124 4 Business-to-Business E-Commerce

OPENING CASE
ALIBABA.COM—THE WORLD’S LARGEST B2B MARKETPLACE

Alibaba Group is a collection of Internet-based e-commerce companies, some of which are B2B (notably Alibaba.com); the
others are B2C and EC services (e.g., payments). For a company overview, see alibabagroup.com/en/about/overview. The
company started as a portal for connecting Chinese manufacturers with buyers from other countries. By 2014, Alibaba Group
became the world’s largest e-commerce enterprise and in 2016 has surpassed Walmart as the world’s largest retailer. Its
business-to-business (B2B) operation (Alibaba.com) is the world’s largest marketplace. The fascinating story of the com-
pany is described by Clark (2016) and by Erisman (2015). The company describes itself as:
We provide the fundamental technology infrastructure and marketing reach to help merchants, brands and other businesses that provide
products, services and digital content to leverage the power of the Internet to engage with their users and customers. Our businesses are
comprised of core commerce, cloud computing, digital media and entertainment, innovation initiatives and others. Through investee affili-
ates, we also participate in the logistics and local services sectors.
(from alibabagroup.com/en/about/overview)

The Opportunity

The Alibaba Group was started in 1999 by Jack Ma and his partners. Ma envisioned an opportunity to connect foreign buyers
with Chinese manufacturers, especially the small ones. These companies wanted to go global but did not know how to do it.
The initial business was Alibaba.com, a B2B portal, which later on developed into a comprehensive B2B marketplace. The
Alibaba Group also added a consumer-to-consumer (C2C) marketplace called Taobao (taobao.com). In 2004, Alibaba added
the “Alipay Cross-Border E-Payment Service” (alipay.com). In 2007, the Alibaba Group founded the Internet-based busi-
ness management software company Alisoft (alisoft.com), followed by Tmall.com (tmall.com), a giant B2C platform. The
company established a cloud computing platform and restructured over time. In 2014 Alibaba Group had an IPO in the USA
raising over $20 billion. In 2015 the company’s valuation was over $158 million compared to Amazon’s valuation of $249
million. This case concentrates on Alibaba.com, the B2B company (herein “Alibaba.com”).

The Solution

Alibaba.com is an online marketplace composed of a platform for buyers and sellers, a community, and B2B services. The
company’s mission is to provide all the necessary support for buyers, suppliers, and traders. The components and role of the
company are illustrated in Fig. 4.1.

• Suppliers: Post their catalogs, company information, special promotions, etc. on the suppliers’ space. Alibaba.com helps
to reach international buyers. Suppliers can get free online training.

Fig. 4.1 The role of Alibaba.

Community My Alibaba

Buyers Suppliers

Alibaba.com
Marketplace

Services, Platforms, Tools, Resources

• Buyers: Search for potential products and suppliers and also have the option to post what they need (requests) on the
buyers’ space and get quotes from suppliers. Buyers can verify the suppliers’ worthiness (see a video about suppliers’
assessment at sa.alibaba.com). Alibaba.com provides inspection services with reliable experts. Buyers can compare
prices and terms of service as well.
• Services for buyers and suppliers: Alibaba.com helps to communicate, negotiate, and assist in reaching a deal. They
also arrange the payment process, insurance, and delivery details. Alibaba.com provides all the technology necessary to
support the activities on its site. It also provides services such as escrow and handling customer complaints.
• My Alibaba: A personal communication and trade management tool on Alibaba.com. It is now separated for buyers and
suppliers.
• Tools and resources: Alibaba.com provides information and tools for export and import. It also provides a tradeshow
channel.
• Alibaba cloud computing and other infrastructure: The company is a developer of cloud computing services. The
company is committed to supporting the growth of Alibaba Group companies and providing a comprehensive suite of
Internet-based EC-oriented computing services, which include e-commerce data mining, high-speed massive e-commerce
data processing capabilities, and data customization.
• Alipay (alipay.com) is a cross-border online payment platform, mainly used by buyers and sellers engaging in e-com-
merce transactions. It offers an easy, safe, and secure way for millions of individuals and businesses to make and receive
payments on the Internet. By 2016, Alipay had 400 million registered users who made over 519 billion monthly payments
and mobile users, through Mobile Alipay. Mobile Alipay is now the largest mobile platform in the world (see chinainter-
netwatch.com/6183/alipay-the-largest-mobile-payments-platform-in-the-world).
• Alibaba.com Secure Payment (an escrow service; alibaba.com/escrow/buyer.html) is a service that holds the payment to
the seller until both parties have confirmed that the transaction is complete. Alibaba Escrow Service also has a Dispute and
Refund process if the buyer does not receive the goods or is unhappy with the delivery. For more information about the
Escrow Service and the Dispute and Refund process, see alibaba.com/help/safety_security/products/escrow/faq.html.

Alipay also offers an online global payment solution to help buyers or sellers outside China to do business in China.
Alipay supports transactions in 28 major foreign currencies (December 2016).

The Database
The center of Alibaba.com is its huge database, which is basically horizontal information organized into dozens of industry
categories, including agriculture, apparel and fashion, automobiles, and toys. Each industry category is further divided into
subcategories (over 800 in total). For example, the toy category includes items such as dolls, electronic pets, and wooden
toys. Each subcategory includes classified postings organized into four groups: sellers, buyers, agents, and cooperation. Each
group may include many companies and products. (Some categories have thousands of product postings.) A powerful search
engine helps navigate the database.

Community Services
Alibaba.com provides the following major features all related to import and export: free e-mail, help center, 24-h online intel-
ligent robot to assist with answering questions, tutorials for traders, Trade Alert free updates to your inbox, news, tradeshow
information, legal information, arbitration, forums and discussion groups, trade trends, and so on. In addition, a supplier can
create a personalized company Web page as well as a “product showroom”; members also can post their own marketing leads
(where to buy and sell). Alibaba.com also offers the TradeManager mobile app (trademanager.alibaba.com), which is their
Instant Messaging tool. TradeManager can be used to chat with buyers in real time, get real-time translation, easily search for
buyers and suppliers, and get the latest trade results. The TradeManager app is provided in multiple languages and at relatively
low fees (the IM is free). For details, see Clark (2016) and alibaba.com/help/features-trademanager.html.
According to DYC Software Studio (chat-translator.com), DYC sells translation software called ChatTranslator for
TradeManager, which is available in 40 languages. It can translate and send messages in any foreign language and translate
replies from one language into the user’s language. (For information about features and to purchase and download the soft-
ware, see chat-translator.com/products/chat-translator-trademanager.html and download.cnet.com/Chat-Translator-
for-TradeManager/3000-20424_4-75212643.html). To see the new features of TradeManager, see trademanager.alibaba.
com/features/introduction.htm. To see more about the tools and features Alibaba offers to help buyers and sellers, see
alibaba.com/help/alibaba-features.html. Note: A free translator is available at facebook.com/FreeTranslator.
126 4 Business-to-Business E-Commerce

The Competition
Many companies are attempting to rival Alibaba. For example, JD.com (jd.com; which merged with Tencent) is China’s
second largest e-commerce company. (It is used for both B2B and B2C.) Trade.gov.cn/product.html is a comprehensive
e-commerce platform, used mainly to promote domestic and overseas trade, and Made-in-China.com (made-in-china.com),
another world leading B2B portal, is another competitor. In the international market, companies such as TradeBanq (trade-
banq.com), EC21 (ec21.com), Hubwoo (hubwoo.com), and Allactiontrade.com (allactiontrade.com) are all competing.
A recent development is conjecture that Alibaba may begin competing with Amazon and other B2C retailers on the United
States. These rumors have spawned many interesting comparisons on the two companies (see cnbc.
com/2016/05/05/a-tale-of-two-companies-matching-up-alibaba-vs-amazon.htmlandqz.com/545687/alibaba-vs-amazon-how-the-
worlds-two-online-shopping-giants-stack-up/).

The Results

By 2016, Alibaba.com covered over 5200 product categories and had about 280 million registered, active buyers. The com-
pany conducts business in over 240 countries and regions, and it employs more than 35,000 people.
Sources: Based on Chen (2016), Erisman (2015), crunchbase.com/organization/alibaba, buyer.alibaba.com, and
seller.alibaba.com (all accessed January 2017).
Note: For ten things to know about Jack Ma, see mashable.com/2014/09/17/jack-ma/#JlbtV2i29PqC.

LESSONS LEARNED FROM THE CASE

B2B e-commerce, which constitutes over 85% of all EC volume, is composed of different types of marketplaces and
trading methods. The opening case illustrates a marketplace for many buyers and sellers to make transactions. The case
presents the technology support provided for the B2B marketplace. In addition, the case describes information about
support services (e.g., escrow services). The case illustrates the services provided for sellers (which are discussed in
more detail in sections “B2B Marketing: Sell-Side E-Marketplaces” and “Selling via E-Auctions”) and the services for
buyers (described in sections “One-from-Many: E-Procurement at Buy-Side E-Marketplaces”, “Reverse Auctions at
Buy-Side E-Marketplaces (E-Tendering)”, and “Other E-Procurement Methods”). The case also demonstrates the role
of marketplaces (sections “B2B Exchanges (E-Marketplaces): Definitions and Concept” and “B2B in Web 2.0 and
Social Networking”). All the major EC buying and selling B2B methods as well as types of B2B marketplaces and
portals are described in this chapter. Finally, we relate B2B to social networking and other support services.

4.1 CONCEPTS, CHARACTERISTICS, AND MODELS OF B2B E-COMMERCE

B2B EC has some special characteristics as well as specific models, components, and concepts. The major ones are described
next.

Basic B2B Concepts and Process

Business-to-business e-commerce (B2B EC), also known as eB2B (electronic B2B), or just B2B, refers to transactions
between businesses conducted electronically over the Internet, extranets, intranets, or private networks. Such transactions
may take place between a business and its supply chain partners, as well as between a business and a government and with
any other business. In this context, a business refers to any organization, private, public, profit, or nonprofit. In B2B, compa-
nies aim to computerize trading transactions and communication and collaboration processes in order to increase efficiency
and effectiveness. B2B EC is very different and more complex than B2C. It is much more difficult to sell to a company than
to individuals. For a comprehensive discussion, see Wirthwein and Bannon (2014).