Alibaba is the largest and most successful B2B wholesale marketplace in the world, accounting for 8,4% of global retail e-commerce (Amazon - 13.7%) and generating tens of millions of dollars for its owners every day. In our article we will look at how this marketplace works and how to create your own clone of Alibaba - a multi-vendor platform with identical functionality and design.
Alibaba Marketplace Business Model
Alibaba Group business structure. Source
Alibaba's online store (site) is part of a huge multinational conglomerate called Alibaba Group Holding Limited, which includes Taobao, Tmall, Alipay, AliExpress, Alibaba Cloud and many other entities. Together, they bring the conglomerate 20 billion in net income. According to the Form 6-K
, report, the Alibaba Group is monetizing its services through four pillars: main commerce, cloud computing, digital media, and innovation.
The Alibaba marketplace is part of the mainstream commerce segment and operates as a multi-vendor platform for entrepreneurs (wholesale B2B market). Any entrepreneur can use it to sell their products. Registration and creation of ads are free (if there are less than 50 of them per month). The platform earns money mainly through Gold Supplier subscription and advertising services.
Key features of the Alibaba marketplace:
- Escrow payments. A transaction that ensures that sellers receive money and buyers receive the goods they ordered. Its peculiarity is that when the buyer pays for the goods, the money is sent to a special bank account, where they are kept until the buyer confirms the delivery. After confirmation of delivery, money is sent to the seller from a special account. This mechanism is considered very secure as it allows both sellers and buyers to complete transactions without exposing credit / debit card or bank account details.
- Verification of sellers. Alibaba checks every seller to make sure it is a legally registered company. The procedure is carried out by Alibaba itself and independent companies. If the buyer is not satisfied with the usual check, he can order a deeper check service.
- Feedback from buyers. After a trade is closed, Alibaba invites the buyer to leave a review - to rate the item and the seller. This can be done within 60 days. When the supplier responds to the review, the buyer has 30 days to review it and respond in some way, for example by opening a dispute, if he is not satisfied with his purchases.
- Inspection service. Buyers can order services of an independent third-party inspector on the platform. He will visit a supplier company in China and provide a report (with photos) as proof that the supplier's products are genuine and of good quality.
- Group purchases. Alibaba allows independent shoppers to create groups to purchase small quantities of goods at wholesale prices. This model lowers supply chain costs and reduces the product turnover time.
Online store monetization model
Alibaba Gold Supplier subscription cost and description
There are many earning methods that can be used to monetize marketplaces. When creating your clone of the Alibaba site, you can choose any of them. Here are the approaches Alibaba is taking:
Other multi-vendor platforms, besides the things listed above, also use other approaches:
- Alibaba's free access option allows sellers to list multiple products for sale, but doesn't give them much of a chance of getting noticed. While subscribing to the Gold Supplier allows suppliers to create better storefronts and get access to many useful tools (marketing, management, analytics).
- Design of ads. Alibaba has developed a special software called Wangpu, which is provided to suppliers of goods and services by subscription. It is a set of tools that allows you to create more attractive online storefronts and makes them easier to manage.
- Marketing services. Alibaba.com has about 10 million active sellers, among whom there is constant intense competition for buyers, where visibility is the decisive factor. To help its sellers, Alibaba provides display marketing services: brighter ads, top positions in listings and search results, place on the main page and in recommendations, advanced analytics, and more.
- Logistic services. Alibaba offers a range of services to suppliers related to advanced data analytics, logistics, shipping, customs clearance, refunds, product demonstrations and many other import and export business needs.
- This approach is used by e-commerce giants like Amazon and eBay (along with other monetization models). These stores charge sellers a certain percentage of each product sold - usually from 2 to 20%. Often the commission depends on the product category.
- Mandatory membership fee. Payment from buyers is usually entered if it is a wholesale market with a large listing of suppliers and detailed information about each of them, which allows you to use various filters to find the right supplier. A mandatory fee for suppliers is entered if the site has a lot of traffic and / or if it is a market with expensive goods.
- Payment processing fees. It is entered if the site provides its own payment system. So, escrow payments are usually a paid service.
- Listing fees. The platform charges sellers for posting their ads. EBay, Craigslist and many other marketplaces do this.
- Since online stores have a lot of traffic, many companies and brands see them as a platform for their advertising.
Functions of a multi-vendor marketplace
Main functions of a multi-vendor marketplace. Source
Alibaba is a giant trading platform that, in addition to standard functions, uses an advanced analytical system, neural networks, big data and hundreds of other complex technologies. Building such a project from scratch
is very expensive, difficult and time consuming. It is better to create a clone
of the Alibaba site with a basic set of functions, which will save resources and allow you to get to market faster. After launch, the list of functions can be expanded as needed