By: Hanming Li
Alibaba, which is interested in developing its B2B business, has shown strong dominance in China’s B2C online shopping industry. Recently, the E-Commerce conglomerate in China has launched many creative implementations to help them explore the B2B market in other Asian countries, such as Thailand, Vietnam and Malaysia. Alibaba revealed an emailed statement which announced that they were planning to launch a new B2B initiative in which they would provide cheaper commodities from other countries to Chinese customers.
Alibaba has a wholesale site, 1688.com, which gives more choices to customers and suppliers; it went global on May 18th, 2015. First, they are focusing on Spain, Portugal, Italy and South Korea and then they might go to North America. The plan is focused on turning 1688.com into the most important portal for Chinese customers and foreign suppliers, and the buyers and sellers can transact on the website directly.
After Alibaba implemented this plan, they had two different options, which include sourcing from overseas for domestic customers, and connecting domestic suppliers with oversea buyers.
The manager of 1688.com has said that the big difference from other import channels is they will lower the prices of imported goods, especially wine. By cutting out many steps from original import process, which requires general agents, customers will receive a lower price than before. Depending on the product, manager Fei said the price will be half lower than before.
In my opinion, the reason why Alibaba is staying ahead of its competitors in China is because they are easing friction in cross-border commerce; they are taking advantage of the opportunity that China’s middle class’s demand for luxury foreign brands has increased dramatically. Furthermore, the Chinese government is planning to open more free trade zones to help citizens get import goods more easily. On the other hand, Alibaba plans to use the B2B model and broader financial services to make their suppliers and buyers feel more comfortable with the transactions. The tool that they introduced to the global market is Yu’E Bao, which is an E-payment platform. This platform was introduced to the Chinese customers many years ago and it is showing great performance. I think this platform will be needed for E-Commerce businesses, and suppliers can use this platform to handle foreign exchange transactions.
Alibaba’s new cross-border commerce play takes a first step towards addressing a new international market, and also provides opportunities to other industries to export products to China. On the opposite side, “tinkers, builders, entrepreneurs, and small businesses can order custom motors and parts from Chinese factories without having to travel there.” The companies, which are located in other countries, will use this platform to investigate the Chinese market and make connections with Chinese companies. For many years, Chinese citizens who have wanted to buy foreign products needed to find different ways to reduce the cost, but now they have a solution to avoid the extra fees that they needed to pay previously. For example, French red wine, which would have previously cost￥1,000 or more, will now be 40% cheaper with Alibaba.
Their B2B model will become more well-known over the next 20 years because customers have put more focus on global business, and at the same time, they want easier and more convenient solutions.