Anthony J. Pennings, PhD

WRITINGS ON DIGITAL STRATEGIES, ICT ECONOMICS, AND GLOBAL COMMUNICATIONS

Chinese E-Commerce Group becoming a Global Power

Posted on | January 6, 2011 | No Comments

dengWhen Deng Xiaoping, the Communist leader who transformed China into state-run capitalism had his famous economic realization, “I can distribute poverty or I can distribute wealth”, he probably could not have imagined the power of the Internet and its e-commerce capabilities. Now, China’s Internet users has risen to nearly 620 million, twice as many as in the U.S. One of the earliest Chinese startups was the Alibaba Group, now considered its most dominant e-commerce player and a major force facilitating its international trade.

alibabaJack Ma founded Alibaba.com in 1999 with 17 partners and quickly raised money from Softbank, Goldman Sachs, and other institutions to build the Alibaba.com site and brand. In a classic Internet rags-to-riches drama, Ma learned English by listening to the radio and created the company after he discovered the Internet while on a business trip to the US during the 1990s. The former English teacher and interpreter named the company after the main character in one of his favorite stories, the Arabic classic Ali Baba and the Forty Thieves. For Jack Ma, Ali Baba was the kind son of a merchant who helped his village. It didn’t hurt that the name was easy to spell and a provocative name.

Since then, they have built an array of companies under the Alibaba banner, starting with Alibaba.com which was set up as a B2B (Business to Business) trading platform for small manufacturers to sell their products to each other. It has since expanded to offer a wide range of online services operating globally. Taobao.com, is the “online mall” with some 300 million customers that operates like a combination of Amazon and eBay, allowing approved sellers to auction or sell their goods outright.

taobaoFounded and owned by the Alibaba Group, Taoboa’s revenues reached US$29 billion in 2009 and are expected to grow significantly over the next few years. It deals in China’s currency, the yuan, and uses Alipay as the preferred payment platform. Alipay is an escrow-based online payment system which is owned by the Alibaba Group. The payment solution site has nearly 500,000 C2C, B2C and B2B merchants using its services, not including those on Taobao and Alibaba.

Based in Hangzhou, just inland from eastern China’s Shang Hai metropolis, the company focuses on three online opportunities:

  • The China marketplace
  • – Using the www.1688.com site, the domestic business-to-business trade in China has been Alibaba’s financial base.

  • The English language international marketplace
  • – The recent purchase of Vendio Services Inc. with its 80,000 merchants is a good indication of Alibaba’s global push. With recent funding from George Soros it brings together importers and exporters from more than 240 countries and regions with substantial English-literate populations. Alibaba UK focuses specifically on the retail marketplace in the United Kingdom.

  • The Japanese marketplace
  • – A new site (alibaba.co.jp) conducts trade to and from Japan. Yahoo Japan and Alibaba’s Taobao have connected e-commerce platforms. Yahoo Japan has opened a section in Chinese in its shopping section, carrying millions of products from China (in Japanese language) while Alibaba’s Taobao is offering wares from Japan-based companies on “TaoJapan”, a Chinese-language section on Taobao’s frontpage. Japanese telecom/media giant Softbank has a major financial interest in both Alibaba and Yahoo Japan.

    As the economic momentum continues to move to Asia, e-commerce will continue to be in the center. AliExpress for example, continues to position itself as a fast and increasingly reliable channel for wholesale transactions targeting small and medium-sized suppliers and buyers who all agree to conduct even very small orders. This is the future of global business. The question is, who is going to gain the most? Will it distribute Deng’s prosperity or beggar thy neighbor?

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    Anthony J. Pennings, PhD is Professor of Global Media at Hannam University in South Korea. Previously, he taught at St. Edwards University in Austin, Texas and was on the faculty of New York University from 2002-2012. He also taught at Victoria University in Wellington, New Zealand.

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  • About Me

    Professor and Associate Chair at State University of New York (SUNY) Korea. Recently taught at Hannam University in Daejeon, South Korea. Moved to Austin, Texas in August 2012 to join the Digital Media Management program at St. Edwards University. Spent the previous decade on the faculty at New York University teaching and researching information systems, media economics, and strategic communications.

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