Alibaba's e-commerce

Information technology and the Internet have had a major impact on business operations. Companies are making large investments in e-commerce applications but are hard pressed to evaluate the success of these e-commerce systems (DeLone & McLean, 2014). This also had a huge impact on Alibaba, led my Jack Ma. Alibaba is part of Alibaba Group Holding Limited, which is a Chinese e-commerce company that provides different sales services, include business-to-business (Alibaba.com), business-to-consumer (Tmall.com) and consumer-to-consumer (Taobao.com). Jack Ma is reportedly the first to have launched a commercial website in China (TechNode Inc., 2016). 

Development of Alibaba

Alibaba.com is the first commercial website launched in China. In September 1995 Chinapages.com, a directory of companies, goes online and within ten years Jack Ma grows it in one of the most successful Internet companies of China. At a certain point Jack Ma decided to hire foreign experts to come in and help the company globalize. Attracting these experts to run the company was an important step, because the people in China had very little management experience. Alibaba has been very successful in the Chinese domestic market. The initial business model of Alibaba was very simple, namely to facilitate a 24/7 platform for suppliers and buyers around the world. From its start Alibaba did not only connect them, but the second goal was to connect importers and exporters around the world with each other (TechNode Inc., 2016). 

Alibaba's founder Jack Ma

The road to success has been a long one and sometimes painful for Alibaba. Jack Ma personifies the saying ‘failure is the key to success’. When Ma founded Alibaba in 1998, he had to face a lot of obstacles. In the first three years of its establishment, the company made no profit (Diligent Media Corporation Ltd., 2016). One of the company’s main challenges was that it had no way to do payments, and no banks would work with him. Therefor Jack Ma decided to start his own payment program called ‘AliPay’. The program transfers payments of different currencies between international buyers and sellers. “So many people I talked to at that time about Alipay, they said; this is the stupidest idea you have ever had, I did not care if it was stupid as long as people could use it” said Jack Ma. Nowadays 800 million people use AliPay (CEO Lifestyle, 2015). 

Alibaba´s (inter)national competitors

Alibaba’s primary competitor is JD.com Inc. in the e-commerce space in mainland China. In contrast to Alibaba’s e-commerce services, JD.com warehouses, markets and ships merchandise directly to Chinese customers through its own national network. JD.com has recently made impressive gains in the market to become the largest online direct-sales retailer in China. This was made possible due to the direct control JD.com have over its supply chain, together with the developed reputation for authentic, reliable products and fast shipping. 

Logo of JD.com, Alibaba's primary competitor

Next to JD.com there are several smaller national competitors across China. Alibaba’s two biggest international competitors are Amazon.com and eBay (Investopedia, 2016³). Amazon.com Inc.’s model is much closer to the traditional style of retailing, as it indulges in direct selling, owning distribution centres and warehouses, unlike Alibaba.  Amazon had built a powerful reputation among its consumers by serving satisfactory consumer experience and service. The competitor eBay is closer to Alibaba in its model, as both e-commerce companies are bringing buyers and sellers together on the platform, and provide them a payment system, called AliPay (Alibaba) and PayPal (eBay). Though Alibaba and eBay have similar models, it would be hard for Alibaba to decrease eBay’s good brand recognition. These companies are likely to compete with each other for markets outside the United States and China, but it is unlikely that these brands will unseat each other from their homeland (Investopedia, 2016²).

Failures of eBay to enter the Chinese market

In 2004, eBay had entered China and was planning to dominate the Chinese market with eBay EachNet. Alibaba was at that time a local Chinese company that helped small- and medium-sized enterprises conducting business online. EBay began with aggressive campaigns to dominate the market and counterwork competitors. Soon after Alibaba’s Taobao was launched, eBay signed exclusive advertising rights with the intention of blocking advertisements from Taobao. Taobao’s was focused on the consumers, to make it as user friendly as possible, also free of charge. Unlike eBay EachNet, which charged its sellers for listing and transaction fees (Forbes, 2010).  After Taobao was established it did not take long before in 2005 Taobao overtook its U.S. rival eBay, the previous market leader in the consumer-to-consumer market in China (TechNode Inc., 2016). 

Consumer-to-consumer market leader; from eBay to Taobao (source: JingLiang, 2014)

Will Alibaba sets foot out of China?

As described before, it is unlikely to unseat competitors from their homeland. Alibaba will not be able to be a daily go-to-site, but instead just the name of an exotic stock with growth potential. Jack Ma is on record as planning to use the newfound inflow of money to expand his idea to the West (Investopedia, 2016¹). This expansion led to an announcement that Alibaba will open its first office in Melbourne, Australia. This first office is part of a company’s globalization strategy to reach two billion customers in the next two decades (Forbes, 2016). This all leads towards the fact that Alibaba is expanding their market. Alibaba is a confident organisation and will become even a bigger by expanding outside of China.

References
CEO Lifestyle (2015). 5 stories of massive failures that lead to success. [Retrieved from http://www.ceolifestyle.io/blog/2015/9/6/5-stories-of-massive-failures-that-lead-to-success on the 20th of September 2016]

Delone, W. & McLean, E. (2014). Measuring e-Commerce Success: Applying the DeLone & McLean Information Systems Success Model. [Retrieved from http://www.tandfonline.com/doi/abs/10.1080/10864415.2004.11044317 on 20th of September 2016]

Diligent Media Corporation Ltd. (2016). Alibaba’s Jack Ma was rejected by nearly 30 companies before he set up shop. [Retrieved from http://www.dnaindia.com/money/report-alibaba-s-jack-ma-was-rejected-by-nearly-30-companies-before-he-set-up-shop-2123055 on 20th of September 2016]

Forbes (2010). How eBay failed in China. [Retrieved from http://www.forbes.com/sites/china/2010/09/12/how-ebay-failed-in-china/#38e40a237abf on 20th of September 2016]

Forbes (2016). Australia is the next stage for Alibaba’s global expansion. [Retrieved from http://www.forbes.com/sites/greatspeculations/2016/07/21/how-significant-is-australia-for-alibabas-global-expansion/#2d4d68491edc on 20th of September 2016]

Investopedia (2016¹). Alibaba’s Goal: Supplant eBay, Amazon and Paypal. [Retrieved from http://www.investopedia.com/articles/markets/092314/alibabas-goal-supplant-ebay-amazon-and-paypal.asp on 20th of September 2016]

Investopedia (2016²). Alibaba’s Top Competitors. [Retrieved from http://www.investopedia.com/articles/investing/110714/alibabas-top-competitors.asp on the 20th of September 2016]

Investopedia (2016³). BABA: Who are Alibaba’s Main Competitors? [Retrieved from http://www.investopedia.com/articles/markets/042716/baba-who-are-alibabas-main-competitors.asp on 20th of September 2016]

JingLiang (2014). Who is Alibaba? [Retrieved from https://www.linkedin.com/pulse/20140909090202-9546435-who-is-alibaba on 20th of September 2016]

TechNode Inc. (2016). A brief history (and future) of Alibaba.com. [Retrieved from http://technode.com/2009/01/22/a-brief-history-and-future-of-alibabacom/ on 20th of September 2016]