Alibaba.com, the ‘Amazon of China’ courts U.S. businesses for platform
If yours is a small business interested in selling through online platforms, there’s a ‘new’ online platform looking for you.
While I’ve used the term ‘new,’ Alibaba.com – part of the Alibaba Group is not new at all. Often called “the Amazon of China,” the 20-year old Alibaba Group has recently announced opportunities for American businesses to sell to other businesses on its B2B (business-to-business) site, Alibaba.com.
If Amazon feels threatened by any company in the world—and I doubt it does—that company is probably Alibaba. Founded in 1999 by Jack Ma, an entrepreneurial rock star in China and one of the world’s richest billionaires, the Alibaba Group is a global powerhouse. Though not widely known in the US, the Alibaba Group is one of the top ten companies in the world.
Now Alibaba is attempting to gain a greater foothold in America by opening its B2B platform – Alibaba.com—to American small businesses to offer their products to both American and global buyers.
“Alibaba.com is the original business that Jack Ma started about 20 years ago, and helping small businesses is in our DNA,” said John Caplan, president of the North America B2B, Alibaba Group. According to Caplan, the site does “billions of dollars a month” in sales.
In July, Alibaba.com announced they were now allowing American businesses to sell on the site and offering a suite of CRM (customer relationship marketing) and digital tools to enable American companies to open “storefronts.”
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“We’ve seen awesome interest and engagement by wholesalers,” said Caplan. “By people who’ve recognized you need to become a multinational company without having the expense of traveling around the world or finding reps around the world.” In particular, he mentioned high interest in the agriculture, food, apparel and health supplements categories.
“Honey Baby Naturals has had tremendous growth in the US over the last three years and now we have the opportunity to share our products with the rest of the world via Alibaba,” said Aisha Ceballos-Crump, Founder/CEO of Honey Baby Naturals, Chicago, which makes honey-based hair care products for children. “I am so excited to promote and showcase Honey Baby Naturals on the largest global B2B marketplace.”
Hopefully, Honey Baby Naturals will do well on the site. It may be a good example of the type of small business that might flourish: one with a very distinct niche product without much direct competition.
For American companies making products with lots of competition, however, platform sites like Alibaba.com are definitely a two-edged sword. Yes, you can reach new markets. But you are right there with dozens—or hundreds—of often lower-priced competitors. While Caplan said Alibaba.com helps buyers connect with “the highest quality manufacturers,” even a quick look shows many offerings are of questionable quality. Will you be competitive in that situation and comfortable in that environment?
“On the Alibaba.com platform today, the majority (of sales) are customized goods, connecting buyers with manufacturers,” said Caplan, giving the example that if someone wanted to create a new kind of chandelier, they could find a manufacturer to make that chandelier on Alibaba.com.
Though Caplan never once used the word “Amazon,” he eagerly differentiated Alibaba.com from “companies that are retailers that tell sellers they’re platforms.” Indeed, one way in which selling on Alibaba.com offers a benefit over selling on Amazon is that, in fact, Amazon as a retailer frequently competes against companies selling on its own site.
Another advantage Alibaba.com has for companies selling on its site is that Alibaba does not take a commission on every sale—as does Amazon–but instead charges an annual fee. There’s a $1,000 startup fee and $1404 annual fee for the basic package.
Here are a few ways in which selling on Alibaba.com is different from and similar to selling on Amazon.
Differentiators of Alibaba.com:
• No commissions on each sale; you pay an annual fee.
• They do not sell their own products and compete against you.
• They do not set prices on your goods (often making it difficult for you to sell in other channels).
• You own the customer.
• You pay once no matter how many different countries (markets) you choose.
• Limited to B2B – business-to-business sales.
• They both charge you to market your products on their site in addition to site fees or commissions.
• You’ll appear next to dozens, perhaps hundreds, of competitors, often cheaper.
• They’re inevitably gathering data on your sales and your customers.
• Many products are of questionable quality, with the possibility of fakes and knock-offs.
Here is more information on Alibaba.com.
Rhonda Abrams is the author of “Successful Business Plan:Secrets & Strategies,” the best-selling business plan guide in the US, just released in its seventh edition.
Connect with Rhonda on Facebook, Twitter and Instagram: @RhondaAbrams. Register for Rhonda’s free business tips newsletter at www.PlanningShop.com.