Reference no: EM133433200
Case Study: For small and medium-sized businesses desperate to reach buyers, global selling platforms have made all the difference. These two-sided platforms need both buyers and sellers to succeed. The interactions constitute a meaningful and widespread form of B2B transactions, with international implications.
As is so often the case, this market has been largely dominated and defined by Amazon, which allows smaller companies to list their products on its site. But that dominance might not be long lasting, considering the ways that Alibaba.com has designed its platform to facilitate more meaningful B2B relationships and provide additional value to its approximately 10 million active business customers, which operate in nearly 200 countries.
The Alibaba Group has been operational for a couple of decades now, with both consumer and business divisions. Only recently has it expanded its B2B platform to include U.S. sellers. The move reflects Alibaba's realization that approximately one-third of the corporate buyers on its Chinese site already were ordering from the United States. In doing so, it believes it can change the narrative, such that rather than continuing to be known as the "Chinese Amazon," it can ensure that Amazon comes to be known as the "U.S. Alibaba." This confidence stems from several benefits it offers, both competitively and collaboratively.
Competitive Benefits
As perhaps its most important and compelling offering, Alibaba promises to .do a better job than Amazon when it comes to facilitating its business partners' sales. The primary difference it highlights is its very status: Alibaba.com is only and exclusively a platform for other sellers. It does not function as a retailer that sells its own products. Therefore, whereas sellers on Amazon might be competing against the site for customers, no such threat exists on Alibaba. Page 243
Furthermore, unlike Amazon, Alibaba does not take a percentage of revenue from each sale. Whether a company sells 20 products or 20,000, it pays Alibaba the same amount. The upfront fee to post products on the platform is about US$1,000, and then firms that decide to remain there pay about US$1,400 annually to maintain their presence. With this payment method, small businesses know exactly what their costs will be, and the more they sell, the more they know they will earn.
The focus on the Alibaba site also is solely on B2B sellers. Therefore, it is not distracted by consumer sales, which represent a totally separate division of the parent company, the Alibaba Group. Thus, the support that clients on the platform receive is unique and specific to their needs as B2B sellers, including more flexible pricing options (whereas Amazon often mandates the prices that sellers may charge), and there are no limits on the number of countries in which they can sell.
Collaborative Benefits
Some of the challenges that sellers face on any international platform still represent a potential risk on Alibaba though. The platform benefits when it can attract more sellers, so each firm may find that its products are being positioned in close comparison with similar offers from its competitors. In an attempt to reduce this threat and assuage concerns, Alibaba collaborates closely with the sellers it hosts to help them.
A notable collaboration involves Office Depot, which has been designated an "anchor seller" on the site. In their collaborative, co- branded efforts, Office Depot and Alibaba have created a dedicated online store. Orders from that store are delivered using the combined distribution and support capabilities of both companies. Thus, U.S. businesses can rely on their familiarity with Office Depot while also developing new markets by positioning themselves on Alibaba.
Furthermore, Alibaba provides its business clients with online payment options, advanced customer relationship management software, and effective search designs. In workshops and webinars, it shares tactics and suggestions for using the platform optimally, and it is partnering with business groups to communicate the benefits to local entrepreneurs. For sellers in the United States, it also promotes its appeal to the millions of available customers. In particular, it is targeting Los Angeles-area businesses in the belief that the region offers a strong manufacturing environment as well as functioning as an international hub. Accordingly, it considers its capacity to help firms target buyers in specific countries to be key to its collaborative appeal.
Continued Challenges
Of course, some of these benefits are still in the promise stage. And while Alibaba can claim lots of B2B relationships, Amazon's business marketplace recently hit the $10 billion mark in sales transactions.33 It isn't as if a competitor can simply come in and supplant Amazon easily, whether in B2B or in consumer markets.
Yet even as Alibaba acknowledges that it still has work to do,34 it has confidence in the benefits it brings, such that it plans to grow even further.35 Just as in nearly every other sector, online platforms continue to expand in importance, and as the market grows, Alibaba wants to be the first name companies turn to when they need to conduct B2B transactions.
Answer the Question:
What methods is Alibaba using to build its B2B relationships? What other methods might it try to expand its reach even further?