ShriMataVaishnoDeviUniversity,Katra

CaseStudyofAlibaba.com

SubmittedTo:

SubmittedBy:

Mrs.SonikaGupta
FacultyofCSE

AkshayPratapSingh(2011ECS01)
RishabhShukla(2011ECS13)

TableofContents

S.No

Topic

PageNumber

1.

Introduction

2.

History

3.

BusinessModel

4.

ProductsandServices

5.

TargetUsers

6.

PaymentMethods

7.

ComparisonofAlibabawithother
TechGiants

12

9.

References

15

Alibaba

Amarketplace,asearchengineandabank,allinone.

Alibaba is Chinas and by some measures, the worlds biggest online commerce company. Its
three main sites Taobao, TmallandAlibaba.comhavehundreds ofmillionsofusers, and
host millions of merchants and businesses. Alibaba handles more business than any other
ecommercecompany.

One can think of it as a mix ofAmazon.com,eBayandPaypal.CustomersuseAlibabatoshop

online, sell unwanted goods and make online payments. Alibaba has two retail sites: Taobao,
which features thousands of nonbrand name products sold by smaller merchants and Tmall,
whichoffersbrandnameproductssoldbybigmerchants.

Unlike Amazon, which buys goods from suppliers and sells them to customers, Alibaba has
always acted as amiddleman,connectingbuyersandsellersandfacilitatingtransactionsbetween
them.
This Chinese B2B tradingplatformconnectsbuyersinNorthAmericaandEuropewithsuppliers
from China. Alibaba follows an aggregation of supply model (similar to other early B2B
players),helpingtosolvethepainofglobalsourcing.

History
Alibaba Group was established in 1999 by 18 people led by Jack Ma, aformerEnglishteacher
from Hangzhou, China. From theoutset, thecompanysfounderssharedabeliefthattheInternet
would level the playing field by enabling small enterprises to leverage innovation and
technologytogrowandcompetemoreeffectivelyinthedomesticandglobaleconomies.
Jack Ma named his company on Alibaba Open Sesame. Alibaba is a kind, smart business
person,andhehelpedthevillage.Alibabaopenssesameforsmalltomediumsizedcompanies.
During Late 90s, Alibaba Group raised a total of US$25 million from SoftBank, Goldman
Sachs,Fidelityandsomeotherinstitutions.
After Alibaba achieved profitability in 2001, its sister organization Taobao was founded as a
consumer ecommerceplatform.WhichfurtherestablishedTMall(TMall.com),aretailwebsite,
tocomplementitsC2Cmarketplace.
After about a decade since its inception Alibaba group also betalaunched eTao as a shopping
searchengine.
Alibaba raised $21.8 billioninitsdebut,makingitthebiggestU.S.listedIPOinhistory afterthe
IPOofcreditcardprocessingcompanyVisain2008.

BusinessModel
The initial business model of Alibaba was simple a facilitate a 24/7 meeting platform for
suppliers and buyers around the world. From the start Alibaba did not just connect Chinese
suppliers with international buyers, but it had the goal of connecting allimportersandexporters
aroundtheworldtoeachother.AlthoughotherB2BwebsiteshavealwayssaidYoucannothave
a global company out of china,itmakesnosense..FromtheverybeginningAlibabawas,the
firstglobalInternetemergingfromchina.
InmoretechnicaltermsthreeofthemostprominentbusinessmodelsemployedbyAlibabaare:
B2B,C2CandB2C.
B2B:
Alibaba.com Limited the primary company of Alibaba, is the worlds largest online
businesstobusinesstradingplatformforsmallbusinesses.
Founded in Hangzhou in eastern China, Alibaba.com has three main services. The companys
English language portal Alibaba.com handles sales between importers and exporters from more
than 240 countries and regions. The Chinese portal 1688.com was developed for domestic
businesstobusiness trade in China. In addition, Alibaba.com offers a transactionbased retail
website, AliExpress.com, which allows smaller buyers to buy small quantities of goods at
wholesaleprices.
According to some ecommerce analysts. Alibaba is probably the oneorganizationintheworld,
which has been able to successfully provide a hassle free platform to small to medium sized
businessestocarryonovertheinternet.
C2C:
Taobao, is Alibabas yet another portal, whichutilizesconsumertoconsumermodelsimilarto
eBay. Taobao.com is China's largest shopping website, and tmall.com, which offers a wide

selection of branded goods to China's emerging middle class.Itfeaturesthousandsofnonbrand

nameproductssoldbysmallermerchants
With around 760 million product listings as of March 2013, Taobao Marketplace is one of the
worldstop10mostvisitedwebsitesaccordingtoAlexa.
B2C:
In 2008, Alibaba Group also established another online website Tmall, to compliment its C2C
market. Although Tmall is mainly a businesstoconsumer platform is known for offering
brandname products. The two sites (Taobao.com and Tmall) are hugely popular, and
collectively account for more than half of all parcel deliveries in China. According to TheWall
Street Journal, their combined transaction volume in 2012 topped one trillion yuan ($163
billion),morethanAmazonandeBay'srevenuecombined.
Tmall marketplace is Chinas largest businesstoconsumer (B2C) onlineshopping venue. The
site allows visitors to quickly view vendor fees, required deposits and other factors associated
withoperatingaTmallstorefront.

ProductsandServices
Alibabaprovidesawidevarietyofproductsandservicesthroughitsvariousonlineportals.Some
oftheseare:
Apparel,Textiles&Accessories
Auto&Transportation
Electronics
ElectricalEquipment,Components&Telecom
Gift,Sports&Toys
Health&Beauty
Home,Lights&Construction
Jewelry,Bags&Shoes
Machinery,Hardware&Tool
Metallurgy,Chemicals,Rubber&Plastics
Packaging,Advertising&Office
Onlinemarketing
CloudComputing
LogisticsOperations
ElectronicPaymentServices
Alibaba is one of those online resources which claims a Get everything and anything
availability. Aconsumercanliterallybuyproductsrangingtosimpletoystoautomobiles.Hence,
Alibaba is provingtobeaonestopplatformwhereaconsumercanchooseamong awidevariety
ofoptions.

TargetUsers
AlibabaGroupprimarilyoperatedwithinChina,whereecommerceissynonymstoAlibaba.But
withinlastdecadeAlibabahasexpandedtoalmostallthecornersoftheworld,consistingitsuser
basefromabout190oddcountries.

AlibabahasbeenturnedintoaglobalorganizationbutstillholdingChinaasitsmajorfocus.
Almost75%ofChinasecommercemarketisdominatedbyAlibaba.Chinahas560million
internetuserstwiceasmanyastheU.S.whospendanaverageof20hoursaweekonline.
AlthoughtogetaholdonotheremergingmarketsAlibabaGrouphasalsoestablishedofficesin
theU.S.,U.K.,India,JapanandKorea.
ApartfromsmalltomediumbusinessesAlibabagroupalsoprovidesonlineplatformto
individualcustomersthroughitsparentwebsitesTmall.comandTaobao.com.

PaymentMethods
Actually Alibaba Group has its own payment solution named as Alipay, is a thirdpartyonline
payment platform with no transaction fees. Other than that, Alibaba also offers many ways to
pay suppliers. Six most commonly used ways are Telegraphic Transfer(TT)/Bank Transfer ,
Letter of Credit, DA/DP, Western Union, PayPal and Escrow. Buyers are advised to consider
eachoptioncarefullybeforecommittingtoone.
S.NO

Methods

Conditions

Description

1.

30%UpfrontTT

Forbuyers:2.5
outof5stars
Forsuppliers:
4.5outof5stars

Since many factories need money in

advance to buy material for production,
30% Upfront TT is a common payment
term for suppliers, especially when dealing
withanunknownbuyer.

2.

100%UpfrontTT

Forbuyers:1
outof5stars
Forsuppliers:5
outof5stars

The supplier gets full payment before

production starts. This payment method
bears the same risk as Western Union and
is not recommended when dealing with an
unknownsupplier.

3.

100%BackwardTT Forbuyers:4.5

If being paid after preshipment

inspections, it is suggested to use trade
terms of FOB. If being paidafterreceiptof
merchandise, it is nearly 100% reliable for
buyercausebuyercancoverthewholerisk,
however, on the opposite, suppliers are not
willing to accept this way due to big
potentialriskofdisputeorfraud.

outof5stars
Forsuppliers:2
outof5stars

4.

LetterofCredit

Forbuyers:4
outof5stars
Forsuppliers:4
outof5stars

Highly recommended for transactions that

are US $20,000 and above because the
bank guarantees the transaction. But
complex procedures and high threshold of
registered finance maypreventsomeSMEs
frombeinginvolved.

5.

WesternUnion

Forbuyers:0
outof5stars

Not recommendedwhenitcomesto paying

suppliers if the payment isnotprotectedby

Forsuppliers:5
outof5stars

escrow on a transaction made online

through AliExpress. However, it's useful
when transferring money to known
individualssuchasfamilymembers.

6.

Paypal

Forbuyers:5
outof5stars
Forsuppliers:3
outof5stars

A popular payment method for buyersasit

presents a much lower risk to them.
However, it is less popular with suppliers
due to difficulties in money withdrawal,
hightaxratesanduncertainclaimofcharge
backfromsomenotoriousimporters

7.

Escrow

Forbuyers:5
outof5stars
Forsuppliers:3
outof5stars

Money is only paid tothesupplierafterthe

buyer confirms satisfactory delivery of
his/her order. A safe way to buying and
sellingonlinebecauseEscrowprotectsboth
thebuyerandsupplier.

In terms of innovation, Alibaba is introducing a new secure mobile payment method as it gets
ready for its IPO.The Chinese ecommerce giant will get ahead of its competitors Amazon,
Google and Paypal with an innovative and secure method of payment using fingerprintsinstead
ofpasswords.
The biometric technology, including encryption and authentication managed by Huawei, will
allow mobile users to confirm payments for a wide variety of goods and services with their
smartphones simply by swiping a digit insteadofenteringalengthycode,the companysayson
itsblog.
Huawei, the worlds thirdlargest smartphone vendor by shipment volume , will also employ
highlevel encryption and verification to ensure only approved thirdparty applications, such as
AlipayWallet,areallowedtoaccessthefingerprintinformationfortransactions.
Its worth remembering that Alibaba is a pretty safe platform to purchase on. Not only do you
have the standard protection that your payment provide gives, but Alibaba hold mostly all

10

payments inEscrowuntilthebuyerconfirmstheyvereceivedthegoodsandtheyreasexpected.
Untilthebuyerconfirmsreceiptthesellerdoesntreceivethefunds.
Alibabaalsoofferssometipsforshippingmethods:
UsingexpresscompaniessuchasFedExorDHL
Youcanopentheshipmentinfrontofthedeliveryperson.Iftheitemisnotwhatyou
orderedoriftheitemisdefectiveduetohandling,youhavetherighttoreturnittothe
deliveryperson.

Usingseafreightshippingmethod
Iftheitemthatyoureceivedisnotwhatyouordered,donotclearcustoms!
Youcanalwaysrequestforacustomsofficerorathirdpartyinspection
companytoconductanonsiteinspectionbeforebeingissuedacustoms
clearancecertificate.Ifyouonlyinspectthedeliveryaftercustoms
clearance,youmightencounterlegalhurdlesshouldyoudecidetodispute
thedelivery.

11

ComparisonofAlibabawithOther
TechGiants
Alibaba is really a technology company that serves retail customers and controls 80% of the
Chinese ecommerce market.Alibaba will compete most directly with online retailers like
Amazon, EBay or Zalando in Europe, Rakuten in Japan, Kobo in India, Wuaki in Spain and
othermajoronlineproviderswithstrongpresenceintheirhomeandadjacentmarkets.
Take market capitalization, or the total value of available shares times the value of a
single share , Alibabas market capitalization value is estimated at $155 billion. That number
makes it look pretty small compared to the top three US tech giants: Apple ($593 billion),
Google ($400 billion), and Microsoft ($378 Billion). But it compares nicely to Amazon, which
alsohasamarketcapinthe$150billionrange.Anditsgrowing.

Fig:RevenuesofvariousfamousTechgiants

12

The comparison is not exactly applestoapples. Alibabas business model is similar to that of
Ebay, in that it is a middleman coordinating sellers and buyers. Alibaba doesnt house and
manageanyproductsitself.
Gross Merchandise Volume (GMV), the metric thecompanylikestohighlight,isthetotalsum
ofgoodsandservicestransactedonallitssites.
In 2013, Alibaba hosted GMV of $248 billion in transactions last year. Thats more than
Amazon and eBay managed to do combined. And while Amazon takes home a lot more
revenue than Alibaba from its fewer transactions, Alibaba takes a much highernetincomefrom
itsrevenuethanAmazon.Alibabanowtakeshome80percentofitsrevenueasprofit.

13

Alibabas revenue is the cut it takes out of each sale. In comparison, WalMarts nearly $250
billion in revenue represents the total value of all the goods purchased along with its builtin
margins.ThisshowshowcomplicateditistovalueAlibaba.
To really understand how big a deal Alibaba is youve got to understand the growth of Chinas
ecommerceeconomyandthestrongholdthatAlibabahasonit.
China has over 618 million internet users and theyre spending lots of money. Thats twice the
population of the United States, but only half Chinas total population. So theres lots of room
for growth in a sector thats already exploding. In 2010, Chinas ecommerce market was $74
billiondollars.In2013,itwas$295billion.By2017,itsestimatedtoreach$713billion.
And Alibaba is cashing in big time. It controls 80 percent of online sales. Even though its not
yet putting up the gross revenue numbers of Amazon and Apple, its 80 percent control of the
market and 80 percent profit take from its revenue adds up to a huge, massive, crazy, growing
amountofmoney.

14

References
1. http://www.cnbc.com/id/101590855
2. http://projects.wsj.com/alibaba/
3. http://expandedramblings.com/index.php/alibabastatistics/
4. http://www.quora.com/Whatisthebusinessmodelofalibabacomhowdotheyma
kemoney
5. http://www.marketwatch.com/story/howtounderstandalibabasbusinessmodel20
14031594855847
6. http://www.forbes.com/sites/chriswright/2014/09/16/sowhatexactlyisalibaba/
7. http://www.economist.com/news/briefing/21573980alibabatrailblazingchineseinte
rnetgiantwillsoongopublicworldsgreatestbazaar
8. https://gigaom.com/2013/06/30/alibabaisjustthebeginninghowb2bmarketplaces
/
9. https://www.techinasia.com/alibabaamazoninfographic/
10. http://www.alizila.com/alipayhuaweirolloutbiometricsecuritymobilepayments
11. http://www.alibaba.com/help/safety_security/class/buying/pay_ship/002.html
12. http://fortune.com/2014/09/12/alibabaisontracktobecomethebiggestusipoeve
rherearethreechartsyouneedtosee/
13. http://www.dailynews.com/generalnews/20140912/thetechstoryoftheweekisnta
ppleitsalibaba
14. http://www.alibaba.com/Products
15. http://www.infoworld.com/article/2607722/techologybusiness/alibabasbusinessm
odelandthechinesemarketmakeitsipohot.html
16. http://www.bbc.com/news/business29077495

15