ALIBABA

Building a Social Sustainable

Ecosystem for E-Commerce
Group – 7A
“ I believe the spirit of transparency and
equality at the heart of the Internet will make it
possible for the Chinese society to leapfrog in its
development of a stronger institutional and
social infrastructure. That’s why we built
Alibaba as a ‘social business’ from day one”

- Jack Ma, Founder of Alibaba Group

2
E-Commerce in China
The Inclusive Growth Model

3
Reform and Opening up Policy

• China Launched reforming • However, since China was a

and opening up Policy in Transition Economy Basic
1970’s Pre-requisites were absent.
• This was done to accelerate • These included –
the growth of the Economy.
1. Property Rights Protection.
• Before this China has issues
2. The Rule of Law.
such as –
3. Efficient Price Mechanism.
1. Scarce Capital.
• The state played a role in
2. Abundant Labor.
amending those laws to
3. Outdated Technologies. promote faster economic
development.

4
 Impact of the Reform Policy
1978 2015 Migrant Workers

Rural Rural
18% Population Population Manufacturing
Urban Urban 33% Other
Population 44% Population
56%
67%
82%

Urbanization in China after Reform Policy Migrant Workers in Mfgd. in 2016 (in Million)

China experienced an
average download
speed of 28 megabits
per second (Mbps), an
almost 50 percent
increase from 2017

E-Commerce growth in China

5
 % GDP Growth Rate of China
16
14
12
10
8
6
4
2
0
2000 2001 2002 2003 2004 2005 2006 2007
 BACKGROUND
• Jack Ma began his entrepreneurial journey from 1995

• Established small business in translational services in early career and faced

bureaucratic challenges

Opportunities seen by Jack Ma

JACK MA – FOUNDER OF ALIBABA • Bureaucratic process was expensive & of limited scope for small businesses

• Sufficient demand for Chinese products in foreign markets

Secret for success
• Finding gaps • Limited online presence of Chinese companies
 Institutional
 Information
• Started China Yellow Pages to facilitate Chinese companies to be
 Market
 Logistics discovered by foreign enterprises searching for Chinese products
 Finance
• Later in 1999, Jack Ma started Alibaba to facilitate trade by Chinese small
• Converting them into businesses that were trying to export their products to global market
business opportunities
 Evolution of Alibaba during 1999-2017

Stage 4

Stage 3
Strategies of 3 future
Platform, strategies

Stage 2 Financing &

Mega Data
Taobao
Strategy
IPO in
Stage 1 IPO of
NY
B2B in
Hong Mega
Kong Alibaba
Independent Strategy
Operation of Launch
Positive Alipay of Aliyun
profit gained
of B2B Launch of
Taobao Mall
Founding of M&A of
Alibaba Founding Yahoo
of Taobao China

99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
First Phase (1999-2003)
Alibaba.com, the business to business (B2B) trading platform
came into being with explicit objective to facilitate easier access
for Chinese small businesses to foreign trade
• Timely entry : China became member of World Trade
Organization in 2001
• Huge hit among the small businesses
• Chinese Government showed an open attitude towards e-
commerce
• In 2002 Ebay entered Chinese Market by acquiring EachNet
• Ebay made successful business out of consumer to consumer
(C2C) online bidding & buying
• In 2003, Ebay’s market share was 85%
• Jack Ma decided to get into C2C business
 Second Phase (2003-2008)
Taobao, C2C platform of Alibaba started in May 2003

Three important strategies to make Taobao successful: VS

1. No fee strategy
• No fees & commission incurred by sellers
• eBay continued charging commission “eBay maybe shark in ocean, but I’m crocodile in the
Yangtze river. If we fight in the ocean, we lose, but if
2. Establishment of Alipay in 2003 we fight in the river, we win.”
• Third party escrow service -Jack Ma
• Payment reached sellers only after buyers were satisfied
• eBay used direct payment of PayPal
• Buyers exposed to asymmetric risk of information in eBay
Year Taobao eBay
3. Introduction of chat service Ali Wang-Wang 2003 0% 85%
• Enabled buyer seller communication 2005 70% 24%
• Allowed negotiation and after-sales services
• eBay prohibited this & penalized off-platform transactions 2008 > 85% < 1%
 Second Phase (2003-2008)
• Businesses found that selling on Taobao was easiest way to reach consumers
• B2C transactions on C2C platform
• China average GDP growth rate of >10% between 2000-2008 % GDP Growth Rate of China
• Increase in employment opportunities, domestic demand had picked up 16
• Annual household per capita expenditure increased 14
• Traditional way of business:
12
• Physical infrastructure Expensive & in short supply 10
• Distribution & logistics facility
• Online business eliminated these needs 8

• Eliminated layers of middle men 6

• Online retail sales grew steadily in China 4

0
2000 2001 2002 2003 2004 2005 2006 2007

3500

3000

2500

2000

1500

1000

500

0
 THIRD PHASE (2008-2014)
• State owned banks focused on lending to large businesses
• Small businesses were starved of funds
• Sellers needed marketing, logistics & storage facilities
• To help small businesses, Jack Ma made Ecosystem
Strategy

• Alibaba engaged and partnered with many third-party

service providers that included: Seller
 Distribution channels s
 Financial services
 Website Design
 Training
Service
 Management & Technical consultancy Providers
 Warehousing
 Logistics
 Marketing

• These service providers themselves became customers of

platform.
• Thus sellers and service providers became interdependent
THIRD PHASE (2008-2014)

C2C B2C
C2C + B2C
• A technological company founded in 2014
Technological challenges due to fast growth • Utilized the data of online transaction and payment to develop a totally unique
• Security & Risk Control for transactions and accounts credit rating system
• Extreme demand for extraordinary computing capacity • A wide range of financial services for consumers and small businesses was
developed through this

• Created in 2013 as a joint venture

between Alibaba and its partners
• Developed Internet of Things to
make online package service more
efficient
 FOURTH PHASE (2014 - PRESENT)
• Alibaba’s revenues surpassed some of the largest
global companies in 2014

• Size of business and volume of sales necessitated

Alibaba to upgrade it’s technologies

• Focused more on building and exploiting

Aliyun’s cloud computing and Ant Financial’s
fintech capabilities

• Goal to transform into a Technology Company

• Huge amount of data on Alibaba platforms

enabled to offer more value added services to
consumers & businesses through Aliyun

• Alibaba typically charged for these services,

hence contributing to revenue significantly
FOURTH PHASE (2014
-Present)
Jack Ma announced 3 strategies for Alibaba,
during its IPO in New York Stock Exchange in
2014

• Globalization
• Big Data & Cloud Computing
• E-Commerce in Rural Areas

Jack Ma believed that world was evolving

from the IT era towards the new era of Data
Technology, in which data will be most
essential output for an innovative society
Taobao Villages
It’s not just about making money. It’s
about making “healthy money” –
sustainable money that’s not only good for
shareholders and employees, but is also
good for society, as it enables people to live
better lives.

-- Jack Ma
 Impact of TaoBao Villages

• In 2010, Alibaba’s researchers identified significant • These Taobao villages were concentrated in developed
economic activity in villages, which were transacting areas of east coast with Zhejiang, Guangdong and Jiangsu
on Alibaba’s Taobao and Tmall. having largest number of Taobao villages followed by
Shandong, Fujian and Hebei.
• To capture this opportunity in rural china, Alibaba came
up with concept of “Taobao Villages” in 2013. • The distribution of Taobao villages was highly correlated
with spatial pattern of china’s industrial clusters,
• A village was qualified to be a Taobao village if - transportation and logistics facilities.
- The number of households enlisted in Taobao and Tmall
• It is estimated that every online store in Taobao villages
were more than 100 or greater than 10% of size of village.
produced on an average 2.8 direct job opportunities along
- Annual revenue from online sales from that village with many indirect jobs like tailors, carpenters, delivery
exceeded RMB 100 million
men, etc.
• By the end of 2016, more than 8.4 lac direct job
opportunities were created by Taobao villages. 21
 Rural Taobao
Seeing great success of Taobao villages, Alibaba decided to create more such
villages and thus came “Rural Taobao” in collaboration with local
governments.
Three-pronged strategy to enforce rural strategy –
• Bring convenient and affordable goods and services to rural areas
• Provide support to develop an ecosystem for sustainable development of
rural economy and society
• Help rural areas to build infrastructure of e-business, including trade,
logistics, finance, cloud computing, data, etc.
Jack ma invested RMB 10 million in 3- 5 years to establish 1000 county
service centers and 1 lac village level service stations.
• Taobao university held many seminars & training sessions to
help rural people understand online buying and starting their
online businesses.
• They worked with logistic service providers to open rural
logistic channels through subsidy.
• Cainiao network-built distribution network with access to 95%
districts and counties in country.
• Ant financial connected more than 2300 rural financial
institutions that gave credit to more than 1.8 lac small and
micro corporations in rural areas. 22
Patent and Technology Management at Alibaba

• There has been an increase of 251 % in the no.

of patents filed by Alibaba in 2019 as compared
to 2018.
• Also in 2017, more than 10 percent of the
worldwide patents filed for Blockchain were by
the Alibaba Group.
Sources –
blog.relecura.com
www.statista.com 23
E-Commerce in India
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Click icon to add picture
Can established E-Commerce
Players in India repeat
Alibaba’s performance in
China ?
Porter’s Fiver Forces gives an
overall view of how difficult it
would be for the Indian
E-Commerce Companies to Repeat
Alibaba’s performance.

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What should be the role of the Indian Government and other institutions in creating a
conducive e-commerce environment ?

Ensuring a Level Playing field into the E-

commerce Market to encourage healthy
Competition.

Improving the connectivity especially in Rural

Areas as was the case with China to ensure more
people have access to E-commerce channels via
Internet.

Ensuring proper skill development so that a huge

chunk of the workforce can become a part of the
E-commerce market

Individual Institutions can educate the villagers

about the advantages of E-commerce and training
people in digital technologies should go a long
way in expanding the E-commerce market in
India
What are the challenges involved in adopting the Chinese e-commerce model, given the
unique characteristics that differentiate India from china?

Higher Return Rate Mode of Payment

Reluctance • The return rate of products due to • The major mode of payment is
• Indians are generally reluctant to various reasons is higher. still cash in India.
buy online.
• On an average in India around 30 • In china, the dominant mode is
• Especially in the rural areas percent of the products are cash but there is almost an equal
people believe more in buying returned due to various reasons no. of digital and card payments
what is seen rather than online which is an issue and costs more with options such as Alipay and
in reverse logistics Wepay already penetrating deep
even in rural areas
THANK YOU
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