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Alibaba Business Model: Everything you need to know about how Alibaba makes money and Complete Revenue Analysis

Alibaba, a technology-driven business, challenges conventional corporates in China, Asia, and the rest of the world, necessitating a different approach to contend with it. Alibaba is a name for figuring out best practices in multi-vendor web-based businesses and blockbuster accomplishments in the B2B e-commerce industry.

What is Alibaba?

Jack Ma, alongside 17 other co-founders, established Alibaba Group in 1999, launching the website Alibaba.com. It was a business-to-business marketplace entry with an expectation to interface Chinese sellers with universal purchasers. Today, Alibaba Group Holding Limited is one of the greatest organizations in China that gives buyer-to-shopper, business-to-customer, and business-to-business deals and different services by means of online business web and also offline entries.

Why Alibaba Business Model is successful and what does it do?

In basic terms, Alibaba is the synonym word for eCommerce in China. As a (B2B) Business-to-Business exchange stage, it stands as the undisputed champion, connecting exporters with businesses across 190+ countries.

The Alibaba Business Model facilitates seamless product purchasing and direct shipping to customers worldwide. Alibaba even tied up with tech enduring Samsung to power its m-payment facility – Alipay.

Web-based business:

The fuel for Alibaba’s relentless development breakout on the web and its network over the world is certainly the fuel that has been driving Alibaba’s triumph as an achievement. Particularly in China, where the population exceeds 1.4 billion, it’s estimated that at least 600 million internet users engage primarily in online shopping and e-commerce activities.

That unquestionably dominates the number of online clients in the US (277 million) and Europe (546 million). Alibaba is balanced for another arrangement of development tide with puzzling numbers. Alibaba is poised for another wave of growth with mysterious numbers.

Alibaba Business Model

Similarly, just as most American shoppers regard Amazon as a web-based business titan, Alibaba’s Business Model dominates China’s e-commerce market. In spite of the fact that the company works through an exceptional business model, Alibaba’s core business resembles that of eBay. Alibaba Business Model goes about as a broker among purchasers and merchants on the web and encourages the offer of merchandise between the two gatherings through its broad system of sites. The biggest site, Taobao, works as a charge-free commercial center where neither dealers nor purchasers have imposed an expense for finishing exchanges.

While the greater part of vendors using the Taobao site are smaller vendors, Alibaba additionally has a dedicated space for bigger retailers. Tmall possessed and worked with Alibaba which is an online business website that takes into account surely understood brands, including Gap (GPS), Nike (NKE), and Apple (AAPL). Actually, Tmall has a small number of dynamic merchants added on Taobao.

A noteworthy piece of the company’s business lies in Chinese-to-Chinese communications. It can’t be neglected as it is a considerable territory of development. In China alone, there are 1.2 million users of Alibaba.com.

Additionally, despite its Chinese dealings, Alibaba.com also has a separate site for Japan. After the site was set up, it completed a surprising activity in drawing in clients and recorded a development of twofold figure in the initial half year as far as Japanese supporters. The Japanese site is upheld by setting up Japanese accomplices. Some examples are Sumitomo-Mitsui Bank, Nikkei BP, and the Japan External Trade Organization (JETRO).

Alibaba Business Model can create income from stores, yearly client expenses, and deals commissions charged to retailers using the site.

Notwithstanding its web-based business locales, Alibaba Business Model has risen as a rival in the Chinese financial framework. To battle client worries over the security and legitimacy of exchanges finished on the web, Alibaba made Alipay. As a safe payment framework, Alipay ensures purchasers in the occasion vendors can’t or decline to convey merchandise sold. Notwithstanding its PayPal-like stage, Alibaba additionally creates income from its recently propelled small-scale loaning business arm that obliges singular borrowers.

Alibaba Business Model Canvas

The Alibaba Business Model Canvas illuminates the key entities, elements, customer relationships, segments, resources, cost structure, and revenue streams.

alibaba business model canvas

Alibaba, the Chinese e-commerce behemoth, has reshaped the global retail landscape with its innovative business model. Let’s delve into Alibaba’s Business Model Canvas and dissect the key components that have propelled the company to prominence in the digital marketplace.

Customer Segments:

Alibaba serves a diverse range of customer segments, including consumers, businesses, and merchants. Its primary customer segments are individual consumers seeking a wide range of products and services, as well as businesses looking to expand their reach through online retail channels.

Value Propositions:

Alibaba offers a variety of value propositions to its customers, including a vast selection of products, competitive pricing, convenience, and accessibility. Through its online platforms, Alibaba provides consumers with access to millions of products from around the world, while businesses benefit from enhanced visibility, marketing opportunities, and access to a global customer base.

Channels:

Alibaba operates multiple online platforms and marketplaces to connect buyers and sellers, including Alibaba.com, Taobao, Tmall, and AliExpress. These platforms serve as channels for conducting e-commerce transactions, facilitating communication between buyers and sellers, and promoting products and services to a global audience.

Customer Relationships:

Alibaba fosters customer relationships through various channels, including online interactions, customer support, and community engagement. The company prioritizes customer satisfaction and strives to provide a seamless and personalized shopping experience for its users. Through its platforms, Alibaba encourages feedback, reviews, and interactions between buyers and sellers to build trust and loyalty among its customer base.

Revenue Streams:

Alibaba generates revenue through multiple streams, including commission fees, subscription fees, advertising, and cloud computing services. The primary revenue source is commission fees charged to merchants for transactions conducted through Alibaba’s platforms. Additionally, Alibaba offers subscription-based services to businesses, advertising opportunities for sellers, and cloud computing services through its subsidiary, Alibaba Cloud.

Key Resources:

Alibaba’s key resources include its online platforms, technology infrastructure, data analytics capabilities, and human capital. The company invests heavily in technology development, data analytics, and talent acquisition to maintain its competitive edge and drive innovation in the e-commerce industry.

Key Activities:

Alibaba’s key activities revolve around platform management, customer acquisition, product sourcing, logistics, and marketing. The company continuously optimizes its platforms, acquires new customers, expands its product offerings, enhances its logistics network, and executes marketing campaigns to drive growth and profitability.

Key Partnerships:

Alibaba collaborates with various partners, including merchants, suppliers, logistics providers, financial institutions, and technology companies, to support its operations and expand its ecosystem. These partnerships enable Alibaba to leverage external expertise, resources, and capabilities to enhance its offerings and create value for its customers.

Cost Structure:

Alibaba’s cost structure includes expenses related to technology infrastructure, platform maintenance, marketing, employee salaries, and customer support. The company also incurs costs associated with logistics, payment processing, and regulatory compliance. By optimizing its cost structure and improving operational efficiency, Alibaba aims to maximize profitability and sustain long-term growth.

Alibaba’s Business Model Canvas encapsulates the key elements that have fueled the company’s success in the e-commerce industry. By focusing on customer-centricity, innovation, and strategic partnerships, Alibaba continues to shape the future of retail and redefine the way people shop and conduct business online.

How does Alibaba Make Money?

how does alibaba make money

In any case, contrasted with Amazon it has high working and net revenues. Further, Alibaba Business Model has a few other e-retail subsidiaries like Taobao.com, Aliexpress, and Tmall.com, all of which generate revenue in a pretty much comparative business pattern.

Alibaba is an intermediary platform between buyers and sellers. There are three big portals that are affected on the part of the revenue model: Alibaba.com, Taobao, and Tmall. All of them target a different audience. There are 6 other areas in which subsidiaries of Alibaba Business Model which include Aliexpress, 1688, Alimama, Alibaba Cloud, Ant Financial, and Cainiao Network. All these subsidiaries work to make Alibaba a big ecosystem. Alibaba.com has allowed its exporters to export to 200 countries worldwide including China.

The company also offers other import /export supply chain services which include

  • custom clearance,
  • VAT refund,
  • trade financing, and
  • logistic services

Sellers can list their services/products for free but must pay for some extra features.

Alibaba Revenue Model

Here are two points that are effective for the Alibaba Revenue Model:

No Warehouse, All Software Format:

Alibaba possesses no stock by any stretch of the imagination. It simply goes about as a delegate that interfaces dealers/exporters to clients/organizations. Every one of its exchanges occurs with the assistance of a web-based business software that encourages the trade of merchandise and enterprises. The software which is effectively scalable likewise adds to Alibaba’s upper hand.

No Listing Fees:

Alibaba does not take posting charges from its merchants. Be that as it may, it takes some type of charge for access to broad item posting and deals boosting features given by the site.

Significant investors: YahooInc., SOFTBANK company, Fidelity Capital.

You may also like to read: How does Uber work? Insights into Business Model and Revenue Analysis

7 Ps of Marketing Mix – Alibaba Business Model

alibaba marketing mix

Here are the 7 Ps of the marketing mix of Alibaba Group.

Price:

Including any other portal, Alibaba offers truly permissive pricing, so its own remuneration is really minimal, enabling entrepreneurs to establish their own personal businesses. Due to this Alibaba has got such excellent heights so quickly. Because of the low-price nature of Chinese products, it is truly said that Alibaba incurs penetrative fees.

Place:

As of now, Alibaba.com is the only website having international occurrence although all the other portals of Alibaba Group are concentrated on China only. Including any other portal, Alibaba offers truly permissive pricing, so its remuneration is minimal, enabling entrepreneurs to establish their businesses. However, almost all of the options are market leaders with Taobao being the market leader for the customer-to-customer platform, Autonavi being the market leader for maps and likewise Tmall having a high business for the sale of global brands.

Overall, Alibaba boasts that it can move to 240 countries from its international business to business portal – Alibaba. com. At the same time, the portal is increasing its actual occurrence across the world.

Promotion:

Alibaba’s Business Model is a master in promoting digitally. Naturally, as most of the services are digital, across the world digital ads are shown. Alibaba does it with hoardings, digital advertising, and sales promotions in China.

Out of China, it does TV advertisements for B2B and bulk suppliers.

Product:

Alibaba Group is dealing with many products like alibaba.com, Tmall, Taobao, Autonavi, Alipay, Aliexpress, etc. But the primary product is Alibaba.com. Alibaba.com covers the B2B market. Other products of Alibaba Group include different eCommerce markets.

Process:

As Alibaba groups are working in the eCommerce area, the process is simple. The transaction occurs through Alipay Western Union or similar methods. Business operates on a customer-to-customer, group shopping, or wholesale basis.

People:

Now, people can cover a wide area. People are in terms of users and in terms of employees. Alibaba groups consider both as valuable assets for success. Alibaba groups focus on the demand of the customers and customer service as well and they don’t forget to give attention to the employees too. The engineers in the engineer department are extremely skilled in their domain and adaptable to the changes in technology.

Physical Evidence:

The physical evidence of Alibaba Business Model includes the intangible aspects of service like the delivery schedule which has to go as promised. All the transactions should be smooth from payment to delivery. These are the things that build physical evidence of the company.

Success of Alibaba

Founder, Jack Ma was an English teacher when he started Alibaba from his one-bedroom apartment in Hangzhou, Zhejiang province, in 1998. Ma’s first e-commerce venture was – China Yellowpages, said to be the first internet company in China. Once in November 2013, Alibaba recorded sale of $5.6bn. The success of Alibaba has been built on the huge number of internet users in China, estimated at 600 million. Taobao holds 7m merchants who sell there on the site so it is the biggest shopping site under the Alibaba umbrella.

Can Alibaba Succeed in Countries Outside China?

Alibaba has different strategies for different regions. They keep being one of the most visited sites in Russia (10th place) which is a significant market for Alibaba group. Moreover, they are making some infrastructure investments in Brazil, building DCs to increase the delivery time of the products. Alibaba’s main strategy in the USA, Europe, Australia, New Zealand, etc is to leverage what they are strongest at, namely helping foreign brands in reaching Chinese customers online. India is the most promising market for startup investment for now. So, they are making some investments in Indians startups, which is a very big deal when we look at the size of the Indian population.

Competitors of Alibaba

Global Competitors:

Amazon: Amazon has built a strong reputation among its customers by providing satisfactory service and customer experience. It is considered to be the global competitor of Alibaba.

Read more: How does Amazon make money

eBay: Alibaba Business Model is closer to eBay and sellers together on a platform and even providing a payment system like eBay’s PayPal, called AliPay.

Read more: eBay business model

Homegrown Competitors:

Tencent: Tencent is among the largest and most widely used Internet service portals in China.

JD.com: JD.com is China’s largest direct online sales company in terms of transaction volume.

Baidu: Baidu is China’s dominant internet-search engine which is aggressively pushing for O2O (online-to-offline) services which is Alibaba’s homegrown competitor in terms of internet searching.

Valuation of Alibaba

Here is Weighted Average Cost of Capital (WACC) table of Alibaba:

wacc of alibaba

Based on the total revenue dynamics over the past four years, consensus expectations for coming years is explained in below graph.

alibaba revenue forrecast

The income of Alibaba is measured and categorized by the market and geographic diversification. Moreover, the rates and phases of growth of the main Alibaba’s revenue segments also greatly vary. Here are the data with graphs.

revenue of alibaba china commerce

revenue source international commerce

revenue source cloud computing

(Image source)

Alibaba’s Mission and Vision

The mission of Alibaba is to provide a platform for all businessmen to do business easily.

Alibaba aims to build the future infrastructure of commerce. They envision that their customers will meet, work, and breath at Alibaba and that we will be a company that lasts more than 100 years.

Alibaba’s vision for the future is to use its ecosystem (core commerce, cloud, logistics, entertainment, and brick and mortar) to support the “Five New” strategies that empower people, small- and medium-sized businesses, farmers, and companies of all sizes to do business globally.

Value Proposition of Alibaba

Alibaba’s focus is to champion small to medium businesses by the 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 markets.

Security:

Reliability and trust are the key values for a value proposition. To take care of this point, Alibaba established Alipay (An important part of Alibaba group’s ecosystem). It provides a secure, trustworthy, and convenient way for sellers and purchasers to make and receive payments online and on a mobile phone. It is a third-party online payment service provider with no transaction fees.

Feedback:

Alibaba allows buyers to write review on products and services they buy or use, and for sellers to receive feedback ratings, and rankings.

Convenience/Accessibility/Connectivity:

Alibaba enables their customers, both buyers and sellers, to discover, connect, and transact with each other on the e-commerce marketplaces easily and internationally.

Customization:

It is done through keyword search engine tools on the platform. So, buyers can find the products on the basis of different categories like type, design, seasonal, color, brand, etc.

Cost Reduction:

Sellers and Companies can set up (without much of a stretch) their online store on Alibaba’s internet business stages and make a nearness to a substantial consistently expanding gathering of buyers. It is additionally reasonable to set up when contrasted with a physical store and decrease cost and time in searching items/clients.

Data density/Choice:

Large databases of R.A.T (Reliable, exact, and timely) data of its vendors and organizations are promptly accessible in their commercial centers. The substantial measure of vendors accessible empowers purchasers to look at the most competitive price and item. It likewise encourages the more extensive range of item offers to buyers empowering long-tail financial aspects.

The Secret Key To Build an eCommerce Website Like Alibaba

This may make one think about whether it is a mountain climbing mission undertaking to fabricate an online business site like Alibaba. It is not that difficult and all the more, reasonable, to make an internet business site like Alibaba utilizing an Alibaba Clone Script (web-based business site layout). But for that, you must be having your “go-to-market” strategies ready.

See, what happens here, starting up is easy with Alibaba Clone Script, but you need to go miles to get success in building up a site like Alibaba. You need to have an idea about your exact custom requirements. You need to work on your own strategies and need to focus on your target audience. The region and the users can be different for you (maybe not like Alibaba). So, marketing strategies can be different for you. And that’s why you need to discuss your custom requirements with the development company by keeping all the aspects in mind.

Do you want to build your own website like Alibaba? Connect with our team today with your requirements. We are open to providing you with the best-customized solution for your e-commerce B2B/B2C business.

Kinjal Buddhadev
Kinjal Buddhadevhttps://www.ncrypted.net/
Specialized in eCommerce, marketplace, on-demand, startup, peer-to-peer, business model

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2 COMMENTS

  1. I would like to review the Architectural Design for Alibaba, eBay and Amazon.com, if there is a ‘Common Framework’ I would appreciate a Schematic, or a fuller representation via a Business Model Canvas

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