ALIBABA’S RISE
Alibaba began in 1999, and in 14 years has grown to become an indomitable presence in the Chinese e-commerce
market. It has expanded to offer both business to business (B2B) and business to consumer services, consumer to
consumer, third party online payment, and web platforms related to merchandise. Taobao, one of the group’s websites, is
one of the most visited globally. The Chinese market in itself has grown inexorably, providing fertile conditions for the
company’s expansion and Alibaba has established itself as a dominant force in the domestic market. It has also been
able to tap into the Chinese consumer’s psyche. Following years of successive growth, the company now looks to rival
many Western online companies, such as Facebook and Amazon.
Alibaba’s growth from apartment to international entity
Beginning in Jack Ma’s apartment in 1999, Alibaba has capitalized on a rapidly expanding Chinese market with a model
which feeds itself. Rapid expansions in internet users in China, along with developing middle classes means there will be
much demand for online shopping. The company’s original remit as a provider of B2B services has crept outwards,
securing positions in many channels of e-commerce which have grown to become some of the most popular websites in
China and globally. The marketplace effect feeds into the company’s capabilities, its monolithic presence in Chinese
online retail allowing it to negate search engines and capture more income from advertisers, as is the case with Taobao.
Growth in Chinese e-commerce
Alibaba initially began as a medium of connecting businesses, but expanded beyond its remit rapidly. The company
achieved profit in 2002, before launching Alipay and Taobao. The company’s growth has exploded, as has the market it
serves. Chinese internet users have also grown robustly over the period, averaging a compound annual growth rate of
17.9%. Despite concern over the Chinese economy’s performance, this number is likely to continue expanding in the
long-term. The company’s strong position in this market means it can continue to provide further connected customers
for the group’s plethora of websites.
In terms of Chinese e-commerce, the China Internet Network Information Center (CINIC) estimates there were 242
million online shoppers in China in 2012, an increase of over 48 million on 2011. Despite the internet users growth
beginning to slow down, online shoppers still maintained momentum. Rising incomes and internet connectivity will help to
provide the company with much larger investment prospects. McKinsey Global Institute predicts that 10-15% of Chinese
retail will be through the e-commerce channel by 2020, varying for different products; it could be as high as 30-40% for
consumer electronics, with grocery retail estimated to grow from 1% online shopping to 10%. The report also praises the
Chinese consumer for being one of the most adaptable, embracing many modern trends. Initially there will be some
novelty to new urbanites in shopping malls, but this will rescind in favor of online shopping, which will surely benefit
Alibaba’s position

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