Friday, October 10, 2014

The application of B2B Exchange in Alibaba

B2B describes commerce transactions between businesses, such as between a manufacturer and a wholesaler, or between a wholesaler and a retailer[1]. As the largest B2B platform in China, Alibaba performs as an information infomediary in the supply chain, integrating large amounts of information on both buyers’ and sellers’ sides, involving different industries from electronics, machinery, clothing to finance and so forth.

Specifically speaking, the B2B exchange of Alibaba operates in the following ways:  

First and foremost, the core concept of Alibaba is information flow, that is to aggregate voluminous market information in a single platform to benefit businesses.

Secondly, for the convenience of companies in different countries, Alibaba runs its website by adopting local languages. The convenience and affinity of the website somehow smoothly integrates markets among nations and correspondingly provides an integrated platform for international trade.

Apart from that, in the initial stage, Alibaba attracts companies in virtue of lowering the threshold of entry and offering free membership. The result is remarkable -- companies join together and contribute to an active market via the Internet, which consequently generates infinite opportunities for members meanwhile.

At the end of August 2010, membership of Alibaba has arrived at 53.4 million from 202 countries and regions, and daily registration goes beyond 1500. Affected by free membership, the majority of its membership is SMEs. And there are about 45 million page views per month, 3000 new trading information per day and more than 300,000 inquiries per month. 
Distribution of Overseas Members
Last but not the least, through value-added services, Alibaba provides an exceptional marketing service to its members, which not only creates service function on the online trading market, but also makes profit for Alibaba. The profit gained mainly comes from China suppliers (they offer Chinese businesses special inquiries for international buyers in various countries), designing of companies’ websites, online marketing programs and Trustpass.
From the above discussion about Alibaba’s B2B Exchange, we can see that B2B Exchanges create value in at least four ways,
1)  expand everyone’s market reach, so it is more approachable for buyers to find suppliers with the right parts and prices;
2)  generate lower prices for buyers, and thusly buyers can reach more suppliers or the most efficient supplier and benefit from increased price competition and access to excess inventory stocks;
3)  cut the cost of the buyer’s operations;
4)  identify industry best practices.
In conclusion, B2B serves as the “glue” to create a coordinated supply chain and is of great significance in today’s supply chain. However, do you think B2B will wane with the rise of B2C and C2C?


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