What is Alibaba?
Alibaba is a technology company. It was founded in 1999 by Jack Ma, who is now one of the richest people in China. Like some of their competitors, Alibaba started out purely in the e-commerce business (albeit focused on B2B), mostly dealing with China. However, over the years they have launched a number of different products and services. This has resulted in several different revenue streams. When it comes to “what does Alibaba do?”, it is basically a little bit of everything. They have e-commerce. They have cloud computing. They have a delivery company. They even have their own payment processor. We will discuss more on this in a short while.
So, where is Alibaba located? Alibaba is located in the Xixi District of Hangzhou. However, there are over 100 different Alibaba operations available throughout the world. However, do bear in mind that the vast majority of these are going to be within China.
What does Alibaba do?
A lot of people equate Alibaba to Amazon. In fact, you will often find it referred to as the “Amazon of China.” We suppose this is true to an extent. Alibaba is active in a lot of the same markets that Amazon is. Although, some would regard the way in which Alibaba works as slightly more convoluted, mostly because their operations are spread out over several different brands rather than sticking to just one brand as Amazon does. So, what does Alibaba do? Well, since we said they are like Amazon, you can imagine that they do a lot.
Alibaba B2B Services
Most of Alibaba's focus has been on its international B2B services. The original purpose of Alibaba was to link businesses outside of China with companies inside of China, for example, companies that were looking to import Chinese products. So, if you run a retail store and want to source products to sell online, you could always head to Alibaba and purchase directly from the manufacturers or wholesalers. Even today, this is how Alibaba gains the vast majority of revenue. This can be found through the main Alibaba.com website.
Taobao C2C services
Taobao is the most-visited e-commerce website in the world. In terms of how it works, perhaps the closest equivalent in the United States would be eBay, although they are not quite the same. Taobao allows individuals to sell both used and new products to others. It is not designed for businesses, but a small number of businesses use it anyway. While the site can be accessed outside of China, it is designed mostly for the Chinese market and many of the payment options available (e.g. cellphone payments) are not available outside of China.
If you run a business and want to sell directly to people in China, then TMall is the route to go down. This is probably equivalent to Amazon Seller accounts in the United States. Businesses head to TMall, list their products, and then they get added to the marketplace. Tmall is actually a spin-off off Taobao. This is because Alibaba realized that business sellers were clogging up Taobao, which went against what the site was originally designed to be. The answer was to create a separate website.
As we mentioned previously; Alibaba has its hands in many different pies. Not all of them are related to e-commerce. This is part of the reason why they attract so many comparisons to Amazon. This includes:
- Cloud Computing
- Alipay (similar to PayPal)
- Event ticketing and event production (similar to Ticketmaster and Live Nation)
- Music streaming
- Social media apps
Basically, Alibaba deals with a little bit of everything.
How does Alibaba work?
In this section, we are going to take a look at how product sourcing works through Alibaba. If you want to find out how Alibaba works for selling, then skip to the relevant section, where will provide you a little bit of advice.
What you must remember is that Alibaba B2B isn't strictly an online store. It is a way for you to get in touch with manufacturers and wholesalers in China. While you will be making your final purchase through the Alibaba system, a lot of what you will be doing on the site is browsing through the various wholesalers, seeing what products they offer, and at what prices they are offering them at. You are free to message wholesalers as much as you like.
It is important to note that not all products are “In Stock” on Alibaba. Only the ones listed as “Ready to Ship” are ready to be sent out. Most manufacturers on there are taking orders as they gear up for a production run. As a result, in some cases, it may take a while for the products to be shipped to you.
The site can then be used like any other e-commerce site. You add products to your basket (paying attention to MOQ) and checkout. The products will then be shipped to you. Nine times out of ten this will be through the Alibaba Logistics service, which means your products should arrive nice and quickly to you. Do bear in mind that you will need to pay import fees when you bring the products into your home country. The amount you pay will be dependent on where you live.
Is Alibaba bigger than Amazon?
One would think that because Alibaba has easier access to the Chinese market, which is probably the largest market in the world, it would be bigger than Amazon. It isn't, and it is unlikely to be as large as Amazon. Don't get us wrong. Alibaba has astonishing revenues. It is the largest small business B2B company in the world, and it also boasts the fantastic Taobao marketplace. However, the revenues do not even come close to Amazon.
So, why is this the case? Well, while Alibaba does offer products and services to the whole world, a good proportion of the focus for the company over the years has been on China. After, this is where the business is located. Amazon, on the other hand, have warehouses operating in at least sixteen countries, with more planned in the foreseeable future. While Alibaba may eventually have the same reach, it is unlikely that we will ever answer the question “is Alibaba bigger than Amazon?” with a definitive “yes.” At least not on a global scale. Since Alibaba deals with 80% of all Chinese business within China, it is certainly never going to be beaten there.
That being said, Alibaba has a greater number of SALES and PROFIT than Amazon. In fact, there is no retailer in the United States that delivers the same number of sales and profits that Alibaba does. Remember; part of the reason why Amazon has a lower amount of profit is due to finer margins and the fact that they pour a sizeable sum of cashback into their business as “investment.”
How to Sell on Alibaba
If you are looking into how to sell on Alibaba, you should know that the site mostly caters to the Chinese market. So, while you can list on their sites as an international seller, you are going to need to have some way to ship products to China. For some businesses, this can be quite difficult.
Deciding which site to sell on
If you are planning to sell on Alibaba, then your first decision will be the site to sell on. It is likely to be one of the following:
- Alibaba: This is for those that manufacture products and wholesalers
- TMall: if you are planning to sell directly to people living in China
Selling on Alibaba
Listing on the Alibaba site as a wholesaler can be a complicated process. Not only because there is a lot of competition, but the fact that you need to think about shipping costs overseas (which can be extreme at high product quantities), and minimum order quantities and price breaks.
Selling on TMall
Honestly, selling on TMall is not all that different from selling on Amazon. You list your products in much the same way, and you will be optimizing them in the same way. You are just going to be catering to a completely different market. Take into account that listing on TMall is going to require at least some understanding of Chinese. There is an annual fee for listing products on TMall.
Receiving payment from Alibaba/TMall
Alibaba and TMall have a variety of payment methods, so it is likely you will have one that is supported in your country. In most cases, this will be a direct bank transfer.
Alibaba is a fantastic platform for those looking to buy in products to sell online or in retail outlets. It is just as great for those who are looking to tap into the Chinese market, the largest eCommerce market in the world, in a bid to try and make some more sales and access a new niche.