Alibaba is big. And it is impressive: its growth, its affect on China’s culture and its role in China’s enormous economy give it the ability to move markets. Even the US Stock market, as it did during the company’s massive $22 billion IPO – the largest ever for an online tech company – on September 19th, 2014. As Alibaba (NYSE Symbol: BABA) went public, it was deemed (by its $215 billion market value) to be bigger than the US’ own e-commerce behemoths – Amazon and Ebay – combined.
There are multiple reasons: the company has not targeted the US market (yet), it has done no advertising, and no significant PR in our media (other than in recent days surrounding its IPO), and most importantly, it’s English language website has not been widely discovered – yet. But Alibaba is too big to ignore – the splash that the IPO created is clear proof of that (up some 32% on its first day of trading) showed that we in the USA need to understand that the center of the online universe is not necessarily always going to be Amazon, Ebay, Google, Facebook, and Youtube. The size of China’s market will eventually dwarf ours, and its top players will certainly be bringing their size, resources, pricing power and creative ideas to our shores in the not-too-distant future.
So in the spirit of learning more about Alibaba and its charismatic founder Jack Ma, and sharing about the firm’s massive growth and success, I have read a number of articles, etc. on Alibaba’s rise to dominance (see links below). I have culled 5 key reasons why it has become such a powerful player in today’s e-commerce world.
Top 5 reasons for Alibaba’s Wild success:
1. A focus on solving problems for B2B customers - When Jack Ma started Alibaba, he was fascinated by the scope and power of the internet. Yet he also recognized it as a way to address one of China’s big problems: struggling small business growth amidst a poor commerce infrastructure. Ma made e-commerce a core solution for Chinese small businesses to find markets and flourish. Ma himself said in comparing e-commerce in the US and China: “In US, e-commerce is a dessert. In China, it's a main course."
2. An early mover in a huge addressable market – It’s no secret that China is the largest e-commerce market in the world (in one of the largest economies in the world), and Alibaba has done a good job of jumping out in front of the competition to gain significant share. However, experts agree that there is still lots of room for growth, and with new competitors now entering the market, Alibaba knows that it must continue to improve its offerings and its technical platform to maintain its lead.
3. Building an online ecosystem – Alibaba does a huge amount of e-commerce, but it does not stop there. It understands that you need to create a platform with multiple services, experiences, and models in order to create a “sticky” customer. So the company also has successfully launched payment systems (Alipay), financial services, Yu’e Bao, and consumer focused discount shopping sites Taobao and Tmall. This allows the company to deepen its customer relationships and diversify its growth channels.
4. A visionary leader who surrounded himself with a strong team – As is mentioned above, Jack Ma had a strong vision that the internet would work well in China, and there is no doubt that he has executed on that vision. But he was also smart enough to know that he couldn’t do it alone. He have built a strong team of leaders, partners and investors that include Joe Tsai (in charge of finance & legal), Jonathan Lu (in charge of operations and marketing), Jerry Yang (Yahoo founder and BABA board member), and Japan’s Softbank (an early investor and supporter)
5. A penchant for keeping humble priorities – In an interview for “60 Minutes,” Jack Ma turned an American business maxim on its head when he laid out his strategic priorities: “customer first, employees second, and shareholders third.” He raised some eyebrows with that statement, but pointed out that if the first two are accomplished, then the third priority will take care of itself. Interesting perspective from a man now with stake in his company worth $25 billion.
Alibaba will be a fascinating company to follow in the coming months & years. As China’s e-commerce market continues to grow, how will increasing competition from both Chinese start-ups as well as US giants (Amazon, Ebay and Google all are making a play for the China market) impact Alibaba’s market power and strategy? How will the Chinese government (who has created a friendly environment for Alibaba to succeed in China) play a role into the future? What does Jack Ma have up his sleeve next (many expect several acquisitions with the newly raised capital). I will be watching this giant that has now come onto our shores – and so should you.
You can read some of the articles that I found on this topic at the below links:
Wired article on Jack Ma
Bloomberg Article on Alibaba's success seen through Foxconn founder's eyes
Stanford University Article on Alibaba success factors
DMR Piece on Impressive Alibaba Stats
See WSJ video on Alibaba and Chinese e-commerce landscape
Thanks, and please feel free to comment.