Alibaba Group is China’s leading e-commerce company, operating the world’s largest online marketplaces for both international and domestic trade. Alibaba serves as the middleman, bringing together buyers and sellers and assisting with transactions between them.
Alibaba has also established an online marketplace similar to eBay called Taobao for small merchants. Taobao has 760 million products listed from seven million sellers. Merchants on Taobao don’t pay fees for selling merchandise; similar to Google, they pay Alibaba for ads and other services to promote their goods and services.
Alibaba offers another site, known as Tmall that is used exclusively for well-known brands. Tmall makes its money by collecting an annual fee along with a deposit and commission on each transaction from its merchants.
To give shoppers some reassurance with their online shopping experience, and the ease of payment, Alibaba has created Alipay, a payment method similar to Paypal, that protects buyers if sellers don’t deliver.
1. What characteristics does Alibaba have with Amazon, eBay, PayPal, and Google?
2. Explain how Alibaba operates. Specifically, who pays Alibaba, how do they pay it, and for what?
Source: Juro Osawa, Wall Street Journal, March 17, 2014