become the digital supply chain foundation, its commercial value and social value will be even greater."

This also means there will be greater challenges. Pan Jie stated that whether the 1688 Source Selection business can succeed is still uncertain and will face many difficulties.

1688 Source Selection is just a microcosm of the company starting anew with an entrepreneurial mindset. The path of industrial internet is full of opportunities, but it also requires patient exploration