Business push

To understand the power of e-commerce in China, one does not need to look further than the success of Jack Ma and his Alibaba Group. Alibaba currently accounts for more than 5 percent of the total retail market in China, and according to Ma's estimates, more than 30 percent of all the retail trade in China will be conducted online over the next five years.

Taobao, the group's eBay-like marketplace, controls more than 90 percent of online transactions among consumers by transaction value, while TMall, the group's online mall, accounts for 51 percent of the business-to-consumer segment, according to industry estimates. The turnover of these two companies outstripped the combined sales of their foreign counterparts, such as Amazon and eBay, last year. Other key Chinese e-commerce players like Tencent, led by Pony Ma, are banking on customized e-commerce solutions and applications to drive growth and attract more customers.

Despite the lackluster export and import situation, Alibaba is looking to take a bigger bite of the e-commerce pie by renovating its systems for better match-making between merchants and buyers. Alibaba will leverage the data it collects from overseas buyers to precisely locate the right Chinese suppliers, something that will enhance transaction efficiency by 28 percent, says Wu Minzhi, president of the company's international business.

"Today we are seeing a changed export environment in which producing bulk orders is no longer a common practice. Instead, what we are seeing is more smaller-cap foreign buyers who are seeking diversified products and want to find the appropriate suppliers in China as quickly as possible," she says.

It is this changing reality that is forcing companies like Alibaba to move beyond playing a mere intermediary role, says Qi Junsheng, business director of the international department of the company's B2B unit. Alibaba is planning to launch a direct procurement platform, known as AliSourcePro, soon by sharing key commercial information such as emerging business trends, he says.

Explaining the changes, Qi says that earlier companies would launch their products on the online Alibaba trading platform and wait for suitable buyers to browse through the thousands of shops before deciding whether or not to make a purchase. That also required a business transaction spread over three weeks, Qi says, adding that the whole process might be a drag on the business efficiency of small businesses struggling to offset the global economic slowdown.

"The model also fails to help buyers precisely locate the vendors. For instance, a customer can never be sure whether his specific requirements would be catered to. It may take at least one week for both sides to negotiate back and forth, only to find out that the deal cannot be clinched due to, for instance, lack of raw materials," he says.

But a direct procurement platform facilitates both parties by providing a bulletin board through which buyers can state their requirements explicitly. The platform will help screen the vendors and recommend viable merchants to the buyers. On average, the new system lowers the transaction duration to 48 hours, thereby significantly cutting time and labor costs.

"A company might need to hire a group of 10 people for procurement. With the aid of this platform, they will need just two or three people," Qi says. The channel generated transaction volumes of $4 billion last year, and Qi expects the number to jump to $20 billion this year. The figure, if realized, would account for two-fifths of Alibaba's overall B2B revenue, which accounted for 10 percent of China's overall trade value in 2012.

Yu Ran, Qiu Bo and Cecily Liu contributed to this story.

hewei@chinadaily.com.cn

(China Daily European Weekly 08/16/2013 page1)