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’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’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’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.
Value Proposition:
- Alibaba offers a comprehensive online commerce ecosystem, making it easy for businesses and consumers to buy and sell products and services.
- Provides a wide range of services, including online marketplaces, cloud computing, digital media, and more.
- Focuses on enhancing the ease of doing business anywhere, both within China and internationally.
- Offers a platform for global wholesale trade, connecting millions of buyers and suppliers worldwide.
- Provides online retail services through platforms like AliExpress, catering to international online buyers.
Customer Segments:
- Consumers: Individuals looking to purchase products and services online, both in China and internationally.
- Businesses: Small, medium, and large enterprises seeking to sell products and services through Alibaba’s platforms.
- Suppliers and Manufacturers: Companies looking to reach a global audience of buyers and expand their distribution channels.
- Retailers: Businesses aiming to establish an online presence and tap into Alibaba’s extensive customer base.
- Cloud Service Users: Organizations and developers seeking cloud computing and infrastructure services.
- Media and Entertainment Consumers: Individuals interested in digital media content offered by Alibaba-owned platforms like Youku Tudou and UCWeb.
Distribution Strategy:
- Utilizes a vast online distribution network through its various online marketplaces and platforms.
- Employs a digital distribution strategy, allowing customers to access services and products through websites and mobile applications.
- Leverages partnerships and acquisitions to expand its distribution reach, both within China and internationally.
- Offers cloud computing services that can be accessed remotely, making them widely available to users across the globe.
- Collaborates with logistics providers and partners to ensure efficient product delivery, including Cainiao Network.
Marketing Strategy:
- Employs digital marketing and advertising to reach its vast customer base.
- Uses data-driven insights to personalize marketing efforts and target specific customer segments.
- Promotes its various platforms and services through online advertising, social media, and partnerships.
- Provides incentives, discounts, and promotional campaigns to attract and retain customers.
- Invests in branding and sponsorships to increase visibility and promote trust in its services.
- Engages in strategic partnerships and acquisitions to expand its ecosystem and user base.
Alibaba’s business ecosystem
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’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’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.
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
Key Highlights
- Introduction to Alibaba: Alibaba is China’s largest online commerce company, founded on April 4, 1999, by Jack Ma. It’s the world’s fifth-largest internet company by market capitalization.
- Business Model: Alibaba’s business model is often compared to Amazon’s. It generates revenue primarily from its core commerce segment, with additional income from cloud computing, digital media and entertainment, and innovation initiatives. The majority of its revenue comes from its operations in China.
- Origin Story: Alibaba was founded by Eddie Wu and Jack Ma in 1999. It has undergone significant growth and acquisitions since 2010, expanding its reach and services.
- Vision and Mission: Alibaba’s vision is to be a company that lasts for 102 years. Its mission is “to make it easy to do business anywhere,” focusing on enhancing commerce ecosystems both within China and internationally.
- Core Values: Alibaba’s core values include customer priority, trust, adaptability to change, continuous improvement, taking initiative, and balancing work and life.
- Value Proposition: Alibaba offers a comprehensive online commerce ecosystem, facilitating easy buying and selling of products and services. It provides various services, including online marketplaces, cloud computing, and digital media, with a focus on global trade.
- Customer Segments: Alibaba serves consumers, businesses, suppliers, manufacturers, retailers, cloud service users, and media consumers.
- Distribution Strategy: Alibaba uses an extensive online distribution network, digital channels, partnerships, and acquisitions to expand its reach.
- Marketing Strategy: It employs digital marketing, data-driven insights, incentives, discounts, and partnerships to engage users. Alibaba invests in branding and sponsorships for visibility and trust-building.
- Business Ecosystem: Alibaba nurtures a vast business ecosystem, facilitating over $1.3 trillion in Gross Merchandise Value in 2022. It includes core technological segments like cloud, logistics, and various commerce segments.
- Monetization Model: Alibaba generates revenue primarily from its core commerce segment, which includes Taobao, Tmall, AliExpress, and other platforms. Additional income comes from cloud computing, digital media, and innovation initiatives.
- Cost of Revenues: Costs of revenue include content acquisition, logistics, traffic acquisition, payment processing, inventory, operation expenses, employee-related costs, rebates, subsidies, taxes, and allowances.
- Organizational Structure: Alibaba’s organizational structure encompasses various business segments, including core commerce, cloud computing, digital media, innovation initiatives, and others.
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