Alibaba’s AliExpress Tests Membership Program in Challenge to Amazon

AliExpress, Alibaba Group’s international e-commerce site, is testing a new VIP membership program in some markets, as it tries to attract and retain high-spending customers in a challenge to Amazon, according to a person with direct knowledge of the efforts.

The VIP program, called Elite, is available on an invitation-only basis to customers who have spent more than $800 a year on AliExpress purchases, the person said. The company is piloting the program in Australia, the U.K., Germany and Spain, and plans to bring it to more European markets as well as South Korea next month, they added.

Unlike Amazon’s Prime paid-subscription service, Elite doesn’t charge any membership fees. Member benefits include an additional 5% discount on a wide range of products, around-the-clock online customer service and a hassle-free return policy, according to the person.

AliExpress’s previously unreported move reflects a broader shift in the global e-commerce market. Growth at rival Chinese companies Shein and Temu, which led an aggressive price war that disrupted the whole industry, slowed significantly last year due to tariff hikes on the imports of e-commerce parcels in the U.S.—a move the European Union is emulating. Now, platforms including Shein, Temu and AliExpress that relied heavily on direct-from-China shipping are adjusting their business model, shifting focus to branded goods and premium services instead of low prices. TikTok Shop, for example, this year has been testing TikTok Shop Plus, a paid membership program similar to Amazon Prime.

AliExpress also plans to bring Elite to the U.S., but the timing is undecided at the moment, the person said. AliExpress internally projects that Elite will have 1 million members by the end of this year, according to the person.

The EU is adding a two euros handling fee per parcel from outside the region in November, in addition to a three euros levy for each parcel valued up to 150 euros.

“Europe right now is the least favorable market for direct-from-China e-commerce apps because each item gets a 3 euros plus VAT fee,” said Juozas Kaziukenas, an independent e-commerce analyst. “They can’t absorb those fees so they increased prices and significantly reduced marketing, which negatively affected both existing customer repeat purchases but also effectively killed new customer acquisition,” he said.

Alibaba’s e-commerce business in China, which generated more than $16 billion in revenue in the quarter through June, is still its biggest source of revenue. But that figure was down 8% amid weak consumption in the Chinese economy, adding incentive for the company to seek more international business.

AliExpress is taking other steps to attract customers who are used to Amazon’s services. For example, it’s testing next-day delivery in some European cities with mature logistics infrastructure such as Madrid, Paris and Warsaw, starting with items that are shipped from local warehouses. It’s considering making next-day delivery available to more markets, according to the person with direct knowledge. AliExpress had 157.6 million monthly active users as of June in Europe, compared with Amazon’s 193.9 million, according to disclosures the companies made under Europe’s Digital Services Act.

A few years ago, Alibaba fought a costly battle against Shein and Temu. To keep up with the two fast-growing rivals, AliExpress overhauled its supply chain and launched a new service called Choice, which competed directly with Shein and Temu by offering ultra-low prices and free delivery in some cases. While Choice boosted AliExpress’s revenue at the time, it also contributed to major losses. In the quarter through March 2024, Alibaba said its international e-commerce business recorded a loss of $566 million before interest, taxes, depreciation and amortization, due in part to the growing investment in Choice.

As the price war with Shein and Temu subsided, AliExpress is trying to reposition itself as a platform more similar to Amazon. For the past year, Alibaba has been increasing the percentage of branded products—rather than much cheaper alternatives from unknown manufacturers—sold on AliExpress. In some European markets including Spain, Germany and Poland, the percentage of branded products is now around 50%, according to the person with direct knowledge.

AliExpress’s new strategy that focuses on profitability is paying off to some extent. It recorded an operating profit in the quarter through June. The revenue in that quarter for Alibaba’s international e-commerce division, which includes AliExpress as well as other businesses such as Southeast Asian shopping site Lazada, declined 1% from a year earlier to $4.09 billion.

Juro Osawa is a reporter covering tech in Asia, from Alibaba and Tencent to startups. He previously worked for The Wall Street Journal. He is based in Hong Kong and can be found on Twitter at @JuroOsawa.