Buying from Alibaba - China Sourcing Guide 2021

If you’re familiar with e-commerce in the slightest, you’ve heard of Alibaba. This Chinese company is one of the world’s largest e-commerce platforms, connecting millions of buyers and sellers worldwide and dealing in almost every product conceivable. And if you’re in the process of setting up an online business or scaling up, there is a high chance you’ll look to source your products from Alibaba. The company had 779 million active consumers across its online shopping properties at the end of December 2020.

Given Alibaba’s dominance in the fast-growing e-commerce space, this piece offers insights into how you should manage your Alibaba experience. Read on to know:

What is Alibaba?How does it work?Advantages and disadvantages of buying on AlibabaDos and don’tsSourcing agent option              

Open Sesame! The Alibaba story

In 1999, a former tourist guide-turned-English teacher, Jack Ma, founded Alibaba in Hangzhou, China. The company facilitated trade between small businesses. Ma was inspired to name his company after the Arabic folktale Ali Baba and The Forty Thieves and its popular catch phrase “Open Sesame”, which opened up a treasure trove. “Ali Baba is a kind, smart businessperson,” Ma said in a 2006 interview. He felt the name resonated with people across the world. “People from India, people from Germany, people from Tokyo and China... They all knew about Alibaba,” he said.

Alibaba’s journey was no less fairytale-like. It rose quickly. In 2005, American Internet company Yahoo! paid $1 billion to acquire a 40% stake in the Chinese firm. Less than 10 years later, Alibaba's IPO at the New York Stock Exchange raised $25 billion, the world's biggest public stock offering at the time. Ma – who bought his first computer when he was 33 – has regularly been voted China’s richest man. It’s not uncommon to hear of Ma being called the “Steve Jobs of China” and Alibaba the “Amazon of China”.

Today, the Alibaba Group houses cloud computing and digital media and entertainment brands along with its core e-commerce businesses. Its main e-commerce platforms are:

Alibaba.com – A wholesale B2B platform and the group’s first venture, Alibaba.com started off with seven employees and, in 2020, by the company’s own account, had more than 20 million buyers from 190 countries.Taobao – Continuing with the Alibaba theme, the word “taobao” roughly translates to “searching for treasure”. It is Alibaba’s business-to-consumer (B2C) shopping site where the merchants are primarily small retailers and individuals.      Tmall – Another B2C platform from Alibaba’s stables, it targets consumers looking for luxury branded products. Unlike Taobao’s small retailers, Tmall hosts multinationals and large companies.

Alibaba has several other businesses under its umbrella, including:

AliExpress – This B2C platform is similar to Taobao and sells similar products. But there’s one difference. Taobao is entirely in Chinese and ships within China. AliExpress ships globally and is available in 17 languages, including English, Russian, Spanish and French.Alibaba Cloud – It is the world’s fourth largest cloud infrastructure market by revenue, trailing Amazon, Microsoft and Google but outpacing IBM. Youku – Acquired by Alibaba in 2016, Youku is a popular video platform that helps users search, view and share video content. Alibaba uses Youku to drive customer loyalty towards its e-commerce business.South China Morning Post (SCMP) – The Hong Kong-based English language newspaper was acquired by Alibaba in 2016 along with its magazine, digital media arm and all its events. 

How does Alibaba work?

Here, we’re talking about the B2B platform and not the Alibaba Group. Sellers on Alibaba.com are suppliers and manufacturers of raw material and manufactured goods in China and elsewhere. Buyers are retailers, wholesalers, manufacturers buying raw material to make finished products, small businesses and sourcing agents. Alibaba serves as the middleman, connecting the two. Unlike Amazon, it doesn’t hold inventory and doesn’t own warehouses. When you sell/buy on Alibaba, it takes care of:

Sourcing – You can choose from a huge range of products, buy in bulk directly from the manufacturer/supplier and at highly affordable rates. You can also work directly with a manufacturer and build a custom product based on your design. Fully digital transaction – You can complete the entire sourcing process online, from searching for a product, comparing and verifying suppliers, communicating/negotiating with the supplier to ordering samples, placing the final order and paying for it. Alibaba also provides logistics support (air and ocean freight, air express, etc) in select regions.Online marketing solutions – Free listing of items, paid advertisement, data-driven consumer insights, secure digital payment, messaging and media services are some of its offerings.       Digital supply chain fulfilment – Cainiao Network, an Alibaba business, partners with logistics service providers to offer local (China) and international logistics and supply chain management solutions. It aims to fulfil orders within 24 hours in China and 72 hours elsewhere. Financial services – You can pay for your purchases on Alipay, the group’s consumer finance app that claims to have 1.3 billion global users. Alibaba also has a Pay Later plan, which offers small businesses a line of credit of $500-$150,000 for six months at an interest rate of 3.5%.