Alibaba | Strategies for Selling on this E-commerce Giant
Alibaba is an online e-commerce giant and continues to dominate the market in China. In this article, we will look at 1) what is Alibaba, 2) selling successfully on Alibaba, 3) advantages of selling on Alibaba, 4) precautions, and 5) successful sellers on Alibaba.
WHAT IS ALIBABA?
Alibaba is a group of e-commerce business created by Jack Ma and based in Hangzhou. The businesses within Alibaba include business-to-business online web portals, online retail services, online payment services, s shopping search engine and cloud computing services. The platform was started in an effort to connect Chinese manufacturers with buyers around the world.
Alibaba offers three main services. These include Alibaba which is a portal for sales between importers and exporters globally. Services are in English on this portal. The second service is a Chinese portal performing the same function domestically. The third service is a retail website by the name of AliExpress which lets individual buyers purchase smaller quantities at wholesale prices.
The company expanded to include a consumer to consumer platform similar to eBay known as Taobao. Taobao has close to a billion items listed and is one of the 20 most visited websites globally. 60 percent of all parcels delivered in China are because of the sites within the Alibaba Groups domain. Alibaba also offers Alipay which is an online payment escrow service. This service accounts for nearly half of all online payments within China.
The company sold items close to $170 billion in sales in 2012 which was more than eBay and Amazon combined. Alibaba group scheduled a planned IPO on 5 September 2014 by filing with the US Securities and Exchange Commission. A share price was set between $60 and 66 per share. The final price is determined after an international roadshow. The listing with the New York Stock Exchange is expected to raise over $20 billion, exceeding Facebook as the largest technology listing in US history. The roadshow will begin in the US with major cities as New York, Boston, Balitimore, Los Angeles and San Francisco on the list. International locations such as Singapore, Hong Kong and London are also on the agenda. The roadshow is planned from September 5 to September 18 with the aim of gauging investor interest in the IPO and share price.
The Business Model
A mix of Amazon, eBay and PayPal, Alibaba Group and its companies dominate the Chinese e-commerce market. The platform takes some elements from different e-commerce platforms with its own Chinese flavor. Alibaba primarily acts like a middleman, both connecting buyers and sellers with each other and helping facilitate their transactions.
Alibaba’s business model is unique in that it does not take any ownership of inventory or stock it anywhere. It only provides a virtual marketplace that connects buyers and sellers. In absolute terms, it has substantially less revenue than Amazon, but with almost no overhead costs, it is extremely profitable while Amazon barely is.
Since Chinese retailers are less widespread, Alibaba has the opportunity to collaborate with these retailers to offer more customers more choices in buying their products.
Sellers on Alibaba pay for advertising their items and for special services instead of a per sale cost. This is a very attractive proposition for sellers as they can sell items at a lower cost. Additionally, Alibaba has closed its search function and items can only be searched for within the website. This protects customers from being poached and also eliminates the need to spend on appearing on top of search engine results.
Alibaba.com Business Tips: Finding Suppliers and Manufacturers
HOW TO SELL SUCCESSFULLY ON ALIBABA
Though it is easy to become part of the seller community on Alibaba, some effort needs to be put in to sell successfully. Some tips to achieve this include:
- Become a Gold Supplier: It is free to become a member and sell products on Alibaba. Potential buyers though, will not discover you unless you become a gold supplier. This membership service is the main source of revenue for the platform. Through this membership, a seller gets access to additional features including a buyer seller matching service. This also improves seller ranking in the Alibaba search engine.
- Proactively Approach Buyers: As a verified or gold supplier, a seller can search for the right buyers and contact them with a quote for the product that they are in the market for. This allows more power to a supplier to gain business rather than wait to be approached.
- Know the Market: Whether selling to Chinese customers or selling to international ones, it is a good idea to understand the market and the product on offer. In some cases, the offering may need to be adjusted to fit the customer’s requirements.
- Add Strong Photos: It is vital to add clear, well positioned and good quality images to accompany product listings. When buyers cannot experience a product before purchasing the next best alternate is to allow them access to good photographs of the products.
- Add Good Descriptions: Necessary specifications, measurements, dimensions, material information and features and benefits should be clearly listed to provide prospective buyers with all the relevant information that they may need before making a purchase decision.
- Allow Multiple Languages: Alibaba offers multi language sites that allow sellers access to a larger client base by catering to those who may not be comfortable transacting in English.
- Target Specific Customers: By targeting everyone, you end up targeting no one. So it is a good idea to identify the right audience and sell to those people.
- List Multiple Products: More products will mean higher visibility in the Alibaba product search. Buyers also seem to be more attracted to sellers with a variety of products on offer rather than a sparse page.
- Provide Seller Description: Buyers will be more likely to buy from sellers who have provide information about themselves. This information includes a history, main markets, products, production capabilities and similar details. It is a good idea to offer translations in a few other major languages.
- List Certifications & Compliance Reports: Several buyers from different parts of the world specifically those from the European Union have to comply with high product standards. Compliance to these standards may seem like an additional hassle but is a sign of good quality and reliability.
- Provide Reliable Customer Service: A customer is likely to choose to buy from a seller who responds quickly, politely and helpfully to any queries pre and post purchase. It is a good idea to always be courteous and quick in responding to any customer queries. This good service could be the difference between a one-time dissatisfied customer and a repeat customer who turns into more of a business partner.
- Create a Desirable Product Offering: There are hundreds of sellers often selling the same or similar items. In order to differentiate yourself from them, try to offer something different from the others whether it is more information, lower prices or special offers.
- Provide Informative Literature: If applicable, make sure that any informative material related to your product is available for the customers to access and use whenever needed.
- Ask for Referrals: Referrals are a good way to get new business and it is a smart plan to ask proactively for these from existing customers and partners.
- Use Special Tools: Alibaba offers a real time statistical tool to analyze business trends. This helps manage online marketing successfully. The tool offers sellers the opportunity to assess online performance, understand buyer behavior and maximize return on investment. Users can access detailed graphs, trends, industry averages as well as personalized advice to grow the business.
ADVANTAGES AND DISADVANTAGES OF SELLING ON ALIBABA
There are many advantages of through selling on Alibaba.com. These include the following.
- Effective Promotion Methods: One of the advantages of Alibaba are that products are promoted effectively. Alibaba charges sellers for the benefit of using their promotion methods. This ensures that customers see your product specifically when they search for related items. The additional costs of marketing a brand separately are reduced as the platform takes care of this for a seller.
- Additional Features: Alibaba offers many tools and features which are also paid for by the seller. These include a search engine, link engine, trade manager, e-shop, forums and live help. There is also a connection tool that joins buyers and sellers together according to search criteria.
- AliPay: A secure system, created and managed by the Alibaba group, AliPay is a popular online payment system. It accounts for a large chunk of all online transaction payments in China.
- Learning & Support: Forums offer support and learning opportunities to new sellers and beginners. The basics of global trade and online systems are available at these forums. There are also options to ask experts for information and advice at no additional charges.
- Global Access: The website is the largest online presence in China and a significant player in the global e-commerce arena. This allows access to a large number of sellers and buyers.
- Better Fee Structure: The website charges for promotional services and additional fees rather than a setup cost or a per item charge. This allows sellers to gain better margins and sell at better prices
Though we tried to find information on the possible disadvantages of selling or even buying on Alibaba, this information was difficult to come by. One reason could be that the major chunk of its users are Chinese and so post in their own language. This point also has the potential for turning into the biggest disadvantage of selling on Alibaba because unless one is fluent in Chinese, it may be difficult to effectively communicate with customers.
Those of our readers who have had experience buying or selling on Alibaba are welcome to add their experiences in the comments section.
There is always the threat of scams when conducting transaction online and globally. While selling or buying on Alibaba, it is a good idea to stay vigilant and keep an eye on the following:
Review Company Profile
Before getting into business with a seller, it is important to read through the company profile and take a look at verified information. Items such as the company name, business type, certifications etc can help understand whether the listed business is reliable or not.
This is a necessary step to ensure that the product was manufactured according to specific rules and regulations that may be necessary before the product is further sold in other countries.
Look for Specialists
If a seller lists only a small number of random articles or too much variety in what they are selling, then there is a high risk of questionable reliability. A good manufacturer will most probably focus on producing specific categories of products and these will be clearly visible in their listings.
ALIBABA SUCCESS STORIES
Inman is a women’s clothing line that has become one of China’s top online retailers since 2008. Owned by the Guangzhou Huimei Fashion Company, the brand sells cotton and linen apparel for women. The company began as a manufacturer for clothes for other brands and when business slowed during the global financial crisis, Inman was created to build an individual online presence. The aim behind this was to keep overhead costs low as they are significantly less for an online store than from a physical store presence.
The company has been doing extremely well online, selling its products through Alibaba.com. The parent company has acquired a new clothing brand along with the existing presence. The Alibaba website offers a chat service where customers can talk to sellers to ask for information and even negotiate prices. There is also the option to rate sellers and post public comments which is a good way to attract new customers.
A pet lover, Lisa Illman is the founder and president of Kritter Kommunity a business born of her love for animals. Always on a lookout for ways to allow her pets to enjoy the sunshine and fresh air while living in an urban environment, she came up with the idea for a Kritter Kondo. The planned pet enclosure needed to be big enough for a small pet or two but small enough to store in the limited space available to most city dwellers. The product needed to be quick to set up and close down.
Illman worked with a local engineer to work out the manufacturing details of her design and set out to find a cost effective manufacturer who could help create a prototype. She worked to find a manufacturer within the United States with little luck as she couldn’t connect with one interested in making the item for her.
While conducting research online, she stumbled upon Alibaba.com and conducted some cautious research into the viability of this avenue. She had never considered the possibility of sourcing online and was apprehensive about the endeavor. Her experience was that the website is simple to navigate and easy to identify and contact possible business partners. There is little or no language barrier and manufacturers are very helpful.
Illman picked a supplier following her research and began her long distance partnership. Over the course of several emails, trust was established and work continued on pricing, design and production. Her first prototype was close to the design that she had in mind and since then business has only continued to grow and flourish. Even though her contact eventually left the company she was working with, she continued to work with him through email and skype.
As her product line grows, Lisa is happy to recommend Alibaba to other entrepreneurs.
Tips from Alibaba.com buyers & sellers
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