The Alibaba Group was founded in 1999 by Jack Ma along with 17 co-founders. It started as a business-to-business portal with an aim to connect Chinese manufacturers with international buyers. Nowadays, it is one of the biggest company platforms in China providing C2C, B2C and B2B services via e-commerce.
Alibaba is disrupting the e-commerce industry by introducing a new way of conducting business that focuses more on corporate social responsibility and helping small businesses grow, which is different from many companies who focus on price differentiation and user experience. Alibaba has committed itself to its stakeholders with expansions to their platform that are designed to offer more value to users. Platformization can be seen as the gradual integration of different markets and services with their own respective consumers, wholesale buyers and manufacturers. The traditional business model describing definitions such as B2B, B2C and C2C are united in platformization. This disruptive model is changing the ecommerce industry as incumbent companies struggle to find ways to compete.
We can see several effects that are caused by the growing e-commerce economy. Network effects entail the increasing value of a platform when more people begin to use it. The idea is that more users bring more credibility to the platform, which brings in more users. Related platform indirectly benefit from this effect, which is called second-order network effects. The second effect is the Long Tail, of which we explain that product variety on e-commerce platforms increases as marginal costs drop. Niches are brought to the front.
The recent trend of e-commerce giants diversifying their platforms to make them stronger, underpins an industry development: platformization, which points out the rise of the platform as a dominant economic model. The paradox is that open e-markets like AliBaba’s lower entry barriers for everyone but the platforms owners themselves.
Alibaba has made a goal to have 2 billion customers by 2036 (Weinswig, 2017), which means that one out of four people on the planet would be using, or have used, their platform. This is potentially challenging as Alibaba is still struggling with the “Made-in-China” issue and a lack of brand awareness in foreign markets.
The ecommerce industry, as a whole, is also likely to see changes in the coming years.
- M-commerce has been rising in popularity and is likely to continue to do so as mobile technology continues to improve (Meola, 2016). E-commerce companies are going to need to develop strategies that take this trend into account or risk having their industry disrupted.
- Artificial intelligence continues to be an exciting area of research and could translate into major changes for e-commerce as businesses are able to more accurately target their products to their customers needs.
- Technological advancements in the logistics field, such as drone technology, is likely to usher in an age of same-day shipping possibilities. As consumers expect more shipping options, e-commerce companies will need to ensure that they have built out this capability.
From Team 2! Allie, Ana, Bastiaan, and Gudo.
References:
Brynjolfsson, E., Hu, Y., and Smith, M.D. 2006. From Niches to Riches: Anatomy of the Long Tail. Sloan Management Review 47(4) 67-71.
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Meola, A. (2016, December 21). The Rise of M-Commerce: Mobile Shopping Stats & Trends. Retrieved September 22, 2017, from http://www.businessinsider.com/mobile-commerce-shopping-trends-stats-2016-10?international=true&r=US&IR=T
Porter, M.E. 2001. Strategy and the Internet. Harvard Business Review 79(3) 62-79.
Ramos, A. A. (2017, May 18). Expand Globally, Using Alibaba’s Ecommerce Ecosystem Strategy. Retrieved September 21, 2017, from https://business.ebanx.com/en/blog/expand-globally-using-alibabas-ecommerce-ecosystem-strategy
Weinswig, D. (2017, June 19). The Domestic Roots of Alibaba’s Global Vision. Retrieved September 22, 2017, from https://www.forbes.com/sites/deborahweinswig/2017/06/16/the-domestic-roots-of-alibabas-global-vision/#296ec6cb5736
Zucchi, C. K. (2014, December 17). How Does Alibaba Make Money? A Simple Guide. Retrieved September 22, 2017, from http://www.investopedia.com/articles/investing/121714/how-does-alibaba-make-money-simple-guide.asp
