Alibaba Took 80% of Chinese eCommerce. How did it do that?

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E-Commerce in China is expected to reach 10% of all retail in China by the end of 2014. It’s an extremely fast growing market. Alibaba (C2C) and Tmall (B2C) are dominating on the domestic Chinese market.

 

  • In the 2000s when domestic eCommerce boom happened in China, Alibaba received  one billion dollars from Yahoo in exchange for 40% of the company. This partnership included consumer marketing know how and IP valued in the millions and millions. Yahoo is one of the first companies that adapted online advertising techniques which makes a great profit for Alibaba. In China, the number two search revenue company behind well known Baidu is … Alibaba driven by consumer searches on Taobao. This is not a coincidence.

 

  • Alipay payment service earned confidence of Chinese consumers. Many of them didn’t have credit cards and other modern forms of payments so it was an important step.

 

  • Taobao B2C online marketplace started learning how to attract and control vendors through its experiences with Alibaba B2B.

 

  • Alibaba uses aggressive and smart marketing when in comes to sales and promotions, plus, the company utilises the latest trends in mass selling such as flash sales and sales on Singles Day in China. The latest Singles Day brought almost 6 billion dollars from TaoBao and Tmall. The Singles Day (November 11) has become so popular in China that many offline retailers also hold sales in their shops during this period. This is how eCommerce influences the retail market and even the pop culture.

 

  • Adapting sales for smartphones is another trend. Shopping and paying via smartphones is growing fast in the distant regions of China. In these regions the demand for goods is even higher than the ability of the limited offline retailers to deliver. It’s a winning combination that works in favor of mobile smart ecommerce players.

 

Compared to Amazon and other big US multi vendor marketplace companies, Chinese eCommerce companies have weak offline competition. On Chinese online marketplaces there are no 100 year strong legacy retailers with very strong nationwide networks and powerful local brands.

 

The fast growth of Chinese eCommerce is motivated by absence of such big nationwide retailers. In China, everything in modern retailing literally came up during the past 20-30 years.

 

Offline retail loses against eCommerce in China. And it is interesting that it was online retail that evolved before the offline retail. We’ll see what’s coming.

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