Alibaba’s plan to become a global brand

Alibaba has scored tremendous success in China by demonstrating an excellent ability to exercise strategic agility. By being able to understand the local market better than competitors such as EBay, Alibaba has been able to effectively capture the market. Statistics indicate that 430million customers buy through this online bazaar. That is an estimated one third of all Chinese buying through Alibaba every year. It is a phenomenal success for an organisation operating in an emerging economy. In fact, it is important to evaluate the e-commerce market and what Alibaba could have gotten right to get Chinese consumers trading through it. It's presence has revolutionied e-commerce in China.

The main hurdle in online commerce is trust. Trust is a major issue because the seller is not on site for the consumer to communicate with and evaluate. There is also no opportunity for the physical evaluation of the products before the goods are purchased. This leaves the consumer with only one option: to trust the seller. But this option is not very easy to accept because it gives unscrupulous traders the opportunity to exploit innocent buyers. Trust issues also exist in reference to the sellers who are often defrauded by unscrupulous buyers. This means that mistrust affects both ends of the transaction. The difficulty in establishing trust online therefore suppresses online commerce. Trust is stimulated by the presence of online intermediaries and they play a strategic role in bringing the two groups together.

Intermediaries are institutions or players that can inspire trust from both ends of the transaction. They have networks and resources that enable them to investigate and verify that a buyer or seller is being genuine. They therefore help to establish some level of augmented trust where the transacting parties trust each other by mutually relying on the intermediary. Alibaba inspires the confidence of the consumers by making basic background checks on the sellers listed on their platform. In addition to this, they run active and efficient dispute resolution systems that provide for penalisation of unscrupulous traders by de-listing them or even instituting legal proceedings against them. This raises the minimum threshold needed for consumers to have confidence and trade online.

The other way in which Alibaba has managed to facilitate building of trust is by enabling the buyers and sellers to rate each other. Where a buyer has a poor rating, it means that they are fussy and potentially a risk to the sellers. This informs the decision of the sellers to transact with them. The same applies to the feature of buyers rating a seller where the highest rated sellers are presumed to be most trustworthy. In addition to this, the organisation plays a critical role in facilitating safe transactions through a payment system in which money is deposited with them but released to the seller only after the buyer has confirmed receiving the products. Such a system helps in building trust. Buyers can be confident that their money will not be lost while sellers are guaranteed that the buyers are genuine and willing to pay for the products. It is these features that have enabled Alibaba to grow the ecommerce landscape in China.

With its plans to expand globally, Alibaba hopes to enlist more than 2million businesses across the world. The trust building approach is expected to contribute significantly to driving growth in e-commerce; especially in the developing world where the concept is yet to be deeply rooted.