Knowledge@Wharton discusses China’s leading trade portal:
Alibaba has three businesses, each of which has a distinct target market and portal. Alibaba International (www.alibaba.com) is an English-language website that facilitates business transactions between small- and medium-size enterprises (SMEs) in China with businesses worldwide. It has one million registered users in more than 200 countries. Alibaba China (www.china.alibaba.com) is a Chinese-language site that focuses on buying and selling among small- and mid-size businesses in China. It has more than five million registered users. Alibaba China’s subscription fee includes authentication and verification, by a third-party credit agency, of the member’s identity. The third business, TaoBao (www.taobao.com), is China’s most popular C2C site and is the business that is in direct competition with eBay within China. TaoBao means “treasure hunt.”
Alibaba has been successful because it recognized it could fill a gaping market need: China has virtually no printed directories or electronic databases that allow companies to describe their products and help buyers and sellers find one another while providing a certain level of comfort that the firms are on the up and up. Moreover, Alibaba focuses on mom-and-pop businesses in China, of which there are untold numbers, rather than trying to facilitate transactions between multinationals, which often have their own web-based systems for dealing with suppliers, and other big companies.
Alibaba “offered a platform where China manufacturers can reach world exporters and vice versa,” says Safa Rashtchy, an e-commerce analyst with the investment firm Piper Jaffray. “It’s a pretty inefficient system [in China] right now. The company figured if it signed up all the manufacturers in China and carefully listed their products and made them available to the U.S., Europe or wherever, it could extract good revenue. That’s what they’re doing.”