Digitally connecting buyers and sellers
To discuss Alibaba as a single entity seems at first like a fool’s errand. What started 20 years ago as a business-to-business (B2B) platform connecting smaller buyers and sellers has grown to include almost 30 distinct business units serving the Chinese and global markets.
By the measure of GMV Alibaba is the world’s largest retailer, but to call Alibaba a retailer is not entirely accurate. The company mission has always been to make it easier for buyers and sellers to connect and transact, anywhere in the world. It is a digital middleman with almost 700 million users per month. This includes retailers who, on other platforms, might be considered competition, but with Alibaba they are looked upon as partners.
Today Alibaba’s business units offers a data-driven digital ecosystem including a payments platform, mobile media and entertainment, marketing services and local services, all powered by its cloud business.
Sticking to the mission
Alibaba’s approach brings partners together in a way that makes it easier for all parties to do business. That simple idea has been the guiding principle for the company’s remarkable growth over the past two decades. When it decides to add new platforms, for example, the expansion is always in an effort to make the business and the process easier for Alibaba’s partners.
This differs from traditional approaches to online retailing, which usually demand end-to-end control of the process, including how profit is being created and how to capture a part of that profit. “We took a very different approach,” says Terry von Bibra, Alibaba’s General Manager, Europe. “Because the original platform was B2B, it was always all about partners. In hindsight, that probably helped set the company’s DNA by declaring: The partner is who we are enabling. We weren’t saying that we needed a partner or a brand or supplier to serve the end consumer. We started off by saying we wanted to help business partners connect to other business partners. We were enabling as opposed to controlling, and that is set in our DNA.”
A fixed strategy for growth
This DNA is present throughout the Alibaba ecosystem, and informs the way the company makes decisions when it comes to finding new growth opportunities. “For example, we launched Taobao in China as a consumer (C2C) platform and then noticed that there were certain needs that weren’t being well serviced by the platform. People were using Taobao in a way we hadn’t intended. They were looking for specific brands and wanted to buy directly from the source of those brands. So, we launched Tmall as a business-to-consumer platform to serve those partners who weren’t getting what they wanted from Taobao,” explains von Bibra. “We see opportunities and demands from our partners (both buyers and sellers) and we ask ourselves how we can connect them and how our model adds value to that connection.”
This means that Alibaba’s approach to growth is different from that of other platforms, where management usually consider geography or market segment when they start thinking of expanding. The fundamental idea of bringing people, both buyers and sellers together is paramount, regardless of the country or the type of products being offered.
This philosophy has driven tremendous growth and it will continue to help the company reach its long-term goal of serving two billion customers, enabling 10 million companies, and creating 100 million jobs. To that end, the company recently invested in Lazada, the top e-commerce platform serving Southeast Asia. Longer-term goals like this are part of the strategic mix that also includes the short-term revenue and user goals that are key to developing any digital business.
Few foundational platforms
When it creates a new platform, Alibaba can also leverage technology developed for previous applications. “We have a few very foundational platforms,” says von Bibra. “They are not a simple platform for one part of the business but they service many parts of the ecosystem.” The payment system, Alipay, which is used inside and outside the Alibaba ecosystem to facilitate payments, is one example. Another is Cainiao, the company’s logistics platform, also developed in accordance with the Alibaba model and mission. “Most people think of logistics and they think of warehouses, trucks, airplanes, and hundreds of thousands of employees to help deal with the packages,” says von Bibra. “Cainiao is a platform that’s about connecting hundreds of logistics companies to hundreds of millions of consumers.”
Learn from your successes
Like any company, Alibaba reflects on projects in order to learn from mistakes made. But it also learns from its successes. An example is Taobao, which the company launched in reaction to eBay’s first foray into the C2C market in China. “The reason Taobao succeeded is that we built it specifically for the market. We built it for the Chinese consumer and the Chinese business person. It was quite different to how C2C was being done everywhere in the world.” The same lesson was learned in the other direction when the company first built AliExpress, a platform for selling Chinese products outside of China.
Collaborating with governments
Buying and selling across national boundaries is complicated by the logistical challenges that come with it. As per its mission of simplifying buying and selling, Alibaba is developing its Electronic World Trade Platform (“eWTP”) initiative , a private sector-led, multi-stakeholder initiative that facilitates public-private dialogue to share best practices, incubate new trade rules, and foster a more integrated and inclusive policy and business environment to promote the development of e-commerce, trade and the digital economy in the internet age.
It aims to help smaller companies and participating countries realize their economic potential by reducing trade barriers and making it easier for small to medium-sized enterprises (SMEs) to expand their trading capabilities worldwide.
Room for more
The company’s latest innovations surround what it calls ‘New Retail’. ‘New Retail’ is Alibaba’s strategy to redefine commerce by enabling seamless engagement between the online and offline worlds. In China, e-commerce accounts for around 18% of total retail. With New Retail Alibaba wants to bring its data and technology capabilities to work with and digitally transform the 82% of offline retail. The goal is to help brick-and-mortar operators restructure and enhance their operations, including customer experience, inventory management and retail spaces, enabling them to succeed in the digital era.
Alibaba has made forays into offline offers for fresh food and seafood with its Freshippo supermarkets and other products associated with shopping malls, department stores, even very small mom-and-pop shops.
“We’re focused on how we can enable companies to digitize the 82 percent,” says von Bibra. “Not because we want to have these companies on our platforms but because we believe that if they digitize the different pieces of their value chain they will be able to deliver more value to their target consumers. We want to help make that happen.” Again, as von Bibra emphasizes, the company is sticking with its original mission of finding better ways to bring buyers and sellers together. “If we couldn’t change the way they do business for the better, we wouldn’t be interested.”