The Simple, Staggering Success Of Alibaba.com

Achim Schneider

index1Alibaba was a household name long before the creation of the retail giant.  In the folk tale “Alibaba and the Forty Thieves,” Alibaba is a poor woodcutter with a good heart. He finds a stockade of gold amassed by forty thieves. Initially, the hero takes only a small part of the wealth, just enough to feed his poor family. His brother, however, is not so pure of heart. He attempts to raid the stash of gold and is killed by the thieves, who catch him in the act. Alibaba is able to stay two steps ahead of the thieves with the help of his cunning servant woman. The character is prepared for every one of his attackers’ moves, and in the end he is victorious.

Jack Ma, creator of the company that bears the same name, found this story inspiring. The moral is simple: Greed will get you into trouble, and forethought can eliminate danger. Alibaba.com was designed to be the “Open Sesame” portal. It would benefit both the manufacturers in China and the retailers in the United States and other countries, all for a small fee.

Ma was born in China and worked as an English teacher. Recognizing the potential in the hyperconnectivity of the Internet in 1995, he began by creating websites for small to midsized Chinese businesses. There was a huge demand, which eventually led him to come up with the concept for Alibaba.com. It was founded with 17 partners in 1998 from his apartment in Hangzhou. Ma raised startup funding from financial institutions like Fidelity, SoftBank, and Goldman Sachs. He was selling a simple idea: connect Chinese manufacturing centers to brick-and-mortar retailers across the world. The theory was wildly successful, and it was only the beginning.

In 2003, Ma addressed a need in the Chinese retail market. The people needed a customer-to-customer digital retail base, much like eBay. He accurately forecasted overwhelming success for eBay in 1999, and this inspired the creation of Taobao, a C2C sales portal. Not long after, Alibaba launched Tmall, the business-to-customer platform. That development rounded out retail capabilities for all types of business connections, including B2B, B2C, and C2C. This is a shining example of omnichannel retail.

But the innovation didn’t end there. The same year, the website launched Ali Wangwang, an instant message service  specifically designed to open a line of communication between buyer and seller. A year later, Alipay sprang up from another developing demand in online commerce: security. The rise of the Internet presented a new world of opportunities for everyone, including scam artists. Ma recognized a need for a secure payment system like the American company Paypal. Alipay was designed to assure the customers of Alibaba that their billing information was secure, boosting confidence and encouraging them to continue using the Alibaba platform.

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Again, the strategy was simple: Identify and eliminate every obstacle to executing an online purchase. The company even went as far as to purchase an online music provider to give customers something to listen to while shopping. More recently, the language barrier became a challenge for international business, so Alibaba acquired 365fanyi, a crowdsourced translation platform.

Alibaba differs from Amazon in that it does not compete with its sellers. About 60% of the orders placed on Amazon.com are fulfilled by its warehouses. Sellers who use Amazon complain that their biggest competitor is the very platform they use to make their own sales. Alibaba does not actually sell merchandise of its own; instead it lends support to its sellers, which are the mainstay of the company’s own success.

To empower its sellers to best market products, Alibaba launched another piece of technology. The system collects valuable information from the wealth of data contained in customer accounts. These analytics serve as a valuable resource for online retailers, offering insights that help the seller understand who its top customers are. Alibaba is more likely to collect the modest 2-5% commission when sellers are empowered to make profitable decisions.

Recently, the cloud computing division of Alibaba formed a partnership with NVIDIA Corporation. Their mission is to provide several new solutions relating to data development, information processing, and image-recognition capabilities. Alibaba is investing in how to improve search functions for merchandise based on a picture. This means that customers will be able to buy an item even if they don’t know what it is called.

From the start, Alibaba has capitalized on a simple concept: to break down barriers between those who supply and those who demand. Today, Alibaba is an end-to-end network that harmonizes every piece of the buyer experience.

Image credit: flickr.com


Achim Schneider

About Achim Schneider

Achim Schneider is the Global Head of SAP Retail Business Unit. He is a dedicated and passionate leader committed to delivering real customer value through innovative software solutions with a high priority on global customer relationships, and overall customer satisfaction across all aspects of the retail business.