Last updated on July 7th, 2020 at 12:44 pm
In this article, we will discuss the business model of Alibaba.
If we talk about the internet users currently in the world almost 4.57 billion people have active internet users and which is 59% of the world population.
China, India and the US rank on the top in terms of internet users and that’s the reason for this three-country is on the top for e-commerce economy.
India has more internet users than the United States but the US is on the second position and India on third for top e-commerce economy countries in the world.
It shows there are lots of emerging scope for the e-commerce company.
You have heard the name of Jack Ma, who is the richest person in China.
And recently he overtook Asia’s richest man Mukesh Dhirubhai Ambani.
Mukesh Dhirubhai Ambani is chairman and managing director of Reliance Industries Ltd.
Jack Ma overtook Mukesh Ambani but in a few days after Facebook invested in Reliance then Ambani again became Asia’s richest man.
A 55-year-old Jack Ma is the co-founder and former executive chairman of Alibaba Group. The success story of Jack Ma is very inspiring to all.
You can not believe that he was rejected by KFC and many other jobs. In KFC he was the only man out of 24 who was rejected to hire.
In this deep research Alibaba case study, we will talk about the profitable business model of Alibaba.
OVERVIEW OF ALIBABA
Alibaba Group was founded by Jack Ma and 17 other co-founders in 1999.
They started the E-commerce website Alibaba.com for business-to-business to connect Chinese manufacturers with international importers.
Currently, Alibaba Group is the biggest company of china and top e-commerce company for B2B.
It’s working on customer-to-customer, business-to-business, business-to-consumer sales with the help of E-commerce website and offline portal also.
They are also generating revenue from its subsidiaries company of electronic payment services, data-centric cloud computing and many others.
BUSINESS MODEL OF ALIBABA
You must have heard about Amazon and eBay working areas.
But the business model of Alibaba is different from other e-commerce leading companies.
Alibaba is majorly focused on B2B and this platform supplies goods from manufacturers in bulk at wholesale price to small scale business or medium-sized business worldwide.
It supports other businessmen to trade with the help of its e-commerce web portal.
Alibaba has divided into some core businesses, for instance, Taobao which is owned by Alibaba focuses on Business-to-Consumer, where we talk about Tmall is for purchasing branded products.
It has many other subsidiaries that help it to grow and earn more revenue.
This group is very big and the business model of Alibaba is made up of its three major web portals which are as follows: Alibaba.com for B2B business model, Taobao for B2C business model and The last one Tmall multinational brand for branded products.
These three subsidiaries of Alibaba connect various types of buyer and sellers.
Apart from these three subsidiaries, Alibaba has 6 more subsidiaries which includes Aliexpress, Alimama, 1688, Alibaba Cloud, Ant Financial and Cainiao Network.
These subsidiaries of Alibaba make a very big ecosystem of this group.
HOW DOES ALIBABA GROUP MAKE MONEY?
As we already discussed above Alibaba.com is not the only source for the Alibaba group to make money.
They have other business that helps them to make money. Let’s discuss the business model of the Alibaba group subsidiaries companies and how they earn.
Alibaba.com was started in 1999 and this is the world’s biggest online business-to-business marketplace for manufacturer and buyer.
Alibaba.com connects 200 countries buyers with the help of Alibaba.com and allows exporters in China, India, Pakistan, US, Thailand and other countries.
The company also offers other services like import and export supply chain which include custom clearance, VAT refund, logistic services and trade financing.
At Alibaba.com sellers can easily list their products for free and sellers can pay for certain extra features to get unlimited product listing and greater exposure on site.
HOW DOES ALIBABA.COM MAKE REVENUE?
Alibaba.com is a great platform where a seller can list their product and find a buyer.
This website plays a role of intermediator which charges some amount of commission from seller apart from this Alibaba.com also generate revenue by providing two types of supplier membership which are:
1.Free Supplier Membership For Seller
The seller can list their 50 products free and they don’t need to pay anything to list their product.
They make money from the seller in the form of commission if the amount is paid by Ali pay and the seller is from the mainland of China, Hongkong and Taiwan.
2.Premium Gold Supplier Membership
The Free Supplier Membership is not for China, they have to take Premium Gold Supplier Membership plans to feature their products on Alibaba.com.
For other countries sellers, those are using free supplier membership so there are some limitations like 50 products listed and apart from this one major drawback is that free supplier membership buyer is not verified that reduces buyer’s trust.
Alibaba’s Gold Supplier Membership is also a source for their revenue because to take this membership sellers have to pay some amount of premium.
Gold members are also charged a rate of percentage on the transaction value of goods sold by gold members.
Range Of Items On Alibaba.com
Consumer electronics, Home Appliances, Apparel, Fashion accessories, Packaging & printing, Beauty & personal care, Home & kitchen, Machinery, Vehicles & accessories, Sports & entertainment, Watches,
Jewellery & Eyewear, Lights & Lighting, Furniture, Garden Supplies, Pet products, Health & Medical, Office & school supplies,
Tools & hardware, Accessories & telecommunications, Toys & hobbies, Baby, Gifts & crafts, Luggage, bags & cases and many more.
Taobao.com is ranked 9th most popular E-commerce website in the world according to Alexa.com. Taobao is the best platform for business-to-consumer and launched in 2003.
Taobao doesn’t charge transaction fees and the best thing is that merchants can join Taobao free that helps to grow faster.
They help merchants to grow and buyers have the benefit to directly ask anything to merchants through Alibaba Group’s messenger software.
Taobao is china’s biggest B2C shopping website.
The website makes money with the help of charging some amount of money by merchants to stand out from all other players through advertising and other strategies.
TMALL.COM FOR MULTINATIONAL BRANDS
Tmall.com launched in 2008 and offers a wide range of branded products. It focuses on bigger companies like Nike and Apple.
Tmall makes money by charging merchants a deposit and commission on the transaction.
Apart from this they also generate revenue from the annual fee.
The best thing is to gain the trust of their seller.
They provide analytic tools that show the number of visitors, customer rating, page views that help sellers to make their business strategies.
This is the largest open marketing platform in China and works as an AdSense in China.
Launched in 2007 and aims to provide marketing and advertising services to sellers on Alibaba Group’s marketplace.
AliExpress is a focus globally and offers consumers from around the world to buy directly from manufacturers in China.
Here is a difference between Taobao and AliExpress that Taobao offers their services to Chinese people whereas AliExpress allows consumers from various countries to shop directly from Chinese manufacturers and distributors.
Aliexpress earns money just like other E-commerce platforms of Alibaba.
They make money here by charging commissions as a percentage on the transaction value.
The commission charge in percentage and range from 5% to 8%. They also charge $1500+ a fixed amount to start a store on AliExpress.
ALIPAY ‘A THIRD-PARTY ONLINE PAYMENT PLATFORM’
It helps buyers for the transaction and it’s just like Paytm eWallet platform that helps shops for the transaction.
Alipay makes money by taking a predetermined rate of interest and it doesn’t charge any fee from their users.
1688.com is one of the leading Business-To-Business marketplaces with 120 million users and many Taobao stores purchase their wholesale products from 1688.com.
Here more than 10 million companies are listing their products on 1688.com. This is a sister website of Alibaba.com and launched in 2010.
The seller can list their product on this website free but if you want to use data-analytics application and want to access upgraded storefront management tools so you have to take a TrustPass membership plan.
Apart from this 1688 also earned from online marketing services.
This subsidiary company began for internal demand of Alibaba’s e-commerce businesses and now Alibaba loudly provides various types of cloud computing services in 8 geographical regions around the world.
Alibaba Cloud offers elastic computing, big data analysis, artificial intelligence, object storage and relational databases.
Do you know Ant Financial is the world’s most valuable unicorn company and biggest valued FinTech company around the world.
It helps Alibaba groups to do easy business anywhere across the world.
Founded on 16 October 2014 and currently operates Alipay, Yu’e Bao which is the world’s largest mobile and online payments platform along with Ant Fortune, Zhima, Credit and MYbank.
This was founded in 2013 and known as Cainiao Smart Logistics Network Limited.
This is a logistics data platform operator that helps to meet the current and future logistics demands of China’s online commerce sector.
The company focuses on delivery anywhere in China within 24 hours and across the world within 72 hours.
ALIBABA OTHER BUSINESS
Alibaba group is so big and they have also invested in other companies some are as follow
Sina Weibo: This is China’s version of Twitter and China’s biggest social media platform. Alibaba group owning 32% post-IPO.
Youku Tudou: This is totally similar to YouTube and Youku Tudou is one of the biggest top online video service platforms because YouTube is ban in China.
Aliwangwang: Alibaba group also invested in Aliwangwang which is a communication software, helps to contact Taobao sellers and other services.
Laiwang: As we know WhatsApp has banned in China and this messaging app is similar and competing with WeChat.
Juhuasuan: This is a platform of sales and marketing for flash sales of Tmall and Taobao.
Apart from this Alibaba group also invested in many companies across the globe such as investment in many companies of India like XpressBees Logistics, Zomato, BigBasket, TicketNew, Paytm, Paytm Mall and many more.
Alibaba Revenue During COVID-19 Lockdown
Alibaba Group recently reported its 4th quarter revenue and profit that is beyond the expectation. As we all know coronavirus lockdown causes brick and mortar stores were closed and that time Alibaba Business model has risen around 19% to $ 13.16 billion in the 4th quarter. Along with this if we talk about the revenue generated only it’s cloud computing business so that is nearly 58%.
Conclusion: Now, you know how big Alibaba Group is and Alibaba.com is not a solo in the success of Alibaba group their subsidiaries companies are also playing a major role to generate more revenue.
The business model of the Alibaba group is really amazing and profitable.
The main thing is that they are planning their strategies according to more expansion of their group in future.
I hope you understood the business model of Alibaba group.
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