---
title: "Doubling Down on Taote & Taocaicai: Alibaba's M2C Model Targets Lower-Tier Markets"
description: "As young people flock to megacities, a notable trend is emerging: new economy, new consumer brands, and pop culture are increasingly originating in lower-tier cities. Alibaba's Taote and Taocaicai are leveraging the M2C model to tap into this vast market, with annual active consumers reaching 270 million and rapid growth in orders."
author: "君子不器"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2021-12-18"
language: "en"
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original_source: "https://mp.weixin.qq.com/s/rzEq2bvuucTKo-Ekz7hCxA"
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# Doubling Down on Taote & Taocaicai: Alibaba's M2C Model Targets Lower-Tier Markets

> As young people flock to megacities, a notable trend is emerging: new economy, new consumer brands, and pop culture are increasingly originating in lower-tier cities. Alibaba's Taote and Taocaicai are leveraging the M2C model to tap into this vast market, with annual active consumers reaching 270 million and rapid growth in orders.

When numerous young people flock to megacities like Beijing, Shanghai, Guangzhou, and Shenzhen to chase their dreams, a special phenomenon is occurring: **more and more new economy, new consumer brands, and new pop culture are emerging in second- and third-tier cities, and even in more down-market fourth- and fifth-tier cities.**
A typical example is Heytea, which started in Jiangmen, Guangdong; Mixue Bingcheng, which began in a urban village in Zhengzhou; Three Squirrels, born in Wuhu, Anhui; and Handu Yishe, which originated in Jinan, Shandong. Additionally, the recently popular band "Wutiaoren" comes from Haifeng, a county in Shanwei, Guangdong; Li Ziqi became famous in the deep mountains of Mianyang, Sichuan; and the phenomenal Douyin blogger "Zhang Tongxue" gained fame by depicting rural life in Northeast China.
These signs indicate that as China's economy reaches a new historical juncture, the innovation, exploration, and consumption awareness in the vast third- and fourth-tier regions are awakening, giving rise to a **new cultural system, communication system, and consumption structure.**
According to the "14th Five-Year Plan for E-commerce Development in China," rural online retail sales in 2020 were five times that of 2015, growing from 0.35 trillion to 1.79 trillion yuan, indicating a huge market. Correspondingly, income levels are relatively low. The "Statistical Report on Internet Development in China" released this year shows that nearly 600 million internet users in China have a per capita monthly income between 1,000 and 8,000 yuan.
The huge market size and low per capita income cannot hide the complex urban structure of China's lower-tier markets and the desire of hundreds of millions of consumers there for new consumption, new distribution, and new lifestyles.
Currently, with the development of the internet and mobile internet, the population, consumption, and distribution in lower-tier markets are being redefined.
**New Layout: M2C Model Targets Lower-Tier Markets**
On December 16, at the 2021 Alibaba Global Investor Day, Dai Shan, President of Alibaba's Industry E-commerce and Community E-commerce, publicly introduced for the first time Alibaba's new strategy, achievements, and plans for lower-tier markets.
In Alibaba's strategy for lower-tier markets, Taote and Taocaicai are indispensable. Although they have not been established for long, their channel achievements are evident. In less than two years, outside of Taobao, Taote and Taocaicai have successively made efforts. From launch to over 240 million users, Taote took only 18 months, while Pinduoduo took 27 months.
Dai Shan also officially revealed a figure: as of the end of September, the de-duplicated annual active consumers of Taote and Taocaicai reached 270 million, a year-on-year increase of 200%, with a high proportion of new users from the group; the de-duplicated daily average transaction order volume also grew by over 400% year-on-year.
More noteworthy is the increase in user stickiness: consumers who have used "Taobao, Taote, and Taocaicai" have an average annual purchase days 1.8 times that of users who only use Taobao.
Earlier, on December 6, Alibaba officially announced a new round of business structure adjustments. The "China Digital Commerce Division" was formed by combining Taobao (including Taobao, Tmall, and Alimama), the B2C retail business group, Taocaicai, Taote, and 1688, under the leadership of Dai Shan.
Alibaba's two major e-commerce divisions—the Taobao system and the B2B system—were fully integrated organizationally for the first time, marking Alibaba's acceleration in merging consumer internet and industrial internet, aiming to drive business innovation with dual engines, and also meaning that the original B2B and B2C business forms will be more interconnected, returning to a new business pattern that emphasizes integration.
Behind these changes, we see Alibaba's determination to transform in the new era and market context, and its emphasis on consumer experience in the vast lower-tier markets.
**Continuously Strengthening Supply and Fulfillment**
Facing a huge consumer base and vast lower-tier markets, many companies have made different attempts, but with little effect, unable to fundamentally solve the problems of agricultural products going upward and new consumer products going downward.
On one hand, agricultural products find it difficult to find good display channels in high-tier markets; on the other hand, consumers in lower-tier markets have not yet formed the habit of online consumption, and infrastructure such as networks, warehousing, and logistics is far from meeting the objective conditions for new consumer products to go downward.
As Dai Shan said, "China has a vast territory, and the lower-tier market relies on a multi-level distributor and wholesaler system, with at least 4 or 5 links before goods can flow from producers to consumers."
The rapid development of Taote and Taocaicai is inseparable from Alibaba's strategic height of adhering to building a healthy and sustainable digital M2C model for the future.
**1. Supply Side**
On the supply side, in addition to connecting more agricultural product growers, implementing digital seed selection, planting, and traceability in batches and by base to help their agricultural specialty products sell better, faster, and more, Taote has also built numerous smart factories, fully leveraging the advantages of various industrial chain clusters to accelerate the circulation efficiency of cluster commodities in the national market.
Take electric toothbrushes as an example. On Taote's electric toothbrush sales ranking, 4 of the top 5 products are priced under 100 yuan, with two priced around 10 yuan, each selling over 50,000 units. Many of these toothbrushes come from Yangzhou Shuguang Toothbrush Factory.
Last year, affected by the epidemic, foreign trade orders plummeted. Yangzhou Shuguang Toothbrush Factory took a different path, shifting its market focus to domestic sales and officially partnering with Taote. During the 618 shopping festival in 2020, a 9.9-yuan electric toothbrush from the factory sold 200,000 units in one day, with annual sales exceeding one million units and annual sales revenue reaching 20 million yuan, a 50% increase compared to 2019.
Such achievements are inseparable from China's vast market and the large number of small-town consumers.
Data shows that the penetration rate of electric toothbrushes in developed countries like Europe and the US is as high as 40% to 50%, while in China it is only 5%. Before officially starting production, Yangzhou Shuguang Toothbrush Factory conducted meticulous market analysis. According to Tu Xinye, the factory's general manager, **consumers in third- and fourth-tier cities and rural markets prefer products under 10 yuan, and this group numbers about 600 to 700 million.**
In addition to demand, the importance of channels is self-evident. Through Taote's M2C model, Shuguang Toothbrush Factory can directly connect with consumers, eliminating intermediate links and reducing price markups, allowing consumers to buy low-priced products at factory prices. This is the core reason why Shuguang Toothbrush can sell at 9.9 yuan and still be profitable.
On Taote, there are many factories similar to Yangzhou Shuguang Toothbrush Factory. Currently, Taote has attracted over 2 million industrial belt merchants, 500,000 factories, and over 300,000 foreign trade factories across the country.
Taocaicai has introduced the "N-pan goods" from Alibaba's ecosystem, such as RT-Mart's supermarket merchandise, digital agriculture, Hema's fresh produce, Taote's daily necessities factory goods, and Ling Shou Tong's FMCG products, with a product library of over 1 million items, maximizing the satisfaction of a family's "three meals a day" high-frequency consumption needs.
Fresh agricultural products are non-standard and perishable, making them the most difficult category to e-commerce. Taocaicai has built an efficient agricultural product circulation chain, aggregating deterministic orders, procuring deterministically upstream, and delivering to users within a deterministic time through a deterministic circulation chain. The certainty of each link greatly improves the matching of supply and demand and the efficiency of commodity circulation.
This also provides a guarantee for the rapid development of Taocaicai. Since its official operation in March this year, as of the end of September, Taocaicai's GMV has grown 531% quarter-on-quarter in half a year, becoming one of the fastest-growing community e-commerce platforms.
**2. Fulfillment Side**
The construction of lower-tier markets depends on the richness of goods on one hand, and on the other hand, it requires complete infrastructure to ensure more efficient circulation of goods.
Taocaicai leverages a hybrid multi-level fulfillment network and a dynamic intelligent dispatch center to expand its business based on its existing layout.
In Taocaicai, many brands enter lower-tier markets for the first time. For this, RT-Mart provides comprehensive MTP services, offering brand operators services such as commerce, logistics, and capital flow operations to address their concerns.
Brand goods only need to be delivered to 10 RT-Mart DC warehouses nationwide. With local marketing and warehousing logistics services provided by dedicated personnel, sales quickly cover the country, achieving user growth and brand awareness improvement.
In rural areas, Cainiao has gradually upgraded its logistics terminal outlets to regional business agents for Taocaicai, combining logistics and commerce, and building cargo co-distribution capabilities, ensuring that 97% of orders can be delivered before 12:00 noon the next day.
Currently, Taocaicai has achieved joint procurement with hundreds of well-known brands such as Yili, Mengniu, Master Kong, Uni-President, Arawana, Vinda, Blue Moon, Dove, and Jindian.
**Dual Engines: Industrial Internet & New Consumer Internet**
As a "flag bearer" in the global e-commerce industry, Alibaba's every move has a strong guiding effect on society and industry enterprises. Standing at a new historical juncture, through this Global Investor Day, we may be able to see Alibaba's next direction.
Today, Alibaba's consumers in the Chinese retail market are close to 1 billion. With an aging population and declining birth rate, lower-tier markets have become a new source of growth.
The explosive growth of Taote and Taocaicai has shown Alibaba a new dawn of growth, but the complexity and diversity of lower-tier markets determine that the layout requires long-term continuous investment, not only in infrastructure but also in the reengineering of Alibaba's existing resources, teams, and organizational structure.
Integrating domestic business as a whole to form a new China Digital Commerce Division, achieving B2B and B2C business integration, conforms to the industry trend of accelerating the integration of consumer internet and industrial internet, and is also the key to Taote and Taocaicai successfully opening up lower-tier markets.
The new round of organizational upgrade is Alibaba's **"facing the future, truly creating long-term value"** again. Taote has become Alibaba's largest source of new users in the Chinese retail market; and Taocaicai has added a family scenario service function of "three meals a day" to "the all-powerful Taobao," increasing Taobao user stickiness through high-frequency transactions. These all create greater imagination space for Alibaba's future China digital commerce business.
**In the context of user scale peaking, whoever can provide better and more complete supply will win long-term competition.** Alibaba's strategy of integrating B2B and B2C will effectively promote supply upgrades and drive optimization across the industry.
From a broader perspective, one of Alibaba's visions is to serve 2 billion global consumers by 2036. Currently, Alibaba has nearly 1 billion domestic consumers and nearly 300 million overseas consumers.
In this context, it is logical for Alibaba to shift its domestic development direction from pursuing quantity and breadth to pursuing quality and depth, while accelerating the pace of overseas business development.
Returning to the FMCG industry, Alibaba's new round of transformation and further strengthening of its lower-tier strategy has built a new set of infrastructure for consumer brands and small and medium-sized manufacturers. How to leverage this new infrastructure to create new growth is what FMCG companies and distributors need to think clearly about in the new technological context.
**Are you "watching" me?**


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