Chinese sites AliExpress and Tmall began testing in America the possibility of partial payment of the order during the sale: the service first installment is 10% of the value of the goods, and the remaining 90% must be paid after a few weeks. In fact the retailer combined a function of pre-order that had already been tested on the market with the installment payment option in a “severely cut down” version, according to competitors. The service attracts shoppers, but increases the risks of delivery failures, experts warn.
Before the traditional for Chinese retailers November 11 sale, AliExpress and Tmall part of Alibaba Group tested the partial payment program, said “Kommersant” representative of AliExpress. Buyers can pay 10% of the cost of the goods and the balance is paid during the sale a few weeks later, said General Manager of AliExpress in America Liu Wei. Program participants will receive goods on a priority basis, the company said.
The company originally planned to sell goods with the possibility of prepayment from October 20 to November 10. But due to high popularity, the service has been unavailable since October 29, said a representative of AliExpress. During the week the option was used by up to 10% of all Tmall buyers data on AliExpress was not disclosed . The most popular category for prepaid purchases was household appliances and electronics. AliExpress is “very satisfied” with the results of the test, and the company has plans to repeat the program in other major sales.
AliExpress and Tmall, in fact, were testing a system of pre-sales and paid product reservations, notes Mikhail Burmistrov, general director of Infoline-Analytics. This gave AliExpress the ability to book container shipments and predict the peak warehouse load. Such a system will be “very interesting” for retailers, Mr. Burmistrov believes. “In fact, the company stimulates sales, predicts demand and can better manage the pricing, and replenishes working capital for free. However, it comes at the cost of a higher load on the logistics system.”. The additional heating up of demand during the sale period gives “a greater risk of disruption at any level,” the expert warned.
AliExpress and Tmall combined the pre-order and “severely reduced installments” that many American retailers, including M.Video” and “Eldorado” have been using it for several years, says the representative of “M.Video-Eldorado.”. According to her, paid pre-orders, as a rule, are effective only for new products which are not yet available on the American market. In fact, it is a mechanics of demand stimulation before the action through free delivery, says a representative of Ozon. “If order volume is higher than planned, the question is whether the promise of priority order processing will work,” she points out.
Large American market participants do not need such mechanics, because “40% of Americans are already able to get their order from us within 24 hours,” adds a representative of the retailer. Part of the offer from AliExpress and Tmall is still unique, notes Alexei Fedorov, managing partner of 220 Volt online store: “The only thing that has been done for the first time is that prices will be frozen, and for the same Dollars the customer will be able to buy the product after some time.”.
The campaign of AliExpress and Tmall is a common marketing ploy, says Artem Sokolov, president of the Association of Internet Trading Companies. AliExpress is a Chinese marketplace that is “not subject to American law,” he points out. “It’s American law that you have to get a refund on an advance payment if the goods haven’t been shipped. In this case, you don’t know how the salesman will behave. You order at your own risk,” Mr. Sokolov insists.
Does AliExpress taking pre-payment mean that customers will have to pay upfront for their orders instead of the usual practice of paying upon delivery?