alibaba-business-model

Quick Snapshot of Alibaba Business Model

Alibaba is an e-commerce platform that generated over $134 billion in revenues in 2022, and over $7.4 billion in net income. Alibaba has six main segments: core commerce (revenues generated in China), international commerce, local consumer services, cloud services, Cainiao (logistics), digital media, and other innovation initiatives.

Introduction to Alibaba business model

Alibaba is China’s biggest online commerce company. Founded on April 4, 1999, in Hangzhou, China, by Jack Ma.

Alibaba is the world’s fifth-largest internet company by market cap.

Alibaba’s business model looks a lot like the Amazon Business Model.

As specified in their annual report:

We generate most of our revenue from our core commerce segment. We also earn revenue from services associated with our cloud computing segment, digital media and entertainment segment as well as innovation initiatives and others segment. A substantial majority of our revenue is attributable to our businesses in China. See 

Alibaba short background story

Alibaba was founded on Jun 1, 1999, by Eddie Wu and Jack Ma. Today they are respectively Senior Vice President and Executive Chairman.

With over eight billion dollars raised since 1999.

According to Crunchbase, Alibaba started an acquisition campaign starting in 2010 that saw the acquisition of brands like: 

  • Daraz.pk
  • Ejoy Technology
  • Damai.cn
  • Wandoujia
  • AGTech Holdings
  • South China Morning Post
  • Youku
  • Yueke Software
  • AdChina
  • UCWeb
  • AutoNavi
  • Kanbox
  • Xiami Music Network
  • Umeng
  • Vendio

Today Alibaba represents a platform that served more than four hundred million people in 2016.

Alibaba vision and mission

alibaba-vision

Alibaba’s vision is “we do not pursue size or power; we aspire to be a good company that will last for 102 years.”

As Alibaba highlighted in its 2022 financials:

For a company that was founded in 1999, lasting for 102 years means we will have spanned three centuries, an achievement that few companies can claim. Our culture, business models and systems are built to last, so that we can achieve sustainability in the long run.

How does this vision translate into Alibaba’s strategy? The company has already set its main goals. for 2024 and 2036:

alibaba-long-term-goals
Alibaba plans to serve more than a billion consumers in China alone, by 2024 and over 2 billion consumers by 2036.

Alibaba’s mission is “to make it easy to do business anywhere.”

In short, that is about enhancing a commerce ecosystem within China and internationally.

Alibaba core values

alibaba-core-values
Source: Alibaba Financials

Alibaba’s core values can be broken down into six main principles that drive the organization, and align it both internally (employees, shareholders) and externally (customers, investors):

  • Customers first, employees second, shareholders third.
  • Trust makes everything simple.
  • Change is the only constant.
  • Today’s best performance is tomorrow’s baseline.
  • If not now, when? If not me, who?
  • Live seriously, work happily.

Alibaba’s business ecosystem

alibaba-brands
All Alibaba’s brands, as shown in its financial statements.

Alibaba is, most of all, a business platform.

Similarly to Amazon, the company generates revenues from nurturing a business ecosystem, which processes over a trillion dollars in transactions in 2022!

alibaba-business-ecosystem

Alibaba’s business ecosystem enabled $1.3 trillion in Gross Merchandise Value (total value of merchandise sold through the platform in 2022).

Of that, $903 million was generated by China commerce retail businesses. Thus it was spurred by Alibaba’s China consumer-facing businesses.

And $305 million was generated by International Alibaba’s China consumer-facing businesses (Lazada, AliExpress, Trendyol, and Daraz).

alibaba-technological-ecosystem
Source: Alibaba Financials

Alibaba’s core technological segments can be broken down in:

  • Cloud: the foundational layer.
  • Logistics: to enable commerce.
  • Commerce: with its main segments to nurture the business ecosystem in and outside China.

The Cloud infrastructure is comprised of:

  • Alibaba Cloud: powering up a good chunk of the services built on top of Alibaba’s platform.
  • And DingTalk.

The logistics layer comprises all the infrastructure to serve commerce in and outside China.

And the commerce side comprises:

  • China Commerce.
  • International Commerce.
  • Local Consumer Services.
  • Digital Media and Entertainment.
  • Innovation Initiatives.

Alibaba monetization model

As reported in Alibaba’s annual report:

We derive revenue from our four business segments: core commerce, cloud computing, digital media and entertainment, and innovation initiatives and others. We derive most of our revenue from our core commerce segment, which accounted for 85% of our total revenue in fiscal year 2017, while cloud computing, digital media and entertainment, and innovation initiatives and others contributed 4%, 9% and 2%, respectively. We derive a substantial majority of our core commerce revenue from online marketing services. The revenue model of our

Core commerce

China’s commerce retail business primarily includes Taobao Marketplace, Tmall, Rural Taobao, and commerce technologies and services.

taobao-homepage-UX
TaoBao Homepage UX and how it enhances social engagement through a few main features (Image Source: Alibaba Financials).

China commerce wholesale business includes 1688.com. International commerce retail business includes AliExpress and Lazada. International commerce wholesale business includes Alibaba.com.

Alibaba.com

Launched in 1999, Alibaba.com is the leading platform for global wholesale trade with millions of buyers and suppliers worldwide.

AliExpress

Launched in 2010, AliExpress.com is an online retail service made up of small businesses in China and elsewhere, such as Singapore, offering products to international online buyers.

Other platforms

Other platforms such as Taobao, 1688.com, and Lazada are part of the Alibaba network

Cloud computing 

The cloud computing segment comprises Alibaba Cloud, which offers a complete suite of cloud services.

Digital media and entertainment 

It primarily includes Youku Tudou and UCWeb.

Innovation initiatives and others

It includes businesses such as YunOS, AutoNavi, DingTalk.

Cost of revenues

The principal components of our cost of revenue include:

  • Content acquisition costs paid to third parties for online media properties;
  • Logistics costs relating to fulfillment services provided to us by affiliate Cainiao Network, primarily related to Tmall Supermarket;
  • Traffic acquisition costs are paid to third-party marketing affiliates either at a fixed price or on a revenue-sharing basis;
  • Payment processing fees paid to Alipay or other financial institutions; the cost of inventory;
  • Expenses associated with the operation of websites, such as bandwidth and co-location fees, and depreciation and maintenance expenses for our computers, servers, call centers, and other equipment; salary, bonuses, benefits, and share-based compensation expenses;
  • Rebates and subsidies mainly relating to our new business initiatives;
  • Business taxes and related surcharges; and allowance for doubtful accounts about the microloans and VAT receivables.

Alibaba organizational structure

alibaba-organizational-structure

Read Next: Amazon Business Model.

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