From eCommerce to Social Commerce – Alibaba Shakes Up Supply Chain Management

Alibaba, the largest online business company, does not manufacture or stock products on its own; Uber, the largest transportation network company globally, actually owns no vehicles; Airbnb, leading hotel and travel company, does not own any real estate. One thing they have in common is that they all create evolutionary ideas to disrupt and reform competitive landscape.

Owning no inventory nor product doesn’t stop Alibaba being the supply chain management guru. In fact, in April 2016 Alibaba Group has officially surpassed Walmart and become the world’s largest retailer.  This set the milestone when the world’s largest retail market shifted from offline to online.

“We used 13 years to demonstrate the power of a different business model compared with brick-and-mortar retailers,” the Alibaba Group said.

A key success factor for Alibaba is to delivery comprehensive while tailored digital supply chain process to customers.

 

In 2015, Alibaba accomplished $248 billion of sales, which is larger than Amazon and eBay combined. Rather than just providing a eCommerce platform, Alibaba serves and collaborates its customers differently in B2B world.

Cost –  By eliminating all the middlemen, Alibaba connects buyers to original manufacturers like never before. Sellers and buyers deal with each other directly online not only to leverage geographical labor and material saving, but also significantly reduces inventory and logistics cost.

Quality – Since buyers communicate to first tier suppliers directly, interaction and communication is more clear. Alibaba also implemented online electronic payment process to ensure buyers’ protection, payment not released from third party account until buyer is satisfied, thus greatly reduced fraud.

Speed – Alibaba breaks barriers for buyers and sellers, allows buyers to explore into a much expended social network. Suppliers’ information and reviews are clearly categorized to enable buyers quickly filter and identify a best match.

“Retailers in particular can benefit from exploring how Alibaba works and taking advantage of its unique strengths. They need to decide how they are going sell their products and get them into consumers’ hands quickly.  Alibaba presents new opportunities for retailers to operate through the marketplace model.” said Bruce Tompkins, executive director, Tompkins International. 

 

On the B2C side, Alibaba has totally transformed itself from eCommerce platform to Social Commerce ecosystem. Different from its competitors waiting to find out what consumers want, Alibaba takes a proactive approach to influence consumer purchasing behavior via social media, and in turn help its supplier to better manage supply chain and logistics.

“Retailers need to ditch the idea that e-commerce is a merely another sales channel for their products and embrace the marketing and brand-building potential that it offers”, Alibaba Group CEO Daniel Zhang said, “We hope to be able to recognize our customers across all e-commerce sites and media, enabling merchants to learn about and operate for their target customers.”

In the past couple years, Facebook has been trying to figure out how to turn its wealthy user base into real profit, perhaps one thing Facebook should learn from Alibaba is to work together with suppliers and content generators to create a one-stop shop ecosystem. An outdoor adventure enthusiast can easily find a Alibaba chat group sharing attractive trip plans, then from booking a trip to buying all the equipment, everything is few clicks away within the company’s mobile app. Study shows Alibaba users visit their mobile app more than seven times and spend as long as 25 minutes a day, this compares to 9 minutes on Amazon’s app and 16 minutes on Twitter.

“Amazon doesn’t get people on the website seven times a day,” said Gil Luria , an analyst at Wedbush Securities. “The level of engagement Alibaba’s able to create is more than what we’d consider with search companies and social companies. They’re investing a lot into making their tools have social engagement like Facebook.”

Lessons for Others

Social media enable organizations to improve supply chain process by delivering better coordination among internal teams and members. Also social media is a great tool to learn and influence customer purchasing behaviors, turn predictive analysis into better production planing and cost saving.

If you have concerns as to the accuracy of anything posted on this site, please send your concerns to Peter Carr, Program Director, Social Media for Business Performance.

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