Alibaba began its journey as an e-Commerce company in 1999 with Jack Ma, its founder securing funding from Goldman Sachs. The internet, then, was a novelty in China. Internet penetration rate estimates stood around 5%. Alibaba is now transformed and is now the fastest-growing internet-enabled economy in China. In December 2020, the internet penetration rate in the country was 70.4 %. (https://www.statista.com/.) The monopolistic power of Alibaba over the Chinese small business economy probably resulted in the crackdown of the Communist Party on Jack Ma. But the importance of Alibaba to the Chinese economy continues despite its founder’s downfall.
Prima facie, it may appear that with penetration rates as low as under 5% in 1999, Alibaba should have a free run in that market. Commerce in China in those days was traditional. China today, like then, is a market where relationship matters. Deal-making entails a lot of knowing each other before you enter business discussions. Trust between partners is built first before deal-making. Deal-making includes a vigorous bout of bargaining before a decision is taken.
In 1999 when Alibaba came into existence, there was little understanding of e-Commerce. The first challenge for the company was to inform customers of the advantages of using digital services for commerce. The Chinese market comprises small and medium-sized businesses, including manufacturers, trading companies, and wholesalers. These enterprises were in the early stages of integration into the global supply chain.
Jack Ma’s vision for Alibaba was to partner with all businesspeople. He wanted these businesses to access the riches only the Internet could unlock. Alibaba.com’s vision was to enable them to interact and trade with each other and the outside world.
Businesses from across the globe have begun leveraging cheap labor, a welcoming business climate, and a rapidly developing quality infrastructure in China. The country was getting transformed into a vast manufacturing hub. All along the Chinese coastline, towns became rapidly converted into manufacturing factories. Cities specialized in the manufacturing and trade of products were mushrooming along the coastline of China.
Foreign companies were rapidly forming joint ventures with local companies. Factories were opening everywhere all along the coast. A global supply chain with China as the manufacturer of the world was emerging. China’s need to interact with the world and other suppliers was acutely felt. It is in this scenario Alibaba was born in 1999. The enabling environment for collaboration within and outside China was rapidly getting created.
Jack Ma‘s, the Founder of Alibaba, had a vision for Alibaba. It is a partner to all business people. It has enabled these businesses to access the riches only the Internet could unlock. Small companies find the Alibaba model attractive. It gives them access to the Chinese domestic and international markets. Manufacturers post their product listings on the site. Buyers worldwide use the platform to send inquiries to sellers in China.
They find Manufacturers, Suppliers, Exporters, Importers, Buyers, Wholesalers, Products, and Trade Leads on Alibaba.com. The platform enables them to interact and trade with each other and the outside world.
Alibaba offers a range of products to customers, most of whom are based out of China. It includes wholesale, group buying, retailing merchandise, luxury, branded products, financial products, and IT infrastructure services.
AliPay escrow payment-based services are another Chinese-specific facility. Payments for goods sit in an escrow account and are released only when both parties are satisfied with the deal and the product. The mechanism provided buyers with the assurance of payments for goods delivered. It has helped small businesses hugely.
Taobao.com and tmall.com, group companies under the Alibaba banner, account for 15 percent and 14 percent of the global e-commerce market. Amazon comes third with a 13 percent market share in the world. Alibaba controls over 50 percent of China’s eCommerce market.
Alibaba has played a significant role in China’s journey from a poor developing country to the world’s second-largest economy. Alibaba has played an important part in transforming small Chinese businesses into large exporters.