B2b Connections With One Of The Planet’s Biggest Markets
Alibaba.com is a Hong Kong based online business-to-business commerce and auction company that has developed into a substantial resource for both Asian businesses and Western corporations. Originally designed to connect Chinese businessmen with Western buyers, Alibaba manages a bilingual format that both Chinese businessmen and English speaking businesses can use to execute trades.
It is a straightforward wholesale marketplace, where member vendors can display wares and prices. It also operates the premiere Chinese auction site, an Asian version of eBay called TaoBao.com. Alibaba dominates the Chinese ecommerce market and is a major player for some import-export markets on an international scale.
In recent years, the company has aggressively expanded its sophistication and service array. In 2005 Yahoo bought 40% of Alibaba for one billion dollars plus all of Yahoo’s Chinese assets. Alibaba founder and entrepreneur Jack Ma has since then redesigned Yahoo’s Chinese portal and attempted to market it as the definitive Chinese search engine. Alibaba has also developed an online funds transfer system with a Hong Kong bank, attempting to establish a tool similar to PayPal.
Recently the firm released a survey claiming to prove that product sourcing online through Alibaba.com can cut the normal sourcing cycle by 75 percent. Alibaba.com members say it takes about three weeks to find the right trading partner and negotiate a deal through the Web site, compared to the average sourcing cycle of 3.3 to 4.2 months.
The survey found that 56 percent of Alibaba.com members take two to four weeks to negotiate the terms of a purchase or sale from first contact to finalized contract agreement, while 17 percent say it takes them no more than a week. The survey was conducted from June 19 to July 9, 2006, and included responses from more than 1,100 Alibaba.com members.
Alibaba claims that it is the simplest and most effective way to find products and resources. Their membership base has reached the point (1.2 million members) that both Chinese and Western entrepreneurs wishing to engage in product sales can no longer ignore this enormous marketplace. ”We reduce the sourcing time by bridging geographies and time zones and putting thousands of products and suppliers in one easy-to-use location,” said an Alibaba VP for operations.
Both Alibaba and TaoBao currently do not charge fees from buyers or sellers. That has force eBay to change its business model in China as well. Alibaba has a “premium” service that it provides to members who wish to sign on; indications are that TaoBao will adopt a fee structure at some point.
It appears that partnership with an indigenous corporation is important. Google’s efforts in China are relatively recent. Yahoo has made its presence there a success by effectively turning its operations over to Alibaba. They won the battle with eBay in Japan by partnering with Softbank, a Japanese conglomerate. So while the Yahoo auction site is inconsequential in the U.S. it forced eBay out of the market before they could get started.
These are critical times for the major web players in China. Less than ten percent of China’s populace has web access – however those early adopters amount to one hundred million people and many of them are businessmen. In ten years, China may be the biggest economy – online and otherwise – in the world. Alibaba has done an excellent job of staking out its domestic turf and joining forces with the entrenched Yahoo in America and Europe. They’ll give Google and eBay a run for their yen.