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ABACUSWhen Alibaba listed on the New York Stock Exchange in 2014, it was the first time many Americans had ever heard about the Chinese tech giant. From
USA Today to
Forbes, media outlets across the country felt the need to explain the company behind the biggest IPO in US history.
EARLY YEARS
It all began in 1999 in a small apartment in Hangzhou, a tourist city known for its scenic lake, around two hours’ drive from Shanghai. Jack Ma,
a former translator, carpet salesman and English teacher, brought together 17 friends and convinced them to pour in a total of US$50,000 for a startup.
Their first product was Alibaba.com, an English-language marketplace for wholesalers to sell directly to buyers around the world. At the time, China was already seen as the “factory of the world”, turning out cheap toys and clothes for the likes of Walmart and Target.
Alibaba linked China’s giant supply chain to smaller buyers that didn’t want to travel half the globe to meet sellers or pay for a costly middleman, giving the country’s manufacturers a vast new market.
Within two years, more than a million users had signed up for Alibaba.com.
SHARK VERSUS CROCODILE
In 2003, as the number of internet users surged in China, the company launched Taobao. While Alibaba.com specializes in B2B commerce, Taobao is for consumers. Suddenly, all of China’s little shops had access to millions of consumers: A mom-and-pop clothing store in Guangzhou could easily sell a dress to someone hundreds of miles away in Shanghai.
Taobao wasn’t the first with the idea. eBay had entered China a year before, holding
more than 70 per cent of the booming market through its acquisition of a local e-commerce startup. But Alibaba had a major edge -- it understood China better. The company
flooded online forums with messages introducing Taobao, and
partnered with leading Chinese banks to run its online payment system, Alipay.
Alibaba’s strategy paid off. eBay shut its main China website in 2006. Meanwhile another competitor, Yahoo, gave up all of its Chinese operations in 2005 and paid Alibaba US$1 billion in return for a 40 per cent stake in the business.
Ma later
summarized the experience: “eBay may be a shark in the ocean, but I am a crocodile in the Yangtze River. If we fight in the ocean, we lose -- but if we fight in the river, we win.”
