Alibaba—Ecommerce Giant in China

Alibaba—Ecommerce Giant in China

Post for Week 6

Yvonne Zhang

China has already been known that has the largest online population, which also stimulates the online shopping. In 2013, China had $296.57 billion online retail sales in total, which increased 41.2% compared with 2012. China has passed the US to become the largest ecommerce market in the world. Based on the report from the Ministry of Commerce in China, the total ecommerce in 2013 was $1.6 trillion, including transactions between companies.

The rapid growth of ecommerce in China is driven by new technology and innovative business models. One of the market dominant players, Alibaba which just went public in New York Stock Market on September 19, has created a unique ecommerce model and proved to be a success. It has two largest online shopping platforms, Tmall and Taobao, and one B2B wholesale platform which has just been built. Somebody said Tmall and Taobao were Chinese Amazon and Ebay. However, it is not quite accurate. Tmall and Taobao don’t have their own warehouses, delivery channel and supply chain system. They only offer a platform for individual sellers to manage their business and monitor the delivery and transactions. Each individual seller has its own supply chain, from source, inventory, and delivery to customer services.

Taobao is created for small and middle scale companies or individuals who don’t have enough money to open a physical store. It is totally free to open a store on Taobao. Tmall is like a virtual shopping mall and usually registered by large scale companies which don’t want to build its own ecommerce platform. They have to pay annual fee for registration, but usually they will provide qualified product and better customer services. Unlike Amazon and Ebay, which specialize in customer-facing goods not business supplies, Alibaba launched its first B2B platform in the US in 2009 to link the customers in North America and Europe with the suppliers in China. Buyers can place orders directly on the website and companies have no need to prepare paper orders or invoices. The wholesale business in Alibaba accounted for 11.8% of its total revenues in 2014, and most of them are from buyers outside of China. This B2B platform has been a new method for global transactions that companies can connect with manufacturers before doing business and people don’t have to travel to another country to do business.

However, there are questions raised along with the prosperity of ecommerce. Even though the ecommerce is more convenient for consumers, some people are still like face-to-face services. It is difficult to check the quality through ecommerce or online shopping, which is the biggest problem with Tmall and Taobao platform. Besides, unlike Amazon, each individual seller on Tmall and Taobao has to manage their own supply chain, which is hard to guarantee the efficiency of the process and quality of service, especially for those sellers who don’t have experience of supply chain management. So the question is which is the most effective and efficient way to manage the ecommerce, like Amazon or Alibaba? Since Amazon started its business in China, will its ecommerce model adapt the Chinese market? And how could ecommerce platforms to face the demand driven market in the future to fulfil the customers’ demand?

References:

Griffith, Erin 2014, In B2B e-commerce, Alibaba has solved the one problem Amazon can't, Fortune, http://fortune.com/2014/09/08/alibaba-amazon-b2b-ecommerce/

Hanks, Jeremy 2013, Evolving The Supply Chain in the Ecommerce Age, MultiChanelMerchant, http://multichannelmerchant.com/opsandfulfillment/warehouse/evolving-the-supply-chain-in-the-ecommerce-age-12082013/

TONG, FRANK 2014, China officially passes the U.S. in e-commerce, Internet Retailer, http://www.internetretailer.com/2014/05/29/china-officially-passes-us-e-commerce

TONG, FRANK 2014, Chinese e-commerce giant Alibaba builds its B2B business, Internet Retailer, http://www.internetretailer.com/2014/04/15/chinese-e-commerce-giant-alibaba-builds-its-b2b-business

Walters, Jeff 2011, The Taobao Phenomenon, BCG, https://www.bcgperspectives.com/content/articles/retail_consumer_products_the_taobao_phenomenon/

Wertz, Boris & Contributor, Guest 2013, Alibaba is just the beginning: How B2B marketplaces will thrive (for real, this time), GIGAOM, https://gigaom.com/2013/06/30/alibaba-is-just-the-beginning-how-b2b-marketplaces/