By Jean Christopher Mittelstaedt
The following questions will be answered in this case study:
What fields and customers does Alibaba service? What are its operations in the post-Soviet space? What does its narrative consist of? What can the EU learn from Alibaba’s system of operation? What start-ups could be bundled together to perform similar operations? What could the EU do differently?
What fields and customers does Alibaba service?
Alibaba is a Chinese e-commerce company that provides consumer-to-consumer, business-to-consumer and business-to-business sales services via its various web portals. As of April 2016, it is the world’s largest retailer.
It’s business-to-business services are conducted over the website Alibaba.com. Oriented towards small businesses, the English version of Alibaba.com has three main services: handling sales between importers and exporters from more than 240 countries and regions; the Chinese version 1688.com was developed to handle domestic business-to-business trade; also, Alibaba.com entails a transaction-based retail website AliExpress.com to sell goods at wholesale prices.
Alibaba’s consumer-to-consumer and business-to-consumer business is conducted through the website Taobao. The most visited website in China, it boasts tens of thousand of shops owned by companies or individuals selling everything from soap and clothing to cars and other high technology goods. It offers commission-free transactions and has enabled consumers from remote places to take part in the national marketplace, thus creating a narrative of empowering the poor.
Alibaba also offers an online payment platform called “Alipay” with no transaction fees. With 300 million users and a market share of more than fifty percent of China’s online payment market, it complements Alibaba’s strategy of establishing an eco-system.
What are its operations in the post-Soviet space?
As part of the One Belt One Road initiative of the Chinese government, Alibaba has taken a more aggressive stance in the countries of the post-Soviet space.
In Kazakhstan, Alibaba signed a Memorandum of Understanding (MOU) with the Kazpost National Company to promote internet-financing, e-commerce, and logistics operations within the country. Alibaba aims to help the development of e-commerce for small and medium companies and the establishment of cooperation between Alibaba’s Alipay and its Kazakh counterpart. Alibaba has signed similar MOUs with Russia to promote the integration of e-commerce and logistics in the post-Soviet space.
Indeed, AliExpress has already become one of the most popular and top-ranking online trading platforms, with clothes, home appliances, and digital products being the favourites among local consumers. Through its subsidiaries and affiliates, it invests in local logistics infrastructure and people and helps the Kazakh company find a market in China.
As of now, Alibaba is still a minor player in the post-Soviet space, but one with high ambitions. It has access to the highest echelons of the Chinese political establishment, attracting the attention of policymakers both inside China and in Post-Soviet space countries.
What is Alibaba’s narrative?
The company’s narrative is revealed in its mission: to “make it easy to do business anywhere” and to “build the future infrastructure of commerce”. To this end, Alibaba brands itself as a supporter for people to join the marketplace. Especially in Western China, still a mainly rural area based on agriculture, people find themselves unable to sell their produce to the highest bidder. By providing a platform to do so, Alibaba alleviates poverty, enabling it to cast itself as an enterprise that can foster local development and embolden and empower people.
Alibaba’s narrative is thus grounded in the moral imperative to better the lives of formerly disconnected and economically disenfranchised people and is in line with the government’s official stance on poverty alleviation and people in previously neglected areas.
What can we learn from Alibaba’s system of operation? What start-ups can we bundle together to perform similar operations?
There are three key learning-points to take away from the Alibaba case:
- The building of an eco-system: Alibaba has managed to establish an eco-system of companies and subsidiaries that provides the consumer or business the luxury of not having to look elsewhere. From setting up an online store with ease, to the infrastructure of delivery, as well as all the financing surrounding it, Alibaba offers everything.
- The success of a narrative that mirrors local political priorities: Alibaba’s narrative is in line with official priorities and policies. Its entrance into Kazakhstan has been widely publicised, and its poverty alleviation measures are being marketed and framed positively by Chinese decision-makers, significantly enhancing the company’s clout.
- The focus on e-commerce and branding: e-commerce, coupled with the right connections, the right team and unique branding can go a long way without requiring grand initial capital investment.
What start-ups are necessary to perform similar functions?
The appropriate bundling of start-ups depends on the market that will be eyed. Markets such as China are embattled and unlikely to be penetrated. Rather, the EU should start looking into niche markets in Central Asian countries or Eastern Europe.
- Low-hanging fruit: e-commerce start-ups. The feasibility of e-commerce is relatively high, because it does not require significant initial investment. An e-commerce start-up that already conducts business-to-consumer, consumer-to-consumer, or business-to-business operations in Europe would be most suitable.
- A local logistics provider and warehousing are needed to provide the basic infrastructure. This does require extensive capital investment, thus requiring a joint venture with a local start-up.
- A marketing and branding expert: to further publicise and utilise official and local narratives in the media, and to establish contacts with local decision-makers. Both European and local start-ups could fill this gap – a joint venture where the European start-up supplies the expertise and gains local experience in cooperation with a local start-up can be sold within the WBE narrative.
- Financing: Financing would currently be unfeasible, due to strict banking regulations in China and elsewhere, however, we could look into local banks and NGOs involved in micro-financing.
How do we make it our own?
- Use a pro-European narrative and focus on start-ups from embattled countries, such as Spain, Italy, or Greece.
- Focus on niche markets such as Central Asian countries, where market penetration is still low, and partner with local start-ups to enhance WBE’s social mission of building Europe, in Europe and abroad.
- Partner with local banks that offer micro-financing, and build a local narrative focused on issues of poverty alleviation and human empowerment.
- Benefit from expertise on the post-Soviet space and China to develop a long-term strategy for the start-up conglomerate, offering local start-ups partnerships with European start-ups, and, in the long-run, penetrate the European market.
- Fostering a long-term partnership focused on developmental and social aims.