Alibaba is an online retail service that has recently grown exponentially. There immense initial public offering and 40 % increase is a signal of great investor interest. I believe a key to Alibaba’s success is their unique business model. As we have learnt, inventory is an immense drain on a businesses ability to optimize usable capital; it also causes depreciation, and an inefficient supply process. Gaging the right balance between having an excess and a shortage of inventory is extremely tricky and can be a common downfall for businesses. So, are they necessary? Many experts would argue that they are, and label them as a “necessary evil” in business. However Alibaba has proven that with an innovation and creativity, they can eliminate this “evil” all together and incur all the benefits of not holding inventory. Alibaba employs a form of networking that connects merchants with consumers, where the merchants supply the products. They serve as a sort of liaison between buyer and seller, this model allows them to work in cooperation with their merchants instead of competing with them, and it allows them to avoid the costs of production and the disadvantages of inventory. Although all of this seems promising to Alibaba, my only worry is that with China’s extremely large and competitive market, their unique business model may soon be adopted by others which would eliminate their competitive edge.