Alibaba Group Holding Ltd launched an IPO on Monday of last week. By Wednesday, they received enough orders to cover the entire deal, which is on track to be the largest stock offering in U.S. history.
Who is Alibaba?
Alibaba was created to help small local companies sell their products online. It was started by Jack Ma and his 17 colleagues in 1998 and, according to Businessweek, has since grown into largest e-commerce company in China.
Today, Alibaba Group Holdings consists of several different sites, each tailored for a different style of transaction.
– Alibaba.com is the company’s original marketplace. It connects Chinese manufacturers and suppliers with small businesses across the globe. With access to hundreds of manufacturers and suppliers right at their fingertips, companies can easily shop competitively for prices.
– Taobao, founded in 2003, is Alibaba’s response to EBay’s entrance into China. By tailoring their services to the Chinese market, Taobao boomed into Alibaba’s largest business and forced EBay to withdraw in 2006. The site offers a selection of everyday items (as well as some unusual ones) and connects primarily Chinese buyers and sellers.
– Tmall is a virtual shopping center that gives international companies and global brands, such as Nike and Apple, easy access to Chinese buyers in exchange for 5 percent of sales. It saves companies the hassle of going through conventional brokers traditionally required to import goods into China.
– Alipay is the online payment processor for the above sites that guarantees every transaction, creating a new level of trust for a country not accustomed to doing business with anyone they don’t know.
Transforming the Landscape of Online Retail
Alibaba holds immense power in the online retail industry. In 2013, the volume of merchandise sold through its various sites totaled $248 billion — double the amount of Amazon and triple the amount of EBay.
In recent months, Ma has been developing ties with the U.S. technology industry by investing in American startups, including ride-sharing service Lyft, mobile search engine Quixey.com, and mobile messaging app Tango. In addition, negotiations are in the works to back Snapchat with an investment that would value the messaging app at $10 billion.
The strategy is clear: Alibaba is positioning themselves to invade Western markets.
Opportunities for Small Business
Alibaba is paving the way to a future with frictionless cross-border commerce; a future where consumers everywhere can buy from retailers anywhere.
It allows sellers in crowded local markets to seek out buyers elsewhere. In addition, seasonal product vendors have the unique opportunity to sell their product, skis for example, locally in the winter and across the world in the summer.
Alibaba’s sites are proving to be beneficial for small businesses. Dennis Zhang, CEO of Sneakerhead.com — an online shoe retailer based in California —
struggled to surpass a stagnant $20 million sales threshold for 13 years. That figure was doubled in only two years after opening a store on Tmall.
What could Alibaba’s services mean for your small business?
