If you haven't heard about Alibaba and the largest IPO in history, do not feel bad. We can all process only a certain amount of information, and Alibaba may not top your list. But the rise of Alibaba, particularly as there are discussions about it rivaling Amazon.com for customers, makes it worth knowing about. So here is some useful and pertinent information about the company Alibaba.
Alibaba Isn't Entirely Like A Chinese Amazon
When you think of Amazon your primary idea is that of a huge online store. Alibaba is more like the front piece with two giant malls behind it. Those malls are named Taobao and Tmall. Each of the malls have literally millions of stores in them. So it is like Amazon, only a million times bigger. It is actually like a combination of eBay and Amazon, because there are places where you can buy retail and others where you can haggle for the best price.
Alibaba.com is only a small part of the total Alibaba network. Beyond its two malls are actually those two separate marketplaces with millions of stores. For those outside of China, only a small part of the massive site can be seen – because it is written in Chinese.
Alibaba Is Huge
The total value of the transactions handled by Alibaba last year was more than $248 billion. Amazon and eBay together did not have that transaction value.
The two malls, Taobao and Tmall, each have their own search engines. So you can add a Google-like efficiency to the list of features the web site offers. Like Google, when you enter a search term products that match the term appear on the results list.
So those are the basics of what Alibaba is about and its basic operation.
But before you start wondering whether it is a major competitor in the world market, and threatens to take over the world in sales, and indeed if it's going to create problems for you in your own back yard, there are several things to keep in mind.
The total transaction value may sound impressive, but keep in mind that China is a country of more than 1.8 billion people. So the total transaction value per person is about $248 for every man, woman and child. Most Americans pay more for an iPhone than that. However, that is still very, very impressive.
Quality of merchandise is always a factor when selling globally. Beyond the basic quality, there are also safety and health factors that may be ignored when selling to people only in China. Powdered baby formula is one example.
There are an estimated 7 million merchants in Taobao. If we presume Tmall has the same number, there are 14 million merchants who sell on Alibaba. The impressive total of $248 billion averages out to about $18,000 per store. That is maybe not so impressive.
It helps to have some balance and look at the big picture, but make no mistake about the potential of Alibaba. Most countries do not have the health or safety standards for their products which America does. In many cases, in developing countries especially, having something of low quality is better than having nothing at all. So while there is room for concern if you are a small businessperson outside of China, there is also room for adjusting to the quality demand your customers have for your products. Just knowing about Alibaba is reason to begin rethinking your business strategy.
