Editor’s note: Alibaba.com, which unlike Amazon doesn’t sell its own products, debuted as a B2B marketplace in 1999 as the first ecommerce portal launched by China-based Alibaba Group. Alibaba now does the lion’s share of its overall gross merchandise sales through its retail-focused marketplaces Tmall.com and Taobao.com, which combined did 5.7 trillion Chinese yuan (US$829.7 billion) in gross merchandise value of transactions for the year ended March 31, 2019.
But B2B ecommerce has always been an important channel for Alibaba Group, which also operates the China-focused B2B site 1688.com. Although primarily a site for B2B buyers and sellers within China, 1688.com in recent years has also included sellers from the United States and other countries who want to sell into China. U.S. manufacturers including Michelman Inc., a producer of industrial inks and protective coatings, for example, sells into China through 1688.com.
In this question and answer session, John Caplan, head of North American B2B, Alibaba Group, goes into more detail on Alibaba’s latest moves and strategy to expedite U.S. B2B ecommerce.
Q: Although Alibaba Group started with B2B online sales on Alibaba.com, it has since become mostly known for its big retail sites—Taobao and Tmall—which enable sales to Chinese consumers. How do you see B2B ecommerce growing, and is it becoming a more important sales channel to Alibaba Group?
Caplan: That’s right—B2B and helping small businesses do business anywhere has been our mission. We see growth potential in helping digitize the B2B marketplace. B2B ecommerce is a $23.9 trillion market—six times larger than B2C ecommerce.
Q: Can you break out any B2B figures for gross merchandise volume of transactions and annual growth rates? And the same for B2B revenue?
Caplan: We do not break out gross merchandise volume (GMV) for Alibaba.com, our global B2B unit.
Q: Is your B2B business profitable? If so, how do you maintain profitability?
Caplan: Yes, we are profitable, but we are not focused on this as a metric for success. We are focused on helping small and medium-sized businesses (SMBs) succeed by making it easy for them to do business anywhere. Metrics for success in this business are number of users (buyers and sellers) and GMV, which is growing robustly.
Alibaba.com is one of the world’s largest global B2B marketplaces. We have 150+ million registered members and 10+ million active buyers and over 150,000 sellers. In other words, there is a lot of demand already on the platform.
What’s important about the announcement we made this week is how we’re looking to serve this demand. One-third of the buyers on our platform are coming from the U.S.
Q: What are some of your critical B2B marketplace features and services, and how are you expanding and improving them?
Caplan: Alibaba.com started as essentially a Yellow Pages for manufacturers to list their businesses, but we’ve transformed the platform to create a digitized end-to-end platform.
This means you can source a factory or supplier, do virtual reality (VR) tours of the factory floors, negotiate with them using our real-time translation chat, payments, loans and even logistics all on our platform.
Buyers also have even more choices and ways to source what they need for their business. The platform has an expanded product selection ranging from ready-to-ship to more fully customized.
Sellers now have simple-to-use tools for building and managing a digital global storefront on the platform, customer relationship management (CRM) and communications tools with built-in translation services for CRM and digital marketing tools to reach likely customers, as well as the ability to receive payments online.
Sellers can also now receive support from a U.S.-based customer success team as they join and grow on the platform. With the addition of U.S. sellers, buyers now have access to a growing number of U.S supplier options on the us.alibaba.com landing page, in addition to thousands of global suppliers.
Q: How would you describe the biggest long-term opportunities and challenges for manufacturers and distributors from countries outside of China to sell internationally through Alibaba.com? What are the most common mistakes companies make in selling to buyers in China and other markets?
Caplan: The big barriers are most commonly digitizing your business so that you can reach the global marketplace and language barriers. With the dramatic changes we have made to the platform, we’re helping U.S. B2B small businesses solve for both of these. Our platform is designed for B2B transactions, and therefore, we have built in CRM and communication tools that facilitate relationships between buyers and sellers.
To further help collaboration between buyers and sellers, we are also incorporating technologies in artificial intelligence (AI), image recognition, and natural language processing.
Q: Please comment on if and how particular types of companies from the U.S. are increasing their selling presence on Alibaba.com. Can you mention some that stand out as strong sellers, and what they’re doing to be successful?
Caplan: Absolutely, we’ve only just gotten started but do have a couple strong early adopters. For instance, Honey Baby Naturals, a company located in Chicago, has developed a new line of hair care products focused on multiracial families.
The company’s products are in over 10,000 stores and they are utilizing Alibaba.com by accessing new customers outside the U.S.
Another company on the platform is Gett Clean Products & Solutions in Manhattan. They saw a need in the professional cleaning supply market.
Alibaba.com was a next step in Gett Clean’s business journey in order to see a higher volume of inbound leads, expanded customer reach and insight into purchasing trends, and since joining the platform, the business receives daily inquiries from countries around the world, including India, Poland and Germany.
Q: What have you learned about the U.S. market for Alibaba.com in the past few years, including through your new association with Office Depot, and how are you responding to what you’ve learned?
Caplan: We know that most B2B businesses are not online, we know that they are strapped for time and resources and that their biggest need is getting more customers and revenue.
We’re still learning and want to hear more from U.S. small businesses which is why we kicked off our Build Up tour—workshops being held across the country where we connect with small businesses in an intimate setting so that we can hear their most pressing needs and also share how they can take advantage of the $23.9 trillion global B2B ecommerce opportunity.
Q: How do you see the role of “anchor sellers” by Office Depot and Robinson Fresh developing and helping to grow Alibaba.com in the U.S.? How many anchor sellers do you expect to have?
Caplan: The role of anchor sellers, such as Office Depot and Robinson Fresh, are analogous to an “anchor tenant” in a shopping mall. They are a draw on their own, but they also generate tremendous foot traffic for the other, smaller tenants. This helps their business and also creates opportunities for everyone in the ecosystem.
Anchor sellers are leading North American wholesalers in select categories that expand U.S.-based supply with a rich inventory of branded finished goods. Each anchor seller is the first large distributor in their category.
Q: What are some of the most important ways Alibaba helps small sellers launch and scale up their Alibaba.com storefronts? How do you work with already established enterprise companies to enter and expand in new markets?
Caplan: Alibaba.com is reshaping B2B ecommerce and enabling U.S. small businesses to reach a global marketplace. We’ve enabled them to easily open their digital storefronts in a few ways, including online self-service.
Q: What are three or four of the toughest challenges Alibaba faces in attracting and working with U.S. sellers and buyers, and how are you addressing those challenges?
Caplan: As an entrepreneur, I try not to think too much about the challenges. It’s much better to think about what the opportunities are. So in this vein, building awareness of Alibaba.com as a channel for sales and a doorway to what is literally a world of possibilities is a massive opportunity for us. This is why we are hitting the road and meeting with U.S. small businesses in a national tour of Build Up events.
Q: Are there things you wished Alibaba had done differently in developing as a B2B online marketplace?
Caplan This is only the beginning, we’re continuing to learn and evolve the platform to meet U.S. small businesses’ needs.
Q: What do you see as the main ways that Alibaba differentiates from other marketplaces?
Caplan: We’re a one stop platform for U.S. B2B businesses to source and sell globally. Our customer’s success is our success. We require only an annual membership fee, and our business model is one that does not profit from each sale a customer makes—we do not take a commission on transactions.
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