How does Alibaba Work: Insights into Business Model and Revenue Analysis

Alibaba business model

Alibaba is a Technology Driven Business challenging conventional corporates in China, Asia and rest of the world and contending with it requires a difference in approach. This implies Thai and ASEAN Corporations must send comparable information driven and innovative strategies to contend. In the present situation, Alibaba is a name to figure with best practices in multi-vendor web-based business and blockbuster accomplishment in the internet business industry.

What is Alibaba?

Alibaba Group was established by Jack Ma alongside 17 other prime supporters, in 1999 with the site Alibaba.com, 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 exchanging stage, it is the undisputed champion that associates exporters with organizations spread crosswise over 190+ nations.

Alibaba Business Model helps anybody from any side of the world to have products purchased and transported specifically to their area. 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 flight

Web and its network over the world is certainly the fuel that has been driving Alibaba’s triumph as an achievement. Particularly in China, with a well-known of more than 1.4 billion populace, no less than 600 million are assessed to be Internet clients who likewise spend the large portion of their time in web-based shopping and web-based business related exercises.

That unquestionably dominates the quantity of online clients in the US (277 million) and Europe (546 million). With industry specialists like Forecaster revealing that the quantity of mobile users is good to go to blast in the close decades, Alibaba is balanced for another arrangement of development tide with puzzling numbers.

Understanding Alibaba Business Model

Similarly, as Amazon is referred to most American shoppers as a web-based business titan, China’s internet business market is ruled by Alibaba Business Model. 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 is smaller vendors, Alibaba Business Model 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). Despite the fact that Tmall has a small amount of the quantity of dynamic merchants recorded on Taobao.

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

Notwithstanding its Chinese dealings, Alibaba.com additionally has site independently for Japan. After the site it was setting up, it completed a surprising activity in drawing in clients and recorded a development of twofold figure in the initial a half year as far as Japanese supporters. The Japanese site is upheld by setting up Japanese accomplices, for example, 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.

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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.

You may also like to read: How does Amazon make money: insight into business model and revenue analysis

Alibaba Business Model Canvas

Alibaba Business Model Canvas clarifies the key entities, key elements of a business model, customer relationship, customer segment, key resources, cost structure and revenue streams of Alibaba.

Alibaba business model canvas

Source of Revenue of Alibaba Business Model

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 the pretty much comparative business pattern.

How does Alibaba Make Money?

how does alibaba business model make money

Alibaba is an intermediary platform between buyers and sellers. There are three big portals which are the 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 are allowed to list their services/products for free but they have to pay for some extra features.

Alibaba Revenue Model

Here are two points which are effective to 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 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 charges 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 of Alibaba Business Model

Alibaba marketing mix

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

Price:

Including any other portal, Alibaba has a truly permissive pricing and so its very own remuneration is really less to provide entrepreneurs to get done their own personal business. Because of this that Alibaba has got such excellent heights so quickly. Because of the low price nature of Chinese products, it truly is said that Alibaba includes 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. However, almost all of options 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 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 Business Model is 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.

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Out of China, it does TV advertisement 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 groups include different eCommerce markets.

Process:

As Alibaba groups are working on eCommerce area, the process is simple. The transaction is done through Alipay or the Western Union and similar to this. Business is done through customer to customer, group shopping or wholesale basis.

People:

Now, people can cover the 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 demand of the customers and customer service as well as they don’t forget to give attention to the employees too. The engineers in the engineer’s 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 which build physical evidence of the company.

Facts about 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 on 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 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.

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.

Homegrown Competitors:

Tencent: Tencent is among the largest and 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 Business Model 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 to all the businessman to do business easily.

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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 market.

Security:

Reliability and trust is the key value for a value proposition. And 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 a review on product and service 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 tool 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 database of R.A.T (Reliable, exact and timely) data of its vendors and organizations are promptly accessible on 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 the site like Alibaba. As 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 development company by keeping all the aspects in mind.

Do you want to build your own website like Alibaba? Comment here for your requirements. We are open to provide you with the best-customized solution for your all the technical requirements.

Here are some informative eCommerce business model articles crafted by NCrypted Websites, it’d help further to understand various business models from the eCommerce segment.

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2 Comments
  1. Pingback: How does eBay Work?: Insights into eBay Business Model | NCrypted Websites Blog

  2. 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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