1688 finds new paths for business growth

Author | Liu Baodan

Editor | Huang Yu

The e-commerce industry continues to be highly competitive, and finding a way to break the growth dilemma in e-commerce is undoubtedly the top priority for platforms like Alibaba, JD.com, and Pinduoduo in 2025. As the upstream supply chain of e-commerce platforms, Alibaba's source factory goods platform 1688 has already started to take the lead.

On February 10, 1688 launched the "Strong Recovery of Industrial Belt"招商活动， during which the company announced five major initiatives centered on growth and cost reduction. At the same time, 1688 also identified new business tracks such as going overseas, distribution, customization, brand creation, and offline operations.

From 招商举措 to growth strategies, 1688 has released a series of significant moves at the beginning of the year, indicating that the e-commerce market will still be in a competitive state filled with smoke in 2025.

1688 is one of Alibaba's oldest businesses, primarily providing digital supply chain services for small and medium-sized retailers and source factories, playing a key role in the early development of Taobao. In November 2023, 1688 was identified by Alibaba Group as one of the first strategic innovative businesses, adopting a more independent strategy to face the broadest market.

According to Alibaba Group's quarterly financial report for the period ending September 2024, the wholesale business in China, where 1688 operates, achieved revenue of 6 billion yuan, with a growth rate of 18%, remaining flat compared to the same period last year, driven by the growth of value-added service revenue from paid members.

Currently, the 1688 platform has 1.07 million merchants, with over 600,000 factories. China has 6 million factories in total, with 2 million being large-scale factories, meaning that the number of factories on 1688 accounts for one-tenth of the national total, and the number of large-scale factories accounts for one-third of the national total.

After the positioning adjustment, 1688 has determined its strategic direction as a digital supply chain, like a digital chip that integrates over thirty years of source factory goods in China, which will be integrated into places with traffic and user demand. In 2025, 1688 will continue to deepen this strategy, and the five major initiatives are the implementation of this strategy.

The five 招商举措 of 1688 can be summarized into two aspects: one is to focus on business growth, including maintaining business, seizing business, and going out; the other is to reduce costs and increase efficiency, including cost reduction and burden reduction.

According to Wall Street Insights, the targets of this 招商活动 are mainly small and medium-sized factories in the middle and upper tiers, which are also the main suppliers of 1688.

These merchants share the commonality of being source manufacturers in industrial belts, focusing on those undergoing generational succession, accelerating digital transformation, embracing AI technology applications, and attempting to enter cross-border markets, especially brand OEM factories with small order quick returns and light customization capabilities, as well as "specialized, refined, unique, and innovative" enterprises.

For these merchants, 1688 provides a "dual guarantee" service, which ensures the number of customer acquisitions and order quantities, guaranteeing that merchants have reasonable profits to carry out digital transformation and upgrades. At the same time, 1688 has also set up special funds to enhance buyer experience to attract more users.

According to Wall Street Insights, in 2024, 1688's investment in traffic will be several times that of the previous year, and the investment in 2025 will continue to double. During the recently concluded Spring Festival, 1688 placed 391 large brand lightbox advertisements at airports and high-speed rail stations in first- and second-tier cities and core industrial belt cities, covering over 100 million people More importantly, 1688 will also step out of the Alibaba ecosystem to expand into off-site, offline, and overseas markets, seizing more business opportunities.

Currently, merchants can distribute products from 1688 to Taobao, Alipay, and WeChat platforms, and in the future, it will continue to expand to almost all mainstream e-commerce platforms. At the same time, 1688 supports merchants in going global through semi-managed and fully managed models, aiming to enter 15 overseas countries and regions by 2025.

The cross-border business of 1688 mainly serves small and medium-sized merchants (B-end buyers) overseas. In 2024, the order volume of cross-border business on the 1688 platform is expected to grow by over 70% year-on-year, with orders from overseas local users increasing by over 50% year-on-year.

1688 has tested local distribution business in Vietnam and Kazakhstan. Zhuo Han, General Manager of the Ecological Development Department of 1688, stated that in addition to cross-border distribution, the focus for 2025 will be on localization, including trunk transportation through orders, deploying localized overseas warehouses, and building an overseas warehouse distribution network.

In terms of cost reduction and efficiency improvement, all AI products aimed at merchants on 1688 are free. The company has not only launched free AI digital employees but has also integrated DeepSeek, which is currently undergoing performance testing and will gradually open to merchants starting in mid-February. Additionally, the business large model based on DeepSeek will also be launched in February.

1688 will also severely crack down on malicious refund and "sheep shearing" behaviors, upgrading its anti-cheating model to accurately identify address numbers. 1688 strictly controls the commercialization rate of the platform, clarifying the operational principle of "buyer experience first, seller interests prioritized over platform revenue."

Behind the breakthrough of source manufacturers, 1688's confidence comes from its insights into the e-commerce market. Beyond the wholesale model, the company has summarized five major new business opportunities, which will be the main focus of 1688 going forward.

In addition to expanding overseas markets, 1688 will also strengthen distribution, utilizing the platform to reduce inventory and promote new products, while continuously focusing on customization, brand creation, and offline businesses. For instance, in terms of branding, 1688's "Source Selection" collaborates with many source manufacturers to help them create their own brands.

Challenges should not be underestimated. The competition in the e-commerce industry is becoming increasingly fierce, making it more difficult for merchants to grow their businesses. As a platform, 1688 must not only gain insights into consumer demand but also continuously push factories to improve the quality-price ratio of their products, which is a significant challenge, especially as going overseas imposes new requirements on the company's capabilities.

More than a year ago, 1688 gained independence during Alibaba's strategic adjustment and began its second entrepreneurial journey. After more than 20 years of development, Alibaba's oldest business can finally operate with less burden. However, for 1688 to take advantage of this momentum, it must still face the harsh test of the market