The Alibaba B2B Strategy: What Wholesalers & Distributors Need to Know
We live in the era of eCommerce. It’s an exciting, albeit competitive, time for business. Of course, the growth of eCommerce around the world isn’t complete without mentioning Alibaba, China’s eCommerce giant. Once upon a time, circa 1999, a little eCommerce company began in a cement-floored apartment in Hangzhou––a city Southwest of Shanghai––at a time when only a few million people where online in China. Led by Jack Ma, they started Alibaba.com, a global wholesale marketplace connecting buyers and sellers. In what was to become a spectacular play, Alibaba.com grew big enough for the whole world to notice, along with its C2C eCommerce site Taobao, as well as B2C retail site Tmall. Alibaba.com handles billions of dollars a year in transactions, increasingly acting as a bridge between mainland China, North America, Europe, and the rest of the world. Alibaba follows the supplier aggregator model (much like many B2B marketplaces of the 90s) working to ease the pain of global sourcing. While Alibaba may be a B2B behemoth, it wasn’t an easy road to growth. As told to Rebecca Fannin of Inc.com, Jack Ma started his entrepreneurial journey very young. At 12, he showed foreign tourists around Hangzhou’s West Lake District, making him more outward thinking and entrepreneurial than most. After finding himself without a job (including a rejection from a KFC restaurant) by 1992, he borrowed $2000 to start a company that directly competed with China Telecom. Then, he ushered in a group of friends and convinced them to part with a collective $60,000 to start the B2B ecommerce site that was to become Alibaba as we know it today. Despite the obstacles, as Charlie Rose of Bloomberg helpfully points out, Alibaba is set to change the face of B2B commerce as we know it. Just how exactly will the Alibaba B2B juggernaut affect business around the world? What do wholesalers, distributors, and manufacturers around the world need to know?
Alibaba is big, but it’s getting bigger.
According to David Moth of Econsultancy, Alibaba has 231 million active buyers, and over 11.3 billion orders flowed through the company’s eCommerce platforms in 2013. An average buyer makes about 49 purchases a year, and the total gross merchandise volume of Alibaba’s three main consumer retail marketplaces is roughly $248 billion. Alibaba has B2B and B2C has suppliers in more than 20 countries. The scene continues to play out in US markets as well. Alibaba’s global IPO was the world’s largest ever at $25 billion. The United States has more than 7 billion B2B customers on Alibaba, and about 1.5 million in the U.K. Ben Popper of The Verge writes that in 2013, Alibaba recorded $240 billion in sales––more than Amazon and eBay combined.
Focus Is the Core of the Alibaba B2B Strategy
Alibaba’s meteoric rise can be attributed to its focus on growing its enormous supplier base, which targets Chinese and other Asian sellers that Amazon and other marketplaces don’t. In other words, Alibaba’s B2B marketplace has acted like a gateway to China and the growing economy’s enormous capacity to produce goods that the world wants. To cater to this global demand, Alibaba does everything it can to build more trust, opening the gates wider to the world. This is evidenced in initiatives like business verification, factory inspections, and stringent demands on quality of products.
Alibaba & The Future of B2B eCommerce
Alibaba is only the beginning of the future of B2B eCommerce. There’s still lot of opportunity for eCommerce stores, wholesalers, distributors, and retailers to build on inefficient supply chains, paper-centric processes, and error-prone workflows. Broadly, there’s opportunity for:
- Adopting, embracing, and deploying modern technologies using matching algorithms, intuitive UX/UI, personalization, and big data.
- Supporting mobile transactions. Mobile accounts for almost half of China’s retail eCommerce sales, according to eMarketer. Mobile B2B eCommerce is a priority. Face-to-face transactions must also pave way to mobile order writing, seamless integration between order taking and enterprise resource planning systems, and mobile-first workflows.
- Competing with Alibaba's broad marketplace model with more focused direct models that engender stronger relationships between suppliers/brands and customers/retail buyers.
Alibaba’s B2B stance is such that it has also led to offshoot opportunities for many wholesalers and distributors. For some wholesalers and manufacturers, it may be beneficial to take advantage of this resource to access to global marketplaces across the world. How can you make these Asian suppliers and buyers part of your own supply chain strategy? Can it help you expand into new markets? How can you set yourself apart with superior customer experiences? What do you make of Alibaba’s B2B strategy? For wholesalers and distributors, do you see an opportunity or threat? Tell us your views in the comments.