Alibaba Sets Sights on Diverse U.S. Markets - Modern Distribution Management

Alibaba Sets Sights on Diverse U.S. Markets

Knowledge of what customers want will play a big role in future success.
april-84x84

Beyond Alibaba Group’s initial public offering that raised a record $25 billion and its sales of $248 million in the quarter ended June 30 (more than Amazon and eBay combined), the Chinese e-commerce company is not especially well-known or understood in the U.S.

Alibaba Group grew more than 50 percent in volume terms between 2012 and 2013. The company owns both B2B and B2C sites, as Amazon does, and Alibaba’s reach into both markets will affect distributors if it isn’t already. Alibaba doesn’t own massive warehouses like Amazon does – one reason that some are saying it operates on a much, much larger profit margin. Its business model is based on simply connecting suppliers with customers, and Alibaba has no hand in managing the movement of products, as Amazon does.

It also had different inception drivers than eBay did, most certainly a driving force in its takeover of Chinese consumers from eBay’s Chinese e-commerce business, EachNet. EBay acquired EachNet for $150 million in 2003, looking to access China’s business-to-consumer markets. With the acquisition, eBay controlled 85 percent of the Chinese market.

But Alibaba’s B2C site, Taobao, shifted everything that eBay was counting on. Taobao offered free services where EachNet required users to pay to use the platform. Alibaba simply knew Chinese customers better and was able to gain their trust. In two years and despite eBay’s millions in investments, EachNet fell from 72 percent market share to 36 percent, while Taobao grew from 7 percent to 59 percent.

The methods used in this takeover are important to consider now, as Alibaba moves in on North American markets – although the exact direction it will take is still unclear. It has invested $8 billion in several different U.S. startups in the past six months, reaching into growing markets such as mobile messaging and gaming, according to Forbes and the New York Times.

But the tactics that worked with Taobao may not work here; Western consumers are different and expect different things from online shopping outlets. Providing a buying process that customers trust is important, and many recent consumer reviews of Alibaba indicate a disconnect.

In many ways, the B2B market is more complicated than B2C. Is a website that got its start as what NPR called a dating site for manufacturers and buyers, really going to make a difference in the U.S. B2B market?

Investors seem to believe that it will have a large impact on e-commerce, based on the company’s hugely successful IPO. It does open the global supply chain a bit wider, according to a Planet Money podcast, providing smaller companies with access to Chinese manufacturers, for example. And it has provided Chinese startup manufacturers with a trusted platform to compete against the established companies.

The total impact, however, remains to be seen.

Jenel Stelton-Holtmeier contributed to this blog.

Share this article

About the Author
Recommended Reading
Leave a Reply

Leave a Comment

Sign Up for the MDM Update Newsletter

The MDM update newsletter is your best source for news and trends in the wholesale distribution industry.

2

articles left

Want more Premium content from MDM?

Subscribe today and get:

  • New issues twice each month
  • Unlimited access to mdm.com, including 10+ years of archived data
  • Current trends analysis, market data and economic updates
  • Discounts on select store products and events

Subscribe to continue reading

MDM Premium Subscribers get:

  • Unlimited access to MDM.com
  • 1 year digital subscription, with new issues twice a month
  • Trends analysis, market data and quarterly economic updates
  • Deals on select store products and events

1

article
left

You have one free article remaining

Subscribe to MDM Premium to get unlimited access. Your subscription includes:

  • Two new issues a month
  • Access to 10+ years of archived data on mdm.com
  • Quarterly economic updates, trends analysis and market data
  • Store and event discounts

To continue reading, you must be an MDM Premium subscriber.

Join other distribution executives who use MDM Premium to optimize their business. Our insights and analysis help you enter the right new markets, turbocharge your sales and marketing efforts, identify business partners that help you scale, and stay ahead of your competitors.

Register for full access

By providing your email, you agree to receive announcements from us and our partners for our newsletter, events, surveys, and partner resources per MDM Terms & Conditions. You can withdraw consent at any time.

Learn More about Custom Reports

Request a Market Prospector Demo

  • This field is for validation purposes and should be left unchanged.

Get the MDM Update Newsletter

Wholesale distribution news and trends delivered right to your inbox.

Sign-up for our free newsletter and get:

  • Up-to-date news in a quick-to-read format
  • Free access to webcasts, podcasts and live events
  • Exclusive whitepapers, research and reports
  • And more!