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.