Alibaba.com Looks Overseas to Grow Beyond Its China Roots
Alibaba.com bills itself as an international online marketplace, but the Hangzhou, China-based Internet company relies heavily on its deep bench of Chinese manufacturers and suppliers to drive its business. With some 45 million registered users, the company's Chinese-language B2B website is more than twice the size of its English-language international site—and much of the trading activity taking place on the latter is between Chinese factories selling to overseas buyers.
It's not really surprising that Alibaba.com's growth over the last 10 years has been a reflection of China's rise as one of the world's leading smokestack economies. But times are changing, and some of the favorable winds that drove China's export boom have in recent years begun to shift. The competitive advantages enjoyed by Chinese factories are eroding, creating what Brian Wong, Alibaba.com Vice President for Global Sales and Service, calls a "golden opportunity to respond to the changing market demands and serve the world’s suppliers beyond just China."
Wong cites several economic and government policy trends that are diminishing Chinese manufacturing competitiveness, among them the rising value of China's currency, the yuan; significantly higher labor costs on the mainland due to manpower shortages and changing labor laws; commodities price inflation, increasing the cost of manufacturing inputs; rising logistics and shipping costs including reductions in favorable tax policies for exporters.
As a result, while China still remains the number one destination for sourcing products, the “Made-in-China” label carries fewer of the cost benefits they once provided—and international buyers who only had eyes for the mainland today "are looking for alternatives to enhance their China + 1 strategy," Wong says.
With offices in Hong Kong, Taiwan, Korea, India, Vietnam, Turkey, Silicon Valley and UK, Alibaba.com is getting the message out to its supply side members, the majority of them small and medium sized enterprises (SMEs), that they can tap the Internet to compete for their share of international business.
For example, on June 1-2 in Mumbai, Alibaba.com held what was in effect a speed-dating seminar for members, putting more than 200 Indian Alibaba.com suppliers together with some of the world's largest retailers, including U.S. big-box chain Office Depot, Goodyear Tire & Rubber Co., and Auchan Group, the second largest hypermarket chain in France.
The first day of the event featured presentations, panel discussions and networking sessions. On June 2, about 20 Alibaba.com members were given an opportunity to pitch their company and products to Office Depot, Goodyear or Auchan Group in one-on-one meetings. The sessions, which included suppliers of stationery, housewares, gifts, auto parts and apparel industries, are expected to generate millions in orders over the coming year, according to Alibaba.com.
Alibaba.com last year launched a fully-owned local operation in India, which is considered one of the B2B website's key regions for future expansion. With more than 2 million registered users, India is currently the company's second-largest market in terms of membership.
After decades of selling largely to domestic buyers, Indian manufacturers are increasingly interested in exporting to the world. "Suppliers from India have made great progress in their competitiveness in recent years," says Office Depot Sourcing Manager Kimmy Cheng, adding that many have become "flexible and innovative. We need partners like these in order to offer more high-quality products to our customers."
Wong says the sourcing event in Mumbai signals a shift in Alibaba.com's approach to developing its online marketplace. The company in coming years expects to move beyond its Chinese roots, expending greater effort in markets such as the U.S., Japan, Turkey, Europe and the subcontinent. "With the growing sophistication of Indian SMEs and increasing Internet penetration in India, it's the right time for us to focus more on developing overseas suppliers especially in India. We want to show that Alibaba.com is not only for made-in-China products and that we are dedicated to developing overseas suppliers to meet buyer demand as well."