This is one question I see getting asked quite frequently on Quora. Every business started under the banner of Alibaba group has seen a phenomenon growth rate and success — not just in China, but often overseas. And they have not been the pioneers of B2B or B2C ecommerce in China as typically they are thought of as. Easynet and ebay were in China before Alibaba began its operations. As a matter of fact, easynet and ebay put together (ebay acquired easynet back in the day) had a combined marketshare of more than 80% in China. Yet, it took Alibaba less than 10 years to dominate the market completely, and force ebay to throw in the towel. And Jack Ma did not have the Midas’ touch as well — his first venture went belly up and was a disaster. Yet, Alibaba has thrived like no other; its NASDAQ public offering was the largest IPO US has seen.
There were a number of factors that have contributed to this growth of Alibaba, and we would talk about some of those factors here. (and won’t talk about some in as much of a detail as we would want to) :-)
One of the growth factors has definitely been a closer touch to the roots. Unlike ebay which was simply putting up its website for use in China, Alibaba’s complete interface was always built keeping in mind its audience. But localization doesn’t make or break a company, so let us not talk about it. Another factor that we won’t talk about would be the ‘fact’ that Alibaba does enjoy some privileges from the Chinese government!
The reasons for success of Alibaba:
- It entered a market that needed its presence at the right time — Alibaba wasn’t Jack Ma’s first internet venture. The venture before it had failed badly, arguably because the market wasn’t yet ready for it. However, when he started Alibaba (back in 1999), the primary focus was on connecting Chinese manufacturers with overseas companies looking to buy Chinese products.
- When Taobao was launched in 2003, it was completely free for merchants — there wasn’t any listing fee or transaction fee. This was based on an understanding of the local market — ecommerce as a concept was completely new, and Jack Ma wanted the merchants to get comfortable with it; he wanted to bring down the inhibition as much as possible, and increase the adoptability and penetration — that is what he had his eyes set on.
- As a next step, Alibaba launched AliPay (something of the sort of PayPal and PaisaPay by ebay). By doing so, the company put a face of trust in front of both involved parties — merchants as well as consumers, and helped in facilitating more and more transactions for the merchants, and increase the ease with which a consumer would want to transact online.
- Different companies under the banner of Alibaba used the previous successes to seed their success. For example, the success of http://alibaba.com helped seed the initial consumer base for Tabao; even some merchants that had been using http://alibaba.com moved over to start using Tabao again, and gradually the whole base exploded. To this date, Tabao is considered the leading source of traffic for a different business unit Tmall.
Alibaba became successful because it did precisely what people would have expected out of a business like that — help consumers buy any product, and help merchants sell as much of their merchandise to as wide a base as possible. Even today, consumers go to Tabao before searching for a product on any search engine. And even though Alibaba has become as big as it is today, they never deterred from what their core offering to the merchants was — listing their products for free, and transacting for no cost; thus enabling and facilitating onboarding for merchants of all sizes — whether new or old. Alibaba generates a lot of revenue through display and search advertising; think of it as Google for ecommerce in China. Merchants bid for keywords and take up display ads. Why? To drive traffic to their storefronts. And it has been working wonders for every single party involved. They have held true to their mission — “To make it easy to do business anywhere”.
Alibaba (or I should rather say Alibaba group — the different websites under the banner of Alibaba) — contributes 80% to the overall e-commerce business in China. It has 25,000+ employees working in 100+ offices all over China. 60% of packages delivered in China are through one Alibaba website or the other.
And finally, UX isn’t user interface, but user experience. And that is precisely where the world’s leading businesses have transformed things. Sometimes it is online as a part of the user’s web or app browsing experience, and sometimes it is the physical experience. But, it is the end-to-end experience a user/customer gets while enjoying the services that really changes the game. You take the example of Google, Facebook (the first few years), Amazon — none of them have a great ‘design’ element to their website, but they do precisely what you expect them to do, and they do so in a completely non-intrusive fashion. So you don’t even notice it most of the time.