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The Rise of Alibaba - Is there room in the Chinese market for digital competitors?

Cory Hughes Client Services Director

With more than 279 million active buyers and a selling power larger than Amazon and Ebay combined, it is surprising to see how few people in the west really know much about online giant Alibaba.

But in China it’s the online retailing powerhouse. There’s no questioning that they have cornered the market and made it almost impossible for competition to exist, but their growth has been clever and involved a lot of risk taking to enable them to hold this position and reap the rewards.

Creating a service to solve a problem

Fifteen years ago, former school teacher Jack Ma launched it as a business-to-business venture enabling companies all over the world to find the right supplier in China. Then, only 1.7% of the 1.3 billion Chinese population had internet access, but that was enough as it was created to solve the problems that China’s sheer size, location and language barriers caused.

Fifteen years on, and the digital solution that was created to help the rest of the world access China has become the world’s largest IPO. Yet when you look at its audience, less than half of Chinese consumers are connected to the internet. So, with over half of the population still up for grabs, is there room for competition or will Alibaba monopolise the market and the rest of us all follow suit?

David vs Goliath

It is clear to see how the smaller more traditional companies living in remote rural areas have had their fortunes changed by the likes of Taoboa.  With over 700 million active smartphones in China, and access to Alibaba’s online payment service, people can settle their utility bills; call cabs and pay the fare on arrival, find suppliers, buy houses and buy and sell any product online - even the most traditional - regardless of location limitations. It is still to this day solving a problem that only digital can fix.

But what of the larger organisations or start-up’s who want to go it alone? The truth is, people globally are spending less and less time in physical retail spaces and more time online. But in China, the impact of this is greater than the likes of the US or UK as Alibaba’s dominance means decreasing profits for many businesses as there are very few people that are providing a digital experience that can sway customers to shop with them direct.

Speaking recently to Joni Ngai from our CMS partner Sitecore, she was quick to point out that ‘the competition for new retail spaces and brands is not their existing competitors, but Alibaba’. When it comes to customer experience, a digital monopoly such as Alibaba will never be good for the consumer in the long term. But how can a competitor brand get a slice if the Alibaba pie? Is it even possible?

Providing a digital experience

We believe the power lies in the ‘digital experience’, and how the online and offline experiences can be connected to deliver something exceptional, not just satisfactory. Doing the same thing but slightly better won’t cut it. To be a game changer requires digital innovation. Digital provides a huge opportunity for businesses in China and let’s face it, there is still a large percentage of the population who are not yet online but will be in the future. The way to gain market share and start to steal the consumers away will not be easy but those that think outside the box, and think ‘experience’, not ‘transaction’ will be the ones to see success.

In our new report on the digital maturity of the HK and Chinese market, we have interviewed digital leaders in their fields to discuss the digital maturity and opportunities of the digital market place in China and HK. They have shared their thoughts on the upcoming trends and the business transformation that is needed to ensure digital innovation can be achieved and competition can remain healthy.

Our report will be available in November, but you can reserve a free copy by emailing us at hello@precedent.com