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What is Alibaba?

June 16, 2021
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From Etsy to Amazon and beyond, there are more eCommerce channels than ever, and each represents an opportunity to make your brand discoverable while generating sales. Beyond U.S. household names, there’s a whole world of international eCommerce. 

And in this space, one company is king—Alibaba.1

What is Alibaba? It’s the world’s fastest-growing eCommerce platform, but it’s also a tech company, a hub for manufacturers, and a forum for C2C sales.

In this short guide, we will cover Alibaba’s vast network of goods and services and the ways U.S. businesses can take advantage.

Alibaba’s Many Revenue Streams

U.S. media outlets frequently refer to Alibaba as the “biggest company you’ve never heard of.”

Founded in 1999 by Jack Ma, Alibaba has experienced a meteoric rise from its roots in Hangzhou, China to its place in history as the biggest U.S. IPO. In 2014, Alibaba’s entry into the New York Stock Exchange raised $25 billion for the company.2

What does Alibaba do? It might be easier to list what it doesn’t. Alibaba’s strength lies in the diversity of its offerings.

The company wears many hats, including:

  • Tech company – Alibaba provides cloud computing and operating systems for businesses in China and around the world. The Alibaba DAMO Academy (Academy for Discovery, Adventure, Momentum, and Outlook) is a forum for new research in computing, robotics, and other related fields, thus promising more innovations in the years to come.
  • Platform for exports and imports – Chinese exporters seeking to place raw materials and manufactured goods in international marketplaces can connect with potential B2B clients on Alibaba. Likewise, startups around the world use Alibaba to find manufacturers for their products.
  • eCommerce giant – Alibaba is the parent company to several different eCommerce sites. Together, they exceeded $248 billion in sales last year—that’s more than Amazon and eBay combined. Alibaba’s sites make up 80% of eCommerce in China.
  • Payment platform – Alibabay’s AliPay payment tool is similar to PayPal, enabling easy peer-to-peer payment and serving as a checkout option on eCommerce channels.

Next, we’ll take a look at the most interesting aspect for U.S. businesses seeking to establish a strong international presence—Alibaba’s different sales arms.

Alibaba’s eCommerce Channels

China boasts the world’s largest eCommerce market—and it’s only growing.

U.S. retailers interested in entering global markets are often curious about Alibaba’s eCommerce sites. 

If you have heard anything about Alibaba, it may be that the site is rife with counterfeit goods that amount to more than 10 million misleading lists per day.3 This problem makes some U.S. consumers skeptical of the overall quality and veracity of goods on the marketplace.

But Alibaba is still an intriguing potential channel.

  • One-third of buyers on Alibaba are actually based in the U.S.4
  • 95% of sellers are based in China.
  • Alibaba is actively seeking to attract U.S. businesses to remain competitive with Amazon.

So, if you do choose to sell on Alibaba, what are your options?

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Tmall Global

Tmall is China’s largest B2C marketplace, full-stop. With over 500 million buyers, there’s a vast network of potential consumers. The launch of Tmall Global makes it possible for international brands to access these shippers.

  • Companies can pay to create their own online storefront on Tmall. Chinese consumers tend to discover brands through established shopping channels rather than by visiting their websites, so a Tmall presence is key for discoverability.
  • Tmall’s vast data analytics are available to help U.S. brands understand Chinese consumer behavior and create effective marketing plans.
  • Brands don’t have to establish a Chinese business presence and can continue to use their domestic bank accounts.

While you can easily navigate the Tmall global site in English, you will need to provide product descriptions in Chinese as well as implement Chinese-language customer support.

For these reasons, you could also consider using a Chinese agent to sell under a brand that already has an established store presence on Tmall.

AliExpress

AliExpress is quickly becoming Alibaba’s premier global online marketplace. With a website available in sixteen different languages, there’s a streamlined process for entering international markets.

  • As on Tmall, you’ll register as a seller and open your own storefront.
  • AliExpress University is a free guide to running a successful online store.
  • The site’s logistics solutions make it fast and easy to ship internationally.

This is perhaps the more straightforward option for U.S. brands seeking to enter the global marketplace without figuring out logistics details or navigating the challenges of multilingual marketing.

Taobao

Similar to eBay, Taobao is China’s largest consumer-to-consumer marketplace.

 However, small businesses can also create accounts and sell goods.

  • Taobao averages 300 million daily active users compared to EBay’s 182 million.5
  • There is no English language version of Taobao, so you’ll need a Chinese speaker on staff to set up your sales.

Since this site’s focus is largely on small businesses, this effort may not be worth it unless you’re absolutely sure your product will appeal to the Taobao user base.

Selling on Alibaba’s eCommerce sites

Is it worth it to sell on one of Alibaba’s sites?

To make your decision, it’s important to understand Alibaba’s requirements and fee structure.

Requirements for Selling

To prevent counterfeits and ensure high-quality goods, Alibaba’s sites will generally require the following information:

  • Business information – Provide your location, contact information, website, and any other information that can confirm you’re a legitimate business.
  • Operating license – While you may not need a specific license to operate in the U.S., providing proof of legality in the form of your EIN can likewise establish trustworthiness.
  • Product certifications – Although not required, certifications can enable you to sell in Alibaba markets with more stringent requirements (for example, the EU).

The verification process usually takes two days. After you’re approved, you’ll need to provide:

  • Fast international subject
  • Reimbursements on returned items
  • Customer support

As with U.S.-based sales platforms, a failure to comply with the terms of service could result in the termination of your account.

Startup Costs and Referral Fees

U.S. brands used to selling on Amazon can easily test out the platform without startup costs (aside from learning to navigate its unique structure and requirements). 

Amazon charges a set fee of 0.99¢ plus a referral fee of 8-15% for businesses selling less than 40 items per month. If you’re selling more, business plans cost $39.99 per month.6

In contrast, you’ll almost always pay an initial transaction fee when selling on an Alibaba subsidiary. 

  • AliExpress – It costs $1,500 annually to sell on AliExpress. Besides the yearly fee, you’ll pay a commission of 5-8% on most sales.7
  • Tmall Global – Selling on Tmall Global comes with a steeper startup fee of $5,000-$10,000 (depending on the kinds of product you sell).
  • Taobao – If you’re ready to tackle this Chinese-language commerce site, prepare to pay $2,000 to set up your seller account.

Besides the cost of startup fees, consider other hidden costs, including:

  • International shipping
  • Multilingual staffing support (if needed)
  • Marketing costs

The Pros and Cons of Alibaba

While there’s definitely a cost to selling and marketing on Alibaba’s channels, weigh your investment against the pros and cons.

Benefits on Alibaba

A successful strategy on AliExpress or Tmall can help you grow your global presence.

You’ll enjoy benefits like the following:

  • Access to global markets – Because Alibaba is the largest eCommerce store internationally, creating a virtual storefront can connect you to consumers from around the world.
  • Lower referral fees – While the initial fees to establish your storefront are steeper than in the U.S., the amount you’ll pay Alibaba per sale is comparatively low. In addition, some fees may be waived or reduced as you increase your sales volume.
  • Some built-in support – There’s always a learning curve as you adjust to a new eCommerce platform. Alibaba provides free learning tools and can even pair you with an account representative to help you establish a plan for success.

Challenges of Alibaba

After paying your storefront fee, you aren’t necessarily guaranteed sales.

Alibaba is a crowded marketplace filled with low-cost goods from China and around the world. You’ll need to sell at competitive prices and offer free shipping to compete. Likewise, the platform requires you to provide thorough customer service support across any differences in time zone or language.

If the resources you need to sell on Alibaba eat into your profit margins, consider whether you’d see more success by investing in your domestic and international marketing.

If you’re determined to expand your digital footprint with Alibaba, you can always hire extra support to make sure you start off on the right foot.

Power Digital Marketing’s Strategies for Global Growth

As a business owner, you’re likely selling in more than one place.

Besides your own web store, options like Instagram Shopping, Amazon, and Alibaba provide unique opportunities to connect with customers. Unfortunately, each one requires its own marketing.

The team at Power Digital specializes in 360-degree strategies that create a unified brand voice across multiple sales channels. Whether your goal is to ramp up your conversions on social media or catapult to the top of Amazon product rankings, we’re here to help you achieve growth.

Get in touch today to learn more.

 

Sources: 

  1. Wall Street Journal. Alibaba. https://graphics.wsj.com/alibaba/
  2. New York Stock Exchange. Alibaba lists on the NYSE. https://www.nyse.com/network/article/Alibaba-Lists-on-the-NYSE
  3. Jinh Daily. Alibaba’s Fight Against Counterfeits: Where Are We Now?. https://jingdaily.com/alibaba-fight-against-counterfeits-where-are-we-now/
  4. Reuters. Alibaba welcomes US businesses. https://www.reuters.com/article/us-tech-alibaba-usa/alibaba-welcomes-u-s-small-businesses-to-sell-globally-on-its-platform-idUSKCN1UI1DO
  5. Oberlo. Top eBay statistics. https://www.oberlo.com/blog/ebay-statistics
  6. Amazon. Selling plans. https://sell.amazon.com/pricing.html#selling-plans
  7. CED Commerce. Your Ultimate Guide to Sell on AliExpress. https://cedcommerce.com/blog/how-to-open-aliexpress-seller-account-to-sell-on-aliexpress/

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