Alibaba.com is a Hong Kong-based online business-to-business trading and auction company that has become a substantial resource for both Asian companies and Western corporations. Originally designed to connect Chinese entrepreneurs with Western buyers, Alibaba manages a bilingual format that both Chinese entrepreneurs and English-speaking companies can use to transact.
It is a simple wholesale marketplace, where member vendors can display products and prices. It also operates the main Chinese auction site, an Asian version of eBay called TaoBao.com. Alibaba dominates the Chinese e-commerce market and is a major player for some international import and export markets.
In recent years, the company has aggressively expanded its sophistication and range of services. In 2005 Yahoo bought 40% of Alibaba for a billion dollars plus all of Yahoo’s Chinese assets. Alibaba founder and entrepreneur Jack Ma has since redesigned the Chinese Yahoo portal and tried to market it as the ultimate Chinese search engine. Alibaba has also developed an online fund transfer system with a Hong Kong bank, attempting to establish a PayPal-like tool.
The company recently released a survey claiming to show that sourcing products online through Alibaba.com can reduce the normal sourcing cycle by 75 percent. Alibaba.com members say it takes around three weeks to find the right business partner and negotiate a deal through the website, 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 final contract agreement, while 17 percent say they don’t. it takes 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 it is the easiest and most effective way to find products and resources. Its membership base has reached the point (1.2 million members) that both Chinese and Western businessmen wishing to participate in product sales can no longer ignore this huge market. “We reduce sourcing time by bridging geographies and time zones and putting thousands of products and suppliers in one easy-to-use location,” said an Alibaba vice president of operations.
Both Alibaba and TaoBao do not currently charge fees to buyers or sellers. That has forced eBay to change its business model in China as well. Alibaba has a “premium” service that it offers to members who want to register; There are signs that TaoBao will adopt a fee structure at some point.
It seems that the association with an indigenous corporation is important. Google’s efforts in China are relatively recent. Yahoo has made its presence there a success by handing over its operations to Alibaba. They won the battle with eBay in Japan by partnering with Softbank, a Japanese conglomerate. So while Yahoo’s auction site is of no consequence in the US, it forced eBay out of the market before they could get started.
These are critical times for China’s top web players. Less than ten percent of China’s population has access to the web; however, those first users number one hundred million people and many of them are entrepreneurs. In ten years, China may be the largest economy, online and otherwise, in the world. Alibaba has done an excellent job of policing its homeland and joining forces with Yahoo in the United States and Europe. They will give Google and eBay a chance.