Alibaba.com: B2B market value co-creation


The industry of B2B (Business to Business) trade, the value co-creation stands as the main pillar around which this industry is built, especially in the modern world. Business to business transaction volume currently is much higher than business to consumer transactions (Richard, 2008). What is meant by value co-creation in this context is the value addition to the online B2B marketplace such as Alibaba.com and Tradekey.com.

Furthermore, there are properties and attributes associated with B2B industry that are not present in the everyday B2C (Business to Consumer) environment and so impose a certain number or risks and difficulties on the traders. Such properties and factors include (Kasera,2006):

  1. Purchase decisions in B2B are usually group decisions rather than individual.
  2. Technical details are of a higher relevance in B2B markets.
  3. Purchases are usually made with longer term perspective than in B2C, and thus reliability and availability are of higher importance.
  4. The sale process is more time consuming and more complicated, it could involve multiple (sometimes international) visits to the vendor or client, prototypes, samples and so forth.
  5. Payment terms are usually lengthier and more complicated than B2C, where it is the norm to pay the full price upon delivery or even after order placement.

As can be deduced, all these factors can only be evaluated with experience in the field and with the seller/buyer. That rose the need for a community marketplace or platform that saves the time, waste, risk and probable losses involved with testing different suppliers and products. This is the center selling point of Alibaba.com, which serves more than 18 million buyers and sellers from more than 240 countries and regions, showcases products ranging from raw materials to finished goods in more than 40 industry categories (Hammet, 2014). This is acheived by the millions of people who try products, service, delivery, reliability for suppliers and consumers and review their experience. Further, the website provides a ranking system and a progressive membership system whereby well rated consumers and suppliers are distinct form fraudulent or unreliable ones. This complex system was build by the millions of users that are both sellers, buyers and promoters of the website. Their cumulative contribution added a whopping 140 Billion dollars to the platform value.

Alibaba.com’s staff are organizers of information and ensure a safe payment environment and organization of data on the website and make efforts into creating a more user friendly system (Economist, 2013). However, the valuable information itself, about the ratings of suppliers, their reliability, integrity, their supply history and consumer experience is all fed into the system by the millions of users every day. That, along with good information management from the Alibaba.com’s part, is what gives the site its enormous value.

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References:

Karuna P. Joshi and Murthy Chebbiyam (2011). Determining value co-creation opportunity in B2B services

Sandhusen, Richard (2008). Marketing.Hauppauge, N.Y: Barron’s Educational Series.

Prashant Kasera J. (2006): ‘World of B2B’ ‘1st Edition.

Nikky Hammet.(2014). 5 global B2B marketplaces that can help you grow your business.

Economist. (2013) E-Commerce in China: the Alibaba phenomenon.

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