What should everyone know about Alibaba?

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Introduction:  Alibaba’s rise to become one of the biggest Internet firms in the world is nothing less than meteoric while its founder Jack Ma is considered a ‘rockstar’ for inspiring entrepreneurial ambitions in hundreds of students all over China. He is idolized by most of my classmates at Peking University.

In China, Alibaba, especially its B2C website Taobao is not just another website, but an intricate part of people’s daily lives. Consumers trust Taobao more than they trust Chinese SOE’s and they prefer investing their money/taking a loan from Alibaba rather than government banks.

After living and studying in China for over an year, here is what I feel everyone should know about Alibaba:

1. Gender Diversity: An odd point to begin with it is something I appreciate the most about Alibaba. Alibaba’s gender diversity as CNN puts it,

Can put ‘Silicon Valley to Shame’.

*Alibaba’s original founders [1]

Among the 18 original founders, 6 were women and key positions such as Chief Talent Officer, in-charge of corporate culture and ethics are held by women.

2. Jack Ma started Alibaba collectively financed by him, his wife and 16 of his friends after two of his startups failed to gain traction.

Jack Ma from Alibaba’s initial years [2]

In the initial years, he operated Alibaba out of his apartment in Hangzhou.

3. A Diversified Conglomerate: Unlike popular perception, Alibaba is not just an E-commerce website. It is a highly diversified technology conglomerate with several subsidiary businesses in financial services and computing.

[3]

The E-commerce wing is the biggest and the most prominent though. The main divisions of Alibaba include

  • Taobao: By far the most popular C2C website in the world. ‘If it is not available on Taobao’, it is not available anywhere in China’ holds true in China.
  • TMall: Started to compete with JD.com and Amazon, it is Alibaba’s B2C platform.
  • Alibaba’s cloud services are the second largest in China

4. Behemoth in Numbers: Alibaba is literally a behemoth when measured in any metric, easily beating most of the established American tech companies by a sizable margin. [4]

  • It has over 230 millionactive subscribers and 2.8 million online stores.
  • 60 % of all parcels handled in China and 80 % of all E-commerce transactions are from Alibaba.
  • Taobao and TMall collectively handled approximately $200 billion worth of sales every year. China’s first Black Friday handled orders worth $5.75 billion, that’s about twice the Black Friday sales in the US.
  • Alipay, Alibaba’s online payments platform handled transactions worth a whopping $660 billion in 2012.

5. Alibaba’s IPO’s is the largest IPO in history valuing Alibaba at almost $170 billion. That combined with the jump share prices after they started trading valued Alibaba at $230 billion. [5]

Alibaba’s IPO when compared to other prominent tech companies. [6]

6. Consumer Friendliness: Pursuant of Jack Ma’s philosophy, Alibaba is one of the most consumer friendly companies in the world.

  • Alibaba’s payment system is designed in such a way that the seller does not receive the payment until the buyer informs Alibaba that he/she has received the product the product is as per his expectations.
  • The sellers have no control on the approval ratings of their virtual shops, they cannot delete reviews or manipulate their ratings.
  • Alibaba’s algorithm promotes negative reviews up the list so that they are clearly visible. This explains high levels of customer satisfaction and low levels of fraud given that 800 million products are listed on Taobao. [7]

The IPO prospectus of Alibaba read,

“Customers first, employees second, and shareholders third.” [8]

7. Product Listing: Yes, you read that right. Total number of products listed on Alibaba.com,Taobao and TMall combined exceeds 800 million. That’s 1 product for every 7 humans (approx.) [9]

8. Taobao Villages: Entire villages in China survive on selling their products all over the world through Taobao and Alibaba.com. They are colloquially called Taobao villages. This has led to the growth of side-businesses such as packaging etc in these villages.  [10]

This is the reason why Alibaba has such an emotional connect with most of its buyers/sellers. They have grown with the corporation.

9. Seller Friendly: Contrary to someone might infer, Alibaba is not biased against the sellers. Unlike Amazon and eBay where buyers can use any standard search engine to list sellers of the product you want to buy, Alibaba requires buyers to begin searching from within the website itself. This removes the ‘Mathew Effect’ bias that might harm new and small sellers. [11]

10.Future Growth: Alibaba’s growth prospects are amazing. Internet penetration in China is still low. Alibaba is set to clock in $ 1 trillion in sales pretty soon. Post IPO, Alibaba is set for major expansion worldwide as echoed in Jack Ma’s statement, [12]

“After we go public in the U.S., we will expand strongly in Europe and America,Because after all we’re not a company from China, we are an Internet company that happens to be in China.” [13]

Sources:

[1][2] Alibaba’s gender diversity puts Silicon Valley to shame
[3] Infographic: All Companies in Alibaba Group
[4] 18 Mind-Blowing Facts About Alibaba, The Chinese E-Commerce Giant On The Verge Of A Gigantic IPO
[5] Everything You Need to Know About Alibaba and its Mega-IPO
[6] Infographic: Alibaba Raises at Least $21.8 Billion in Record IPO
[7] China’s Internet Giants Lead in Online Finance
[8] Alibaba IPO Investors Come Third in Jack Ma’s Vision
[9] [10] ‘Taobao Villages’ reaping rich e-commerce harvest
[11] 18 Mind-Blowing Facts About Alibaba, The Chinese E-Commerce Giant On The Verge Of A Gigantic IPO
[12] The Alibaba phenomenon
[13] Everything You Need to Know About Alibaba and its Mega-IPO

*Most of this article is from the discussions and seminars about Alibaba at Peking University.

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