As the largest e-commerce company of China, Alibaba’s unique business model cannot be copied. Its success is established on both opportunity and predictable strategy. For now, Alibaba can be called a conglomerate. It has set foot in C2C, B2C, B2B, group buying, online payment, logistics, online advertisement and cloud.

What makes the figures more interesting, is that the company was not even the first comer of e-commerce in China. EBay entered China first through a joint venture, EachNet. However, it failed to enter the Chinese market due to lack of the knowledge of China.

Mr.Ma realized the increasing price of rent due to the upgrading cost, which will inevitable lead to the rise of e-commerce. He targeted at C2C segment by the trend of China. Taobao was launched as a fee free business for small and medium-sized Chinese sellers. The action is meaningful because FREE IS THE MOST EXPENSIVE. In other word, Mr.Ma used “Free” to open the market. Totally free service gave Taobao the largest advantage over its major rival at that time, eBay. As such, buyers and sellers had no good reason to accept the fee structure of EachNet.  Although by the end of 2005, EachNet had eliminated fees, it already had been reduced to a trivial player. That’s how Alibaba opened the market under the pressure of eBay.

Another strategy is Virtualization. For E-commerce, logistics is pretty important. Many company prefer to choose self-logistic to earning profit, but Mr.Ma outsource it to existing big logistic company, he gave the sellers power to choose which delivery company they want. Let’s do a simple calculation, if he choose to build a logistic department, he has to pay for the salary of Hundreds of thousands workers. It will be a heavy burden of the company. So why don’t use the strategic of virtualization and outsource the logistics to the existence logistic company? It’s a clever strategic vision for the sustainable development, cash flow is always the most important thing for a company.

Lastly, communication between parties was crucial for shopping online. Buyers may not have been so familiar with the product, they may have wanted to bargain, a common habit in China. All these called for a communication channel. But the business model of EachNet prohibited such direct communication between parties. Taobao adopted a free mode, and hence did not have to face the same dilemma. Its communication tool, AliWangWang, became correspondingly very popular.

Overall, the rise of Alibaba can be attributed to its local knowledge, which is not an accidental of the heat in e-commerce, but a result of a series of thoughtful strategic decision. It understands the local buyers and sellers better than western competitors. Until now, Taobao dominated the market. eBay, Amazon all  have an eye on Chinese e-commerce, but none of them have achieved noticeable market size.

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Work Cited:

Graphics, WSJ.com News. “What Is Alibaba?” – WSJ.com. N.p., n.d. Web. 02 Oct. 2016.