How logistics contributes to Alibaba’s outstanding success


Last November -a month of global sales- Chinese ecommerce giant Alibaba raised as the unquestionable conqueror. In just one day –the Single’s Day annual event- they hit a record sale of US$ 14 billion, more than Cyber Monday and Black Friday combined.

Consultant and experts agree that the secret of Alibaba’s success lies in its business model, because the company is able to provide a customized sales experience for every buyer, irregardless if they are in China, US, Africa or South America. In fact, Alibaba’s founder, Jack Ma, stands that his company puts “customers first, employees second, and shareholders third,” and he also aims towards long-term value, instead of short-term profits.

“Our proposition is simple: we want to help small businesses grow by solving their problems through Internet technology. We fight for the little guy. Since our founding in 1999, we have helped millions of small businesses to achieve a brighter future.”

Jack Ma, Alibaba’s founder

According to the Harvard Business School, “Alibaba dominates China’s Internet and logistics space with over 600 million subscribers, and nearly a quarter trillion dollars of annual transactions. A combination of Amazon and eBay, it holds an 80 percent share of the e-commerce market in the world’s second largest economy.”

Also, in the last few years, its growth rate has been mostly impressive. “Its net income for 2013 was four times more than in 2012. Its products and services lie at the core of an extraordinary transformation of China today from a low-cost, export-driven economy to one that is driven by consumers.” Harvard adds.

The supply chain model

As with any ecommerce model, Alibaba’s logistics plays an important role in their business strategy, and it significantly contributes to Ma´s company success. It started in 1999 as a platform for B2B businesses, to connect eastern suppliers with western buyers.

On one side, Alibaba offers online platforms (Ali Express.com, Taobao.com, and Tmall.com) where retail buyers and sellers can meet each other in the same space to do business and have the chance to enter in new markets, and also are supported with business intelligence, SEO and keyword management in order to maximize their possibilities to be reached by buyers or sellers.

On the other hand, Ma’s company also offers a big online platform (Alibaba.com) for wholesale buyers and sellers. As in retail, they get business intelligence benefits due to the fact that Alibaba “runs marketplaces and has a huge customer base, the amount of business that flows over its sites dwarfs that of other e-commerce companies,” Wall Street Journal explains.

“Alibaba’s meteoric rise can be attributed to its focus on growing its enormous supplier base, which targets Chinese and other Asian sellers that Amazon and other marketplaces don’t,” ecommerce company Handshake stands.

“In other words, Alibaba’s B2B marketplace –Handshake adds- has acted like a gateway to China and the growing economy’s enormous capacity to produce goods that the world wants.”

So, what role does logistics and supply chain management play in this successful business model?

The key is integration at the service of the client. Firstly, Alibaba offers the possibility to search, find, negotiate with the manufacturer, close a business deal, and agree payment options.

But also, market players can agree on delivery options, negotiate time and methods, choose shipping rates, and even program deliveries. All of it, at very convenient prices (probably due to the huge amount of deliveries and shipping that they do everyday).

In addition, Alibaba “doesn’t own any of its own assets for lastmile delivery or even fulfillment; they are an online virtual e-commerce platform that tenders orders, more like an eBay. The company will either sell consignment inventory provided by vendors, or goods will be shipped from a vendor warehouse or location. Alibaba’s role is essentially to coordinate track-and-trace logistics, giving coordinate information for delivery, tendering the funders and clearing it—much like what Amazon does when they sell goods for a third party,” Industry Week explains.

Some Alibaba Key numbers:

– US$ 25 billion was the Alibaba’s global IPO in 2015, the world’s largest IPO ever.

– 231 million active buyers.

– 11.3 billion orders flowed through the company´s ecommerce platform in 2013.

– 49 purchases done an average by each buyer every year.

-Alibaba has B2B and B2C suppliers In more than 20 countries.

(Sources: https://www.handshake.com/blog/alibaba-b2b-wholesale/)

How do you evaluate the shipping experience that Alibaba.com provides? Do you think that its supply chain management is setting a course for next ecommerce businesses? Share your opinion.

Francisca is the Business Development Director of Drivin, a SaaS transportation management solution that generates an optimized delivery plan, improves customer service, and reduces transportation costs by up to 30% from day one.