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Case Study of Alibaba.

com
Submitted by:
Shrikant Jhajhra (BT14CSE077)
Shubham Patil (BT14CSE078)

Introduction
Jack Ma is a man on a mission. The Chinese
entrepreneur who founded Alibaba and other
companies wants to change the way business to
business (B2B) is conducted. He wants to develop
platform to support small and medium sized
enterprises (SMEs). Alibaba, Taobao, and other Ma
creations have already begun to make some wonder
how this former English teacher, with an unassuming
demeanour, has been so successful, and what the
future holds for his companies and the future of B2B
activity

Company Information
A marketplace, a search engine and a bank, all in
one.
Alibaba is Chinas and by some measures, the worlds
biggest online commerce company. Its three main sites
Taobao, Tmall and Alibaba.com have hundreds
of millions of users, and host millions of merchants
and businesses. Alibaba handles more business than
any other Ecommerce company.
One can think of it as a mix of Amazon.com, eBay
and PayPal. Customers use Alibaba to shop online,
sell unwanted goods and make online payments.
Alibaba has two retail sites: Taobao, which features
thousands of non-brand name products sold by smaller
merchants and Tmall, which offers brand name
products sold by big merchants. Unlike Amazon, which
buys goods from suppliers and sells them to
customers, Alibaba has always acted as a middleman,
connecting buyers and sellers and facilitating
transactions between them.
This Chinese B2B trading platform connects buyers in
North America and Europe with suppliers from China.
Alibaba follows an aggregation of supply model
(similar to other early B2B players), helping to solve
the pain of global sourcing.

History
Alibaba Group was established in 1999 by 18 people
led by Jack Ma, a former English teacher from
Hangzhou, China. From the outset, the companys
founders shared a belief that the Internet would level
the playing field by enabling small enterprises to
leverage innovation and technology to grow and
compete more effectively in the domestic and global
economies. Jack Ma named his company on Alibaba
Open
Sesame. Alibaba is a kind, smart business person,
and he helped the village. Alibaba opens sesame for
small to medium sized companies.
During Late 90s, Alibaba Group raised a total of
US$25 million from SoftBank, Goldman Sachs,
Fidelity and some other institutions. After Alibaba
achieved profitability in 2001, its sister organization
Taobao was founded as a consumer ecommerce
platform. Which further established TMall
(TMall.com), a retail website, to complement its C2C
marketplace. After about a decade since its inception
Alibaba group also beta launched eTao as a shopping
search engine.
Alibaba raised $21.8 billion in its debut, making it the
biggest U.S. listed
IPO in history after the IPO of credit card processing
company Visa in 2008.

Business Model
The initial business model of Alibaba was simple a
facilitate a 24/7 meeting platform for suppliers and
buyers around the world. From the start Alibaba did
not just connect Chinese suppliers with international
buyers, but it had the goal of connecting all importers
and exporters around the world to each other.
Although other B2B websites have always said You
cannot have a global company out of china, it makes
no sense.. From the very beginning Alibaba was, the
first global Internet emerging from china.
In more technical terms three of the most prominent
business models employed by Alibaba are: B2B, C2C
and B2C.

B2B: Alibaba.com Limited the primary company of


Alibaba, is the worlds largest online Business-To-
Business trading platform for small businesses.
Founded in Hangzhou in eastern China, Alibaba.com
has three main services. The companys English
language portal Alibaba.com handles sales between
importers and exporters from more
than 240 countries and regions. The Chinese portal
1688.com was developed for domestic business-to-
business trade in China. In addition, Alibaba.com
offers a transaction based retail website,
AliExpress.com, which allows smaller buyers to buy
small quantities of goods at wholesale prices.
According to some ecommerce analysts, Alibaba is
probably the one organization in the world, which has
been able to successfully provide a hassle free
platform for small to medium sized businesses to carry
on over the internet.
C2C: Taobao, is Alibabas yet another portal, which
utilizes consumer-to-consumer model similar to
eBay. Taobao.com is China's largest shopping
website, and tmall.com, which offers a wide
selection of branded goods to China's emerging
middle class. It features thousands of non-brand name
products sold by smaller merchants with around 760
million product listings as of March 2013, Taobao
Marketplace is one of the worlds top 10 most visited
websites according to Alexa.
B2C: In 2008, Alibaba Group also established another
online website Tmall, to compliment its C2C market.
Although Tmall is mainly a business-to-consumer
platform is known for offering brand name
products. The two sites (Taobao.com and Tmall) are
hugely popular, and collectively account for more than
half of all parcel deliveries in China. According to The
Wall Street Journal, their combined transaction
volume in 2012 topped one trillion yuan ($163 billion),
more than Amazon and eBay's revenue combined.
Tmall marketplace is Chinas largest business-to-
consumer (B2C) online shopping venue. The site
allows visitors to quickly view vendor fees, required
deposits and other factors associated with operating a
Tmall storefront.

Targeted Users:
Alibaba Group primarily operated within China, where
ecommerce is synonyms to Alibaba. But within last
decade Alibaba has expanded to almost all the corners
of the world, consisting its user base from about 190
odd countries.
Alibaba has been turned into a global organization but
still holding China as its major focus. Almost 75% of
Chinas ecommerce market is dominated by Alibaba.
China has 560 million internet users twice as many as
the U.S. who spend an average of 20 hours a week
online.
Although to get a hold on other emerging markets
Alibaba Group has also established offices in the U.S.,
U.K., India, Japan and Korea. Apart from small to
medium businesses Alibaba group also provides online
platform to individual customers through its parent
websites Tmall.com and Taobao.com.

Products and Services:


Alibaba provides a wide variety of products and
services through its various online portals. Some of
these are:
Apparel, Textiles & Accessories
Auto & Transportation
Electronics
Electrical Equipment, Components & Telecom
Gift, Sports & Toys
Health & Beauty
Home, Lights & Construction
Jewellery, Bags & Shoes
Machinery, Hardware & Tool
Metallurgy, Chemicals, Rubber & Plastics
Packaging, Advertising & Office
Online marketing
Cloud Computing
Logistics Operations
Electronic Payment Services
Alibaba is one of those online resources which claims
a Get everything and anything! availability. A
consumer can literally buy products ranging to simple
toys to automobiles. Hence, Alibaba is proving to be a
one-stop platform where a consumer can choose
among a wide variety of options.

Order:
Steps for ordering:
Begin Your Search: There are two common approaches to doing a
search on Alibaba. You can either search for items based on
product descriptions, alternatively, from the drop-down menu,
you can select Suppliers instead of Products and instead
search for manufacturers that specialize in that particular type of
product

Unit Price: One of the first things you will likely want to look at is
the price. For this listing we can see a price of $2-$3 USD FOB.

Minimum Order Quantity (MOQ): The minimum


order quantity (MOQ) is the smallest order the
manufacturer is willing to accept.

Payment Options: There are several common


methods of payment, each have their pros and
cons for both the buyer and the seller.

Payment Methods:
Actually Alibaba Group has its own payment solution
named as Alipay, is a third-party online payment
platform with no transaction fees. Other than that,
Alibaba also offers many ways to pay suppliers. Six
most commonly used ways are Telegraphic
Transfer(TT)/Bank Transfer, Letter of Credit, DA/DP,
Western Union, PayPal and Escrow. Buyers are advised
to consider each option carefully before committing to
one.
S.n Methods Condition Description
s
o
1. 30% Upfront TT For Since many
buyers: factories need
2.5 money in
out of 5 advance to buy
stars material for
For production,
suppliers: 30% Upfront TT
4.5 out of is a common
5 stars payment
term for
suppliers,
especially when
dealing
with an unknown
buyer.
2 100% Upfront TT For The supplier gets
buyers: 1 full payment
out of 5 before
stars production starts.
For This payment
suppliers: method
5 bears the same
out of 5 risk as Western
stars Union and
is not
recommended
when dealing
with an
unknown
supplier.
3. 100% Backward For If being paid after
TT buyers: pre shipment
4.5 inspections, it is
out of 5 suggested to use
stars trade
For terms of FOB. If
suppliers: being paid after
2 receipt of
out of 5 merchandise, it is
stars nearly 100%
reliable for
buyer because
buyer can cover
the whole risk,
however, on the
opposite,
suppliers are not
willing to accept
this way due to
big
potential risk of
dispute or fraud.

4. Letter of Credit For Highly


buyers: 4 recommended for
out of 5 transactions that
stars are US $20,000
For and above
suppliers: because the
4 bank guarantees
out of 5 the transaction.
stars But
complex
procedures and
high threshold of
registered
finance may
prevent some
SMEs
from being
involved.

5. Western Union For Not


buyers: 0 recommended
out of 5 when it comes to
stars for paying
suppliers: suppliers if the
5 payment is not
out of 5 protected by
stars
6. PayPal For A popular
buyers: 5 payment method
out of 5 for buyers as it
stars presents a much
For lower risk to
suppliers: them.
3 However, it is less
out of 5 popular with
stars suppliers
due to difficulties
in money
withdrawal,
high tax rates and
uncertain claim of
charge
back from some
notorious
importers
7. Escrow For Money is only
buyers: 5 paid to the
out of 5 supplier after the
stars buyer confirms
For satisfactory
suppliers: delivery of
3 his/her order. A
out of 5 safe way to
stars buying and
selling online
because Escrow
protects both
the buyer and
supplier.

The Chinese ecommerce giant will get ahead of its


competitors Amazon, Google and PayPal with an
innovative and secure method of payment using
fingerprints instead of passwords. The biometric
technology, including encryption and authentication
managed by Huawei, will allow mobile users to
confirm payments for a wide variety of goods and
services with their smartphones simply by swiping a
digit instead of entering a lengthy code, the company
says on its blog.
Huawei, the worlds third largest smartphone vendor
by shipment volume, will also employ high level
encryption and verification to ensure only approved
third party applications, such as Alipay Wallet, are
allowed to access the fingerprint information for
transactions.
Its worth remembering that Alibaba is a pretty safe
platform to purchase on. Not only do you have the
standard protection that your payment provides, but
Alibaba hold mostly all 10 payments in Escrow until
the buyer confirms theyve received the goods and
theyre as expected. Until the buyer confirms receipt
the seller doesnt receive the funds.
Alibaba also offers some tips for shipping methods:
Using express companies such as FedEx or DHL
You can open the shipment in front of the delivery
person. If the item is not what you ordered or if the
item is defective due to handling, you have the right to
return it to the delivery person.
Using sea freight shipping method
If the item that you received is not what you ordered,
do not clear customs!
You can always request for a customs officer or a third
party Inspection company to conduct an on-site
inspection before being issued a customs clearance
certificate. If you only inspect the delivery after
customs clearance, you might encounter legal hurdles
should you decide to dispute the delivery.

Delivery of Products
1.1 Delivery: Delivery will take place at the place of
delivery specified in the relevant order. If the order
does not specify a place of delivery, Buyers place of
business indicated by Buyer on the order will be
deemed to be the place of delivery. In case of return,
Suppliers place of business indicated on the order will
be deemed to be the place of delivery.
1.2 Transfer of risk: unless the relevant order
provides otherwise, the products remain at Suppliers
risk until the products are delivered to Buyer. The risk
of loss or damage to the products will pass to Buyer
upon delivery.
1.3 Time of delivery: Buyer may cancel the
Transaction and request refund before Supplier
commences the shipment. If Supplier continues to ship
the products despite Buyers cancellation, Supplier
does so at its sole responsibility and risks, and Buyer
is not obliged to take delivery. If Supplier has already
commenced shipment before Buyers refund request
despite that Supplier has not yet notified Buyer of the
shipment, upon Suppliers proof to Alibaba.coms
satisfaction, Buyers refund request will be void.
1.4 Prohibited and restricted products: Buyers and
Suppliers shall not deal with products in breach of
the Sites Product Listing Policy and the applicable
services agreements. If Supplier delivers any
prohibited or restricted product not in conformity with
the relevant order, Buyer has the right to refuse to
take the delivery and Supplier should be responsible
for all the costs including the costs for the return of
the products. If Alibaba.com discovers that Supplier
and Buyer intentionally deal with prohibited or
restricted product, Alibaba.com reserves the right to
refuse to make the payment to Supplier and report the
same to the relevant government enforcement
authority.

Negotiating
Once you have begun conversations with several
suppliers and have a good idea of each of their prices,
MOQ's and payment terms, you can begin negotiating
with them. As mentioned previously, the minimum
order quantities are almost always negotiable, it's
simply a matter of asking. Remember, a good
negotiation leaves both parties happy with the
outcome so push a little but not too hard.

Competition with Other Tech-Giants:


Alibaba is really a technology company that serves
retail customers and controls 80% of the Chinese
ecommerce market. Alibaba will compete most
directly with online retailers like Amazon, EBay or
Zalando in Europe, Rakuten in Japan, Kobo in India,
Wuaki in Spain and other major online providers with
strong presence in their home and adjacent markets.
Take market capitalization, or the total value of
available shares times the value of a single share,
Alibabas market capitalization value is estimated at
$155 billion. That number makes it look pretty small
compared to the top three US tech giants: Apple
($593 billion), Google ($400 billion), and Microsoft
($378 Billion). But it compares nicely to Amazon,
which also has a market cap in the $150billion range.
And its growing.

The comparison is not exactly apples to apples.


Alibabas business model is similar to that of EBay, in
that it is a middleman coordinating sellers and buyers.
Alibaba doesnt house and manage any products itself.

Gross Merchandise Volume (GMV), the metric the


company likes to highlight, is the total sum of goods
and services transacted on all its sites.
In 2013, Alibaba hosted GMV of $248 billion in
transactions last year. Thats more than Amazon and
eBay managed to do combined. And while Amazon
takes home a lot more revenue than Alibaba from its
fewer transactions, Alibaba takes a much higher net
income from
its revenue than Amazon. Alibaba now takes home 80
percent of its revenue as profit.

Performance
Alibaba Group revenue was US$4,838 million, an
increase of 59% year-over-year. China retail
marketplaces revenue was RMB23,383 million
(US$3,518 million), an increase of 49% YoY; and
mobile revenue of China retail marketplaces was
RMB17,514 million (US$2,635 million), an increase of
119% year-over-year, representing 75% of Alibabas
total China retail marketplace revenue.

Alibabas mobile MAUs in June reached 427 million,


an increase of 17 million over March 2016, while
annual active buyers on its China retail marketplaces
increased to 434 million, a net addition of 11 million
from the prior quarter.

Innovations:
A Big-Data Business: Alibaba focuses relentlessly on
big data. In fact, big data underpins all of Alibabas
efforts to harness the capabilities of everything from
cloud computing to AI to smart logistics to digital
entertainment. And big data has helped Alibaba build
what has become the worlds largest retail platform.
Enabling AI: Alibaba uses innovative AI to build a
smart business. Personalized search and
recommendation engines help e-commerce platforms
better "understand" users likes and intentions. In
addition, the technology can build comprehensive
shopper and seller credit systems and valuation
models. For instance, robots now handle 95 percent of
Double 11s customer service.

Cloud Computing and Cybersecurity Capabilities:


To facilitate the enormous volume of online traffic and
transactions during the Double 11 Festival, Alibaba
leverages cloud-computing technologies such as
elastic computing, virtualization, and real-time data
processing backed by the worlds largest hybrid-cloud
architecture.

Moving Toward the Infrastructure for Global


Commerce: Since its inception as part of Chinas
Singles Day, a nationwide holiday intended to help
young Chinese people celebrate being single, the
Double 11 Global Online Shopping Festival continues
to grow and set a high bar for the online customer
experience.

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