Alibaba Is No Fairy-Tale, It's A Web 2.0 Reality




If you thought Alibaba.com was something to do with an Arabian fairytale, you’d be mistaken. It is a Chinese web 2.0 platform connecting foreign businesses to Chinese suppliers, which is now ready to expand its presence abroad through AliExpress, its new online marketplace. Jack Ma is the charismatic boss behind Alibaba, who possess a keen flair for publicity; Mr Ma annually entertains international and high-profile figures at AliFest in Eastern China. This year he stood side-by-side with Arnold Schwarzenegger, while previous personalities have been Bill Clinton and Kobe Bryant (basketball star). Alibaba is ambitious and wants to pioneer China's outside growth, but the question is, can a Chinese company manage to operate businesses overseas and target foreign consumers? China has the world's largest internet population of 400 million and last month, Deutsche Bank forecast China would handle more than 1.5 trillion Yuan in online transactions by 2014; it has an annual growth rate of 42%.

Well, may be Jack Ma is the maverick that can do it. Alibaba.com's 2007 flotation netted $1.5bn and in recent months it made its first two US acquisitions, Vendio and Auctiva. It has also set its sights on Japan and India. Mr Ma’s two web 2.0 businesses have very specific business aims;   Alibaba.com helps firms to find suppliers and AliExpress enables them to buy online. AliExpress has no minimum order controls, making it popular with bargain hunters; you can buy a single memory card reader for 30 cents to a pair of platform shoes for under $10, all with free shipping. Research firm Analysys, estimates that Alibaba controls more than 73% of the Chinese domestic business-to-business market by income.
The confidence of Alibaba was seen when eBay bought a leading local Chinese customer-to-customer site in 2003. Jack Ma set up a rival service, web 2.0 platform Taobao, which was free to users and carefully tailored to China in everything from its colour scheme to the creation of a process to counter widespread fears of being cheated. Within two years, eBay withdrew and Taobao now boasts more than 190 million registered users. Analysys, the research firm estimates it has more than 75% of the consumer-to-consumer market, with online transactions of 88.2bn Yuan in the second quarter of this year. Yet, outside China, Alibaba will need eBay to provide the link between retailers and customers; and at the same time Alibaba could help eBay to fight off its web 2.0 competitor, Amazon. Though, analysts predict conflict, as Alibaba and eBay are encroaching on each other's territory; eBay helps China manufacturers sell directly on eBay and Alibaba develops relationships with US online merchants. However, that said Alibaba's acquisitions of Auctiva and Vendio provide web 2.0 tools for about 250,000 sellers who together account for about a quarter of eBay's business. As Mr Ma sets off for new shores he has good reason to be wary; at home they are web 2.0 leaders, yet it could be the cultural differences that may hold them back.

Photo Credit: World Economic Forum