The Challenge of Keeping up with Change

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China’s Internet pioneer Jack Ma, formerly an English teacher, entered the bizarre world of the Net more by accident than by design. After creating China Pages, the country’s first Internet business in 1995, Ma was invited by the ministry of foreign trade and economic cooperation (MOFTEC) to head the information department of China International Electronic Commerce Center (CIECC). His role as president of that department gave him an insight into the e-commerce needs of SMEs. In 1999, he left MOFTEC to launch, his dream venture for the small entrepreneur. With Alibaba, Ma wants to provide a platform for SMEs to reach out to the global export-import market. In an interview with DATAQUEST, he shares his views on Alibaba’s B2B strategies for Asia:

What is all about? 
Alibaba is a site born in China and we have a localized presence in Korea as well, but we want to make it a global company because the Internet itself is a global phenomenon. We are using the Net as the cement to unite all the small and medium-sized suppliers of Asia so that they can do business globally. 

How do you intend to promote e-business across Asia?
We are a B2B e-marketplace for small and medium-sized export-import companies. The big companies have the money and the technology to get all the required information quickly and accurately. But the small enterprises don’t. Most of the SMEs in Asia want to sell their products abroad. Before the Internet came, it was impossible for them to access the outside world so easily and to find out who needs their product, what kind of a product they want and how much they will pay for it. But today, we can do it. No matter how big or small you are, you have plenty of choice. We have started as an information e-marketplace and later we’ll go to a stage where we’ll facilitate all kinds of buyers and suppliers to distribute their products all around the world.

Most of the B2C sites in Asia have not yet been able to define any clear revenue models. What is your opinion on this?
B2C was very popular 10 months ago but I personally don’t believe B2C works very well in Asian countries like China or India. B2B is the future for Asia. Moreover, no matter in what business we are, we should always believe in our own model. The Asian entrepreneur can’t afford to blindly follow any existing model. He has to define his own strategy. Whether we are following a B2B or a B2C model, the important thing is to bring value to the customer. While B2B in Asia has just started, B2C hasn’t even started as yet. Asia should have its own way of B2C; what is being followed in the US may not be applicable to Asia.

How should they differentiate from the US models? 
I think Asian companies should not follow the US models, but can learn a lot from the US companies. The computer penetration in the US is great and they are technically advanced. The market there is much mature and unlike Asia, a lot of basic things like infrastructure, banks and credit card system are already in place.

Specifically, what are the factors that should define the B2B strategy here? 
For any B2B model, there are three stages. The first stage is what I call the information exchange platform. The second stage is document exchange and the third is money exchange or an actual transaction. E-business in Asia should focus more on the exchange of information rather than go to the transaction platform right now. A lot of people are saying we can do transactions. Technically speaking, it might be easy to do a transaction, but if nobody uses it, there is no use. Although it has a great potential and will eventually happen, you have to go step by step. You have to do well in the first stage, and then only you can go to the next one.

If we focus only on information exchange right now, how will the actual transactions take place?
Offline. Online matchmaking and doing the business offline. Never force your customers to do something they are not ready for. The SMEs are so skeptical. If the market is not ready, why should you force your customers to do something they don’t like? No matter what you do, you have to keep your business partners happy. If they are not prepared for online transactions let them be happy with offline. The day online transactions become better, they will take it.

But will you be able to generate enough revenues in this manner?
Again we have to go step by step. First, we are focussing on online business promotion for importers and exporters. In the second stage, we will be facilitating the buyers to purchase products through the Internet. We will also be facilitating suppliers to distribute their products. In the third stage, we will go to the transaction model. But we have to do the first stage well before we move on to the next stage.

Looking at the state of infrastructure in countries like India or China, How long do you think it will take for online transactions to start?
About 2-3 years. Things are growing much faster than we expected. India and China need a critical mass. Today, the state of Internet usage here is more like it was in the US in 1996. I believe when China has more than 14 million users and India has more than 25 million users, things will change completely. In China, every six months, the number doubles. And in India, I think by the next year, we should have 8-10 million users.

Do you have any statistics to show how many users are actually benefiting by your site?
We don’t have any specific data. But within such a short time, we have over 350,000 registered members from over 202 countries. They keep on using it and our traffic is increasing every day. That proves one thing-they are benefiting. Business people are usually very busy, if they don’t think this site has anything for them they will never come back again. I can’t say that we are the best, but we are among the top sites in Asia for transactions.

What kind of response have you received in India?
We have got a very good response from the people here. China and India are the largest supply chains of the world and we would like to help them find more opportunities. Alibaba has more than 15,000 Indian members, mainly from the agriculture, textile and chemical industries. 

Whom do you see as your major competitors?
In the Internet age, there are no competitors-you only compete with yourself. In 1995, there were about 2,000 companies doing search engines, but later they moved to different directions. The Internet in Asia has just started. Today someone may be your competitor and tomorrow he may not. As an Internet company, if you say “I want to compete”, you’ve failed in the first move. So, I would say, spend your time on your customers rather than your competitors. The important thing is to see how great is the value added by the service you offer.

Where do you see yourself in the next 3-5 years?
We say we are open to all opportunities. We have a long vision, but short plan. For the next 3-5 years we would focus on B2B. Which countries we target or what we do, will depend on where we get good partners, whether the market is ready for B2B and whether we are ready.

Which are the potential markets in Asia that you want to tap?
India is a very big market. Korea, Japan and Singapore are also there. We will try to connect Asia with the markets in the US and Europe.

What are the main advantages and disadvantages you see in the Indian market?
India is a new market. It is growing so rapidly. And our philosophy is to grow with the market-never try to grow faster than the market. The Indian economy is rising and the businesses here are using the Internet aggressively. Another advantage is the talent -India has some of the best brains that can be tapped. The main disadvantage here is the infrastructure; people are still using cyber cafes to go online. 

Your advice to the Indian entrepreneur…
I would say learn from the experience of others in the Internet business, but don’t copy them. India should have its own model. 

Do you charge your members for your services?
As of now we are not charging anything from members, we might do it later when we add more value to our services. We are charging a bit for business promotion and advertising. Eventually, money will come when the actual online transactions start taking place. 

Is Alibaba targeted towards any particular industry?
It is not specific to any sector, but would cater to all those who are looking for partners across the world. Our vision is to “Open Sesame” especially for small and medium enterprises. We have a set of 27 informative catalogues. These will be useful for all kinds of buyers and suppliers to meet online.

In what way is the Asian market different?
The markets are very different. They have been there for 20 years. Asian businesses are so different. Most of them are small businesses, but they want to be on their own. They don’t want to join big companies. Their way of doing business is also very different from the US. Here relationships are so important. Even Alibaba is based on a community model where traders discuss and help each other. The Western B2B models are more mechanical. The human element is not as prominent.

in New Delhi

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