What can Alibiba do for you?

Amazon and Ebay have been dominating the online shopping marketplace for many years, but Alibaba, a comparably young tech giant from China, is swimming in profits and continues to heat up. Alibaba now has the biggest IPO of all time.

But let’s start at the beginning. Alibaba Group was funded by Jack Ma in his small apartment in Hangzhou 15 years ago. Ma is an eccentric former English teacher who simply had a good idea and stuck with it. He is now a chairman (no longer CEO) and still does not know how to code. Nonetheless, he has driven Alibaba to the top of the Chinese economy and now that their IPO has opened up, you essentially have to be a bank to get in on it.

Alibaba functions somewhat like a combination of ebay and amazon. It’s a b2b, b2c, and c2c marketplace where businesses essentially pay for adspace and keywords, much like they would for google. Vendors range from small, local craftsmen selling figurines to big, international corporations like Nike. Products have as broad a range as what you can find on Amazon or eBay, but Alibaba specializes in technology, luxury goods, and specific one-of-a-kind products sold by small, local vendors.

Another way Alibaba makes money (and sets itself apart from competitors) is by offering premium accounts. Alibaba premium members have access to numerous perks such as increased visual quality, early access to consumers, and a verification stamp to encourage customer trust. Premium membership also grants access to an exclusive club of business and executives where your business can make connections with “Big Buyers.” Premium members also have access to analytics data, a major asset in today’s digital marketplace.

Alibaba may sound a lot like Amazon, but the business models and histories differ substantially. Here are some of the key comparisons:

1. The market cap for Alibaba and Amazon are similar: approximately $168 billion and $157 billion respectively.

2. Amazon’s profit last year far surpassed Alibaba’s: compare around $75 billion to only $8 billion. Source: Business Insider.

3. However, not only did Alibaba nearly double Amazon’s amount of sales last year, their margins were much higher: 50% compared to less than 1% for Amazon.

4. Alibaba’s team is younger and fewer – founded 5 years after Amazon and has around a quarter of the workforce.

5. Single’s Day, China’s cyber-shopping version of Cyber Monday, generated 3x the revenue for Alibaba as Cyber Monday did for Amazon.

6. Amazon sells and ships products to its customers. Alibaba functions more like a bazaar allowing their customers and business partners to conduct their own business using Alibaba as a platform.

Why is Alibaba so important?

Alibaba is making money and doing it rather quickly. Last year, Alibaba made almost $250 billion in transactions, compared to eBay’s $80 million. Plus, Alibaba is growing at an unbelievably rapid rate. That $250 billion is triple the profits of the previous year. Alibaba’s operation is so sleek and simple that they can function without any of the heavy costs that Amazon suffers from. No direct sales means no distribution centers, no shipping costs and far fewer employees and customer service needs.

The other exciting thing about Alibaba is its access to the Chinese tech world. The internet-having population of China is rapidly increasing and Chinese tech is booming. Alibaba is both a way for consumers to readily access Chinese products and technology, but also a way for Western companies to reach an enormous and rapidly growing population of consumers. According to Professor Sun Baohong’s research at the New York City campus of Cheung Kung Graduate School of Business, Chinese internet users, while still less than half of the country’s population, are far more mobile, social and e-commerce oriented than American internet users on average.

Finally, their brand new IPO is opening up new possibilities both for US investors and for Alibaba itself. Western investors are finally able to get a piece of the action overseas, and the profits that Alibaba will see from the sold stock will give them new possibilities and resources for growth.

So, how can Alibaba help your business?

Well, one great thing about Alibaba is that it can be as specific, expensive, or targeted as you would like. The right way to use Alibaba really depends on your business. For many small businesses, such as technology or luxury goods that are unique to their business, Alibaba is simply a platform for you to reach audiences. For larger audiences, premium membership grants all the above perks plus possible connections and “Big Buyers” for your company as part of the package – “Gold Suppliers” get special promotional opportunities.

The other advantage of using Alibaba is that you can reach a large, rapidly growing international audience. Even at only 42% of the population using the internet in 2012 (compared to the US’s 81%), China’s internet users still more than doubled American internet users (570 million compared to around 250 million). This number is expected to rapidly grow in the next decade. Particularly if your company deals in technology or luxury goods, or any product that could succeed in the Chinese marketplace, Alibaba’s access to Chinese consumers in unparalleled.

If you choose to become a Premium member, Alibaba’s analytics can offer strategy building opportunities for your business. Not only will you be able to see how your product does internationally, you’ll be able to track specifics – who’s buying your product, what tags are they using, and what are they searching for? Where in China is your product popular? Alibaba’s analytics software can help you target your efforts and use their service more efficiently and lucratively.

Another advantage of the Premium membership is the chance to build relationship with big buyers. Branching out into an international marketplace is difficult when you don’t know where to start, and Alibaba is the perfect tool to build contacts and foster relationships. Of course, it all comes at a price, but it could be the right place to start for broadening your business’ horizons.

In what ways have you used Alibiba for your business?