For five years now, November 11 is D-Day for millions of Chinese shoppers to rush spending their money on e-commerce websites like Alibaba. Due to special discounts, Chinese consumers actually buy more online that day than Americans on Cyber Monday (the Monday after Thanksgiving) and Black Friday (the day after Thanksgiving) combined.
Undeniably, Alibaba is the dominant player in China’s ecommerce industry and the world’s largest e-commerce platform, representing a kind of combined Amazone.com. eBay and Google in one entity. In fact, the total volume of traded goods last year by Taobao and Tmall, the company’s two main shopping sites, exceeded 1.1 trillion yuan ($ 170 billion), which is more than last year’s revenue of Amazon.com and eBay combined.
The so-called 11/11 Shopping Festival started in 2009, when 27 merchants on Tmall offered discounts to perk up sales in the otherwise quiet period between China’s autumn holidays and Christmas and today coincides with what is known in China as Single’s Day, a vaguely defined holiday on which young people lament or celebrate being single. According to Alibaba, the date has been chosen as it is easy to remember and it seems the idea added up: Tmall and Taobao managed to generate $3.1 billion in sale together last year. Surprisingly, despite such amazing success, many people outside China still have barely noticed the rise of this privately held e-commerce giant.
Alibaba.com started in 1999 as a business-to-business (B2B) portal that connects small Chinese manufacturers with buyers overseas. Then, in 2003, Taobao has been launched, a consumer-to-consumer (C2C) portal much like eBay that makes money not by charging vendor commissions, but with advertising and other services merchants need to stand out of the vast crowd and get the attention of consumers. Their ads appear within search results, giving Taobao a Google-like feel. Taobao by now features nearly a billion products and is one of the 20 most-visited websites globally, Tmall, on the other hand, is a business-to consumer (B2C) portal, a bit like Amazon that helps global brands reach China’s middle classes.
In January this year, Jack Ma, founder and CEO of Alibaba, announced his intention to step down, pushing Jonathan Lu as the new CEO into the limelight, who revealed soon afterwards the company’s IPO plans. Most probably Alibaba’s public listing will make even more waves than Facebook’s IPO. It’s already estimated to range from $55 billion to more than $120 billion and will for sure turn global attention to Alibaba’s remarkable rise.
Take a look at Bloomberg’s Alibaba IPO discussion: http://www.bloomberg.com/video/is-alibaba-the-world-s-most-anticipated-ipo-Jr3l0abMSjmSGDhOn5kk0A.html
It is predicted that by 2020, China’s e-commerce market will be bigger than the existing markets in America, Britain, Japan, Germany and France combined. The country’s and Alibaba’s global expansion respectively, seems to be unbeatable, not only because it is capturing the spending of Chinese overseas, but by moving self-reliantly into emerging countries as well.
Alipay, the company’s novel online-payment system, only spurs on the success. It relies on escrow, which guarantees that money is released only to those sellers who made their buyers happy with goods received, that way gaining and building trust.
So, by now six million vendors are listed with Alibaba’s sites that feed the demand of an enormous amount of consumers. From a marketer’s perspective, its customer data base could be regarded as the company’s biggest asset. Besides that, its sites account for over 60% of the parcels delivered in China and Alibaba knows more than anyone about the spending habits and creditworthiness of the Chinese middle class and merchants. However, a stumbling block for the e-commerce giant could be that Chinese companies are generally viewed with suspicion abroad and probably the biggest threats are lurking right at home: Like Amazon or eBay, Alibaba needs to be monitored by antitrust regulators, with domestic politics posing as a risk in particular, be it distrust and lobbying against services by the Communist Party or banks. But since Alibaba already learned to spread its wings, it is destined to fly.
By Daniela La Marca