1. Shri Mata Vaishno Devi University,Katra
Case Study of Alibaba.com
Submitted To:­Submitted
By:­Mrs.
Sonika Gupta Akshay Pratap Singh (2011ECS01)
Faculty of CSE Rishabh Shukla (2011ECS13)
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2. Table of Contents
S.No Topic Page Number
1. Introduction 3
2. History 4
3. Business Model 5
4. Products and Services 7
5. Target Users 8
6. Payment Methods 9
7. Comparison of Alibaba with other
Tech­Giants
12
9. References 15
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3. Alibaba
A marketplace, a search engine and a bank, all in one.
Alibaba is China’s and by some measures, the world’s biggest online commerce company. Its
three main sites — Taobao, Tmall and Alibaba.com — have hundreds of millions of users, and
host millions of merchants and businesses. Alibaba handles more business than any other
e­commerce
company.
One can think of it as a mix of Amazon.com, eBay and Paypal. Customers use Alibaba to shop
online, sell unwanted goods and make online payments. Alibaba has two retail sites: Taobao,
which features thousands of non­brand
name products sold by smaller merchants; and Tmall,
which offers brand­name
products sold by big merchants.
Unlike Amazon, which buys goods from suppliers and sells them to customers, Alibaba has
always acted as a middleman, connecting buyers and sellers and facilitating transactions between
them.
This Chinese B2B trading platform connects buyers in North America and Europe with suppliers
from China. Alibaba follows an aggregation of supply model (similar to other early B2B
players), helping to solve the pain of global sourcing.
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4. History
Alibaba Group was established in 1999 by 18 people led by Jack Ma, a former English teacher
from Hangzhou, China. From the outset, the company’s founders shared a belief that the Internet
would level the playing field by enabling small enterprises to leverage innovation and
technology to grow and compete more effectively in the domestic and global economies.
Jack Ma named his company on “Alibaba ­Open
Sesame”. Alibaba is a kind, smart business
person, and he helped the village. Alibaba opens sesame for small­to
medium­sized
companies.
During Late 90’s, Alibaba Group raised a total of US$25 million from SoftBank, Goldman
Sachs, Fidelity and some other institutions.
After Alibaba achieved profitability in 2001, it’s sister organization Taobao was founded as a
consumer e­commerce
platform. Which further established TMall (TMall.com), a retail website,
to complement its C2C marketplace.
After about a decade since its inception Alibaba group also beta­launched
eTao as a shopping
search engine.
Alibaba raised $21.8 billion in its debut, making it the biggest U.S.­listed
IPO in history after the
IPO of credit card processing company Visa in 2008.
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5. Business Model
The initial business model of Alibaba was simple ; a facilitate a 24/7 meeting platform for
suppliers and buyers around the world. From the start Alibaba did not just connect Chinese
suppliers with international buyers, but it had the goal of connecting all importers and exporters
around the world to each other. Although other B2B websites have always said “You cannot have
a global company out of china , it makes no sense.”. From the very beginning Alibaba was , “the
first global Internet emerging from china.”
In more technical terms three of the most prominent business models employed by Alibaba are:
B2B, C2C and B2C.
B2B:
Alibaba.com Limited the primary company of Alibaba, is the world’s largest online
business­to­business
trading platform for small businesses.
Founded in Hangzhou in eastern China, Alibaba.com has three main services. The company’s
English language portal Alibaba.com handles sales between importers and exporters from more
than 240 countries and regions. The Chinese portal 1688.com was developed for domestic
business­to­business
trade in China. In addition, Alibaba.com offers a transaction­based
retail
website, AliExpress.com, which allows smaller buyers to buy small quantities of goods at
wholesale prices.
According to some e­commerce
analysts. Alibaba is probably the one organization in the world,
which has been able to successfully provide a hassle free platform to small to medium sized
businesses to carry on over the internet.
C2C:
Taobao, is Alibaba’s yet another portal, which utilizes consumer­to­consumer
model similar to
eBay. Taobao.com is China's largest shopping website, and tmall.com, which offers a wide
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6. selection of branded goods to China's emerging middle class. It features thousands of non­brand
name products sold by smaller merchants
With around 760 million product listings as of March 2013, Taobao Marketplace is one of the
world’s top 10 most visited websites according to Alexa.
B2C:
In 2008, Alibaba Group also established another online website Tmall, to compliment it’s C2C
market. Although Tmall is mainly a business­to­consumer
platform is known for offering
brand­name
products. The two sites (Taobao.com and Tmall) are hugely popular, and
collectively account for more than half of all parcel deliveries in China. According to The Wall
Street Journal, their combined transaction volume in 2012 topped one trillion yuan ($163
billion), more than Amazon and eBay's revenue combined.
Tmall marketplace is China’s largest business­to­consumer
(B2C) online­shopping
venue. The
site allows visitors to quickly view vendor fees, required deposits and other factors associated
with operating a Tmall storefront.
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7. Products and Services
Alibaba provides a wide variety of products and services through its various online portals. Some
of these are:
● Apparel, Textiles & Accessories
● Auto & Transportation
● Electronics
● Electrical Equipment , Components & Telecom
● Gift, Sports & Toys
● Health & Beauty
● Home , Lights & Construction
● Jewelry, Bags & Shoes
● Machinery, Hardware & Tool
● Metallurgy, Chemicals, Rubber & Plastics
● Packaging, Advertising & Office
● Online marketing
● Cloud Computing
● Logistics Operations
● Electronic Payment Services
Alibaba is one of those online resources which claims a “Get everything and anything”
availability. A consumer can literally buy products ranging to simple toys to automobiles. Hence,
Alibaba is proving to be a one­stop
platform where a consumer can choose among a wide variety
of options.
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8. Target Users
Alibaba Group primarily operated within China, where e­commerce
is synonyms to Alibaba. But
within last decade Alibaba has expanded to almost all the corners of the world, consisting its user
base from about 190 odd countries.
Alibaba has been turned into a global organization but still holding China as it’s major focus.
Almost 75% of China’s e­commerce
market is dominated by Alibaba. China has 560 million
internet users ­twice
as many as the U.S. ­who
spend an average of 20 hours a week online.
Although to get a hold on other emerging markets Alibaba Group has also established offices in
the U.S., U.K., India, Japan and Korea.
Apart from small­to­medium
businesses Alibaba group also provides online platform to
individual customers through its parent websites Tmall.com and Taobao.com.
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9. Payment Methods
Actually Alibaba Group has it’s own payment solution named as Alipay, is a third­party
online
payment platform with no transaction fees. Other than that, Alibaba also offers many ways to
pay suppliers. Six most commonly used ways are Telegraphic Transfer(TT)/Bank Transfer ,
Letter of Credit, DA/DP, Western Union, PayPal and Escrow. Buyers are advised to consider
each option carefully before committing to one.
S.NO Methods Conditions Description
1. 30% Upfront TT For buyers: 2.5
out of 5 stars
For suppliers:
4.5 out of 5 stars
Since many factories need money in
advance to buy material for production,
30% Upfront TT is a common payment
term for suppliers, especially when dealing
with an unknown buyer.
2. 100% Upfront TT For buyers: 1
out of 5 stars
For suppliers: 5
out of 5 stars
The supplier gets full payment before
production starts. This payment method
bears the same risk as Western Union and
is not recommended when dealing with an
unknown supplier.
3. 100% Backward TT For buyers: 4.5
out of 5 stars
For suppliers: 2
out of 5 stars
If being paid after pre­shipment
inspections, it is suggested to use trade
terms of FOB. If being paid after receipt of
merchandise, it is nearly 100% reliable for
buyer cause buyer can cover the whole risk,
however, on the opposite, suppliers are not
willing to accept this way due to big
potential risk of dispute or fraud.
4. Letter of Credit For buyers: 4
out of 5 stars
For suppliers: 4
out of 5 stars
Highly recommended for transactions that
are US $20,000 and above because the
bank guarantees the transaction. But
complex procedures and high threshold of
registered finance may prevent some SMEs
from being involved.
5. Western Union For buyers: 0
out of 5 stars
Not recommended when it comes to paying
suppliers if the payment is not protected by
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10. For suppliers: 5
out of 5 stars
escrow on a transaction made online
through AliExpress. However, it's useful
when transferring money to known
individuals such as family members.
6. Paypal For buyers: 5
out of 5 stars
For suppliers: 3
out of 5 stars
A popular payment method for buyers as it
presents a much lower risk to them.
However, it is less popular with suppliers
due to difficulties in money withdrawal,
high tax rates and uncertain claim of charge
back from some notorious importers
7. Escrow For buyers: 5
out of 5 stars
For suppliers: 3
out of 5 stars
Money is only paid to the supplier after the
buyer confirms satisfactory delivery of
his/her order. A safe way to buying and
selling online because Escrow protects both
the buyer and supplier.
In terms of innovation, Alibaba is introducing a new secure mobile payment method as it gets
ready for its IPO.The Chinese e­commerce
giant will get ahead of its competitors Amazon,
Google and Paypal with an innovative and secure method of payment using fingerprints instead
of passwords.
“The biometric technology, including encryption and authentication managed by Huawei, will
allow mobile users to confirm payments for a wide variety of goods and services with their
smartphones simply by swiping a digit instead of entering a lengthy code,” the company says on
its blog.
Huawei, the world’s third­largest
smartphone vendor by shipment volume , will also employ
high­level
encryption and verification to ensure only approved third­party
applications, such as
Alipay Wallet, are allowed to access the fingerprint information for transactions.
It’s worth remembering that Alibaba is a pretty safe platform to purchase on. Not only do you
have the standard protection that your payment provide gives, but Alibaba hold mostly all
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11. payments in Escrow until the buyer confirms they’ve received the goods and they’re as expected.
Until the buyer confirms receipt the seller doesn’t receive the funds.
Alibaba also offers some tips for shipping methods:­●
Using express companies such as FedEx or DHL
You can open the shipment in front of the delivery person. If the item is not what you
ordered or if the item is defective due to handling, you have the right to return it to the
delivery person.
● Using sea freight shipping method
If the item that you received is not what you ordered, do not clear customs!
You can always request for a customs officer or a third­party
inspection
company to conduct an onsite inspection before being issued a customs
clearance certificate. If you only inspect the delivery after customs
clearance, you might encounter legal hurdles should you decide to dispute
the delivery.
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12. Comparison of Alibaba with Other
Tech­Giants
Alibaba is really a technology company that serves retail customers and controls 80% of the
Chinese e­commerce
market.Alibaba will compete most directly with on­line
retailers like
Amazon, EBay or Zalando in Europe, Rakuten in Japan, Kobo in India, Wuaki in Spain and
other major on­line
providers with strong presence in their home and adjacent markets.
Take market capitalization, or the total value of available shares times the value of a
single share , Alibaba’s market capitalization value is estimated at $155 billion. That number
makes it look pretty small compared to the top three US tech giants: Apple ($593 billion),
Google ($400 billion), and Microsoft ($378 Billion). But it compares nicely to Amazon, which
also has a market cap in the $150­billion
range. And it’s growing.
Fig : Revenues of various famous Tech­giants
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13. The comparison is not exactly apples­to­apples.
Alibaba’s business model is similar to that of
Ebay, in that it is a middleman coordinating sellers and buyers. Alibaba doesn’t house and
manage any products itself.
“Gross Merchandise Volume (GMV), the metric the company likes to highlight, is the total sum
of goods and services transacted on all its sites.”
In 2013, Alibaba hosted GMV of $248 billion in transactions last year. That’s more than
Amazon and eBay managed to do — combined. And while Amazon takes home a lot more
revenue than Alibaba from its fewer transactions, Alibaba takes a much higher net income from
its revenue than Amazon. Alibaba now takes home 80 percent of its revenue as profit.
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14. Alibaba’s revenue is the cut it takes out of each sale. In comparison, Wal­Mart’s
nearly $250
billion in revenue represents the total value of all the goods purchased along with its built­in
margins.This shows how complicated it is to value Alibaba.
To really understand how big a deal Alibaba is you’ve got to understand the growth of China’s
e­commerce
economy and the stronghold that Alibaba has on it.
China has over 618 million internet users and they’re spending lots of money. That’s twice the
population of the United States, but only half China’s total population. So there’s lots of room
for growth in a sector that’s already exploding. In 2010, China’s e­commerce
market was $74
billion dollars. In 2013, it was $295 billion. By 2017, it’s estimated to reach $713 billion.
And Alibaba is cashing in big time. It controls 80 percent of online sales. Even though it’s not
yet putting up the gross revenue numbers of Amazon and Apple, its 80 percent control of the
market and 80 percent profit take from its revenue adds up to a huge, massive, crazy, growing
amount of money.
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15. References
1. http://www.cnbc.com/id/101590855
2. http://projects.wsj.com/alibaba/
3. http://expandedramblings.com/index.php/alibaba­statistics/
4. http://www.quora.com/What­is­the­business­model­of­alibaba­com­how­do­they­ma
ke­money
5. http://www.marketwatch.com/story/how­to­understand­alibabas­business­model­20
14­03­15­94855847
6. http://www.forbes.com/sites/chriswright/2014/09/16/so­what­exactly­is­alibaba/
7. http://www.economist.com/news/briefing/21573980­alibaba­trailblazing­chinese­inte
rnet­giant­will­soon­go­public­worlds­greatest­bazaar
8. https://gigaom.com/2013/06/30/alibaba­is­just­the­beginning­how­b2b­marketplaces
/
9. https://www.techinasia.com/alibaba­amazon­infographic/
10. http://www.alizila.com/alipay­huawei­roll­out­biometric­security­mobile­payments
11. http://www.alibaba.com/help/safety_security/class/buying/pay_ship/002.html
12. http://fortune.com/2014/09/12/alibaba­is­on­track­to­become­the­biggest­u­s­ipo­eve
r­here­are­three­charts­you­need­to­see/
13. http://www.dailynews.com/general­news/
20140912/the­tech­story­of­the­week­isnt­a
pple­its­alibaba
14. http://www.alibaba.com/Products
15. http://www.infoworld.com/article/2607722/techology­business/
alibaba­s­business­m
odel­and­the­chinese­market­make­its­ipo­hot.
html
16. http://www.bbc.com/news/business­29077495
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