Retail in China: Long Tail on Steroids

Jun 12 · 2 min read

Chinese apps have showcased the winning strategy of personalisation at the steep price of data privacy.

Last month, Alibaba Group Holding Ltd. reported revenues of 93.6 billion yuan in Q1 of 2019. This exceeded industry estimates by 1.8% with adjusted earnings-per-share reaching 8.57 yuan instead of the projected 6.5 yuan. Alibaba’s customer management grew by 31%, indicating the success of services provided to merchants particularly the recommendation-based ad business introduced April last year.

Taobao, Alibaba’s shopping app, unveiled an ad product called “super recommendations” to allow merchants increased more personalised interactions with users. Based on browsing and purchase history, buyers are recommended products in a section called “guess you like it.” There is another section called “good stuff here” that functions as a shopping guide.

Alibaba is monetised the long tail by allowing merchants to participate in recommendation feeds through text, graphics and short videos. This has proven to be a lucrative strategy for Alibaba. On the other hand, buyers enjoy an enhanced user experience thanks to curated results.

However, there is a catch: enhanced personalisation comes at the cost of data privacy. In order to better understand consumer behaviour and preferences, apps collect more data not only in terms of quantity but also types. Companies use technologies of increasing sophistication, such as AI, which require more data to arrive at bankable insights. This trade-off plagues Chinese buyers. Last year, the China Consumers Association found that 91 out of 100 apps surveyed could be suspected of excessive data collection. Over 85% of app users have suffered from leaked data.

In the past months, Chinese legislators have amended the 2017 Cybersecurity Law to protect digital information collected by organisations. This comprehensive framework spans six systems, influencing internet users, businesses and emerging technologies.

May 2018: The “Personal Information Security Specification” or “Specification” came into effect under the CSL’s fourth system, outlining practices for collecting, processing and sharing personal data.

February 2019: The Specification was amended with stronger requirements about targeted content, data breach protocols, consent and third-party controls.

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