Alibaba: China’s ecommerce giant highlighted
You may suspect that the biggest ecommerce marketplace is either Amazon or eBay. What if we told you that both Amazon and eBay looked like a pair of dwarves when compared to the real giant?
So who’s the real ecommerce titan?
… you will ask. There’s a marketplace that generates more sales than Amazon and eBay combined. It’s Alibaba: a huge Chinese conglomerate that has swept the world of ecommerce off its feet and sparked investors’ interest.
eBay may be a shark in the ocean, but I am a crocodile in the Yangtze river. If we fight in the ocean, we lose – but if we fight in the river, we win.
Jack Ma, Alibaba founder
Alibaba’s super strong position in global ecommerce
Alibaba belongs to top ecommerce platforms. It has become one of the most valuable tech companies worldwide (after Apple, Google and Microsoft), raising billions of dollars from its U.S. IPO.
Alibaba acts as a middleman, allowing businesses and people to offer their products in auctions. At the same time the platform makes money from advertising. Just like Amazon, it has a wide range of other businesses: it’s a shipping company, payment processor and cloud-services provider.
Alibaba has several main divisions, including Taobao for private persons and small businesses who want to sell their products. Taobao sellers must pay for the advertised promotion as opposed to eBay that requires sellers to pay a commission.
Taobao is C2C, whereas Tmall is B2C with payments facilitated by Alipay (the Chinese equivalent of PayPal).
It’s worth mentioning that Alibaba is the leader as far as online payments are concerned. The mobile app version of Alipay, Alipay Wallet, is the most popular mobile wallet in China. It also joined Sino Corp to create a payment option, enabling quick payments by scanning a QR code on Sina Weibo.
Alibaba’s platforms account for approximately 76% of mcommerce transactions in China. 23% of mobile payments are made through mobile payment systems, e.g. Tenpay or Alipay.
How big and influential is Alibaba?
So let’s reiterate: Alibaba is bigger than eBay and Amazon.
Western marketplaces seem to be lagging behind. Take China’s Singles’ Day promotion (celebrated on 11 November) as an example. Singles’ Day is the biggest online shopping day in China.
According to Fortune, Cyber Monday 2016 was the biggest day in the history of US ecommerce, hitting $3.45 billion (compare Black Friday’s online sales of $2.72 billion). However …
Both Cyber Monday and Black Friday’s sales results, even combined (!), are nothing compared to what was achieved on November 11: $17.8 billion.
Alibaba likes to feature augmented reality games and offer virtual reality shopping experiences. Product communications very often have a hybrid infomercial format with internet celebrities or narrative storylines.
Singles’ Day and Chinese ecommerce may be the future of digital innovation. China is already at least one digital step ahead.
How does Alibaba compare to Amazon?
Alibaba controls 80% of the Chinese ecommerce market. Its customer base is gigantic.. well no wonder, considering the 1.4 billion people that inhabit China. Alipay has 400 million users; Alibaba employs over 50,000 workers. Most parcels delivered in China are Alibaba parcels.
Alibaba’s growth potential is beyond imagination. Especially because it all starts in the most populous market: China.
Alibaba is a real titan in the world of ecommerce. However, one of its biggest challenges has to do with the low recognition of its brand worldwide.
Actually, there’s a few of us from the West who find it difficult to comprehend Alibaba’s position. At least without juxtaposing it against a more familiar marketplace, such as Amazon or eBay.
So let’s take Amazon. To get a handy comparison of the two ecommerce platforms, click on the image below to check out the Ecommerce-Platforms’ infographic Who is winning the ecommerce war? Amazon or Alibaba.
Alibaba’s ecommerce challenges
Alibaba may be a key player in the world of ecommerce, yet it has to face a number of challenges. One of them is lack of brand recognition, which may translate into the lack of trust in countries outside of China.
According to one of the polls conducted in the USA, nearly 90% of respondents had no clue what Alibaba was. Thus, the fact that it is a primarily domestic operation may mean limited opportunities in the context of cross border trading.
Some critics also say that Alibaba is full of fake goods and illegal business. Violations include trademark infringements, fake cigarettes & alcohol, mobile phones and counterfeit certification. Apparently the company has put a number of procedures into place to combat counterfeit practices and remove problematic listings, yet the problem seems to persist.
It’s also worth mentioning that contrary to many ecommerce companies, Alibaba does not let Google index its wares, which means that customers must go directly to its website to search for products.
The future of Alibaba
According to Forrester Research, it will take Alibaba a few years to compete with the leaders of the US online retail industry. US consumers may be too wary to trust the unknown brand from the Far East.
One of the solutions may be to gain the trust of the Chinese clients based in the US first. This step may be a good starting point to enter the rest of the market.
Since Alibaba is still an emerging ecommerce market, it offers loads of potential compared to more mature marketplaces where a slowdown is being observed.
Hence, there are many opportunities for growth and Alibaba’s turnover is likely to increase even more. It may be too early to predict how it will affect the global marketplace landscape, but eBay and Amazon may have to face strong competition from their Asian counterpart.
In a nutshell
Alibaba has already conquered the gigantic Chinese ecommerce market, but soon US and European marketplaces may be targeted.
Alibaba is not just an online marketplace: it’s more of a self-contained ecommerce micro-economy.
As soon as the issue of low brand recognition and the problem of fake goods have been overcome, Alibaba’s prospects could become even brighter. The increased trust levels in the western world combined with Alibaba’s strong position are likely to facilitate its expansion overseas immensely.
How will it affect the world of ecommerce and future trends? We’ve yet to see…
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Further reading and other sources
Will China’s Singles’ Day turn global ecommerce upside down?
[FREE ebook] Online sales revolutionised: how to sell behind the Great Wall of China
Alibaba has more sales than Amazon and eBay combined, but will Americans trust it?
10 Reasons Why Alibaba Blows Away Amazon And EBay
Alibaba and the 40 facts
Five important ecommerce trends in China during 2014