What is Alibaba.com's competitive advantage? (expected to write quite a bit)

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rogal eNotes educator| Certified Educator

Alibaba.com was started in 1999 and is one of the top e-commerce firms that offer consumer-to-consumer, business-to-consumer, and business-to-business goods and services through their website. They offer products in a diverse range of categories that include consumer electronics, machinery, agriculture, textiles, health, and beauty. The company has over 10,000 employees. Some of its top competitors are Amazon (over 300,000 employees), Flipkart (over 10,000 employees) and Walmart (over one million employees).

Alibaba’s competitive advantages include the following:

Location

Alibaba is headquartered in Hangzhou, Zhejiang Province, China. Note that China is the world’s largest internet market, hence Alibaba has a large pool of domestic customers into which it can tap.

Economies of scope

Alibaba has many divisions that concentrate on specific functions. For instance, its Taobao Marketplace arm works like eBay and allows product listings from small-scale buyers and sellers. It operates as a consumer-to-consumer system that enables the sale of commodities by individuals. Its Taobao mall (Tmall) works like Amazon and facilitates trade between large-scale buyers and sellers. It is a business-to-consumer service where businesses involved are registered legal entities. Aside from these marketplaces that deal with Chinese customers, Alibaba also has Alibaba.com (a global market), 1688.com (a Chinese wholesale market), and AliExpress (a global market for consumers). Through such divisions, Alibaba is able to cater to the diverse needs of its shoppers.

Business model

Alibaba’s business is really a network of many businesspeople who provide products sold on the platform. As such, Alibaba simply facilitates the trading process and charges commissions for this. It does not, however, sell any products itself, nor does it hold any inventory. In comparison, Amazon not only facilitates trade between other large sellers and buyers but also stocks and sells products itself. Alibaba’s model attracts more sellers to the network, with the result that all benefit from the increased customer traffic. Also, Alibaba uses the Alipay payment wallet for e-commerce transactions. In efforts to drive expanded use of Alipay in non-Asian countries, Alibaba recently launched a face recognition feature called “Smile and Pay” for its customers who are registered with Alipay.

gsenviro eNotes educator| Certified Educator

Alibaba has positioned itself as a major economic force to be reckoned with through several key innovations. The major competitive advantages of Alibaba are:

1) Huge marketplace (China): Alibaba operates in China and taps this vast market, where other e-commerce players have limited access. A rapidly developing economy of over a billion people has a rapidly growing middle-class with millions of people. These people are savvy, have deep pockets and prefer online shopping due to time constraints, the freedom it offers, discounts, and the ability to choose from various options (in a single place). This is very similar to the growth of Flipkart in India. Thus Alibaba is tapping a big market.

2) Seller-based revenue models: Unlike other e-commerce companies, Alibaba offers three different revenue models for different types of sellers. While small sellers can list products for free on Taobao, Tmall is exclusive to big brands and sellers pay for subscription and transaction. Alibaba.com itself works as a middleman and connects buyers and sellers (mostly importers and exporters), charging them for each transaction. Thus the strategy of multiple revenue platforms offers it a distinct competitive advantage in attracting all types of sellers.

3) Networking: Alibaba, through various online portals, has the biggest network of sellers and buyers. 

4) Scale of operation: Given the transaction size in the Chinese economy, Alibaba has scale of operation working wonders for it. If you have a large scale operation, a very high number of sales/transactions, you have a lower cost of operation and thus a more profitable business.

Besides, Alibaba has its own payment portal, thus saving on the cost of transactions that would have to be paid to a third-party payment gateway (such as paypal, etc.).

All these provide Alibaba with distinct advantages over its established rivals.