“When KFC came to China, 24 people went for the job. 23 people were accepted – I was the only guy.” – Jack Ma, Founder of Alibaba Group
Ma Yun, known professionally as Jack Ma is a true rags-to-riches story. He is a Chinese business magnate who grew up poor in communist China, failed his universityentrance exam twice, and was rejected from dozens of jobs before finding success with his third internet company, Alibaba.
Ma grew up at a time in Hangzhou, China when communist China was increasingly isolated from the West. He started to study English at a young age and practiced English daily by conversing with Englishspeakers at Hangzhou international hotel and provided them with free tours around the city to improve his English for nine years.
EARLY LIFE OF JACK MA
After teaching English for 5 years, Ma started with his entrepreneurial journey by starting anEnglish translation and interpretation company in 1994 to capitalize on China’s export boom. He had his first encounter with the internet during his business trip to US and saw the lack of Chinese web sites as a great business opportunity. He later decided to found China Pages which was a directory of various Chinese companies looking for customers abroad, considered the country’s first internet business.
STEPPING STONE IN RETAIL: ALIBABA
New Beginning for Retail in China
“Never give up. Today is hard, Tomorrow will be worse, but the day after tomorrow will be sunshine.” – Jack Ma
China Pages did not work out well for Ma and flopping quickly after its inception. But four years later, Ma took another stab at an internet business. He called his second company Alibaba. There were hundreds of millions of small and medium sized enterprises in his province alone. Ma believed the Internet could connect these small companies, which were mostly privately owned. He took advantage of the situation and was convinced that the small-business-to-small-business Internet market had much greater potential for growth than the business-to-consumer Internet market. Small businesses paid a membershipfee to be certified as trustworthy sellers on Alibaba, with a greater fee being charged to businesses that wished to sell to customers outside China.
Today, Alibaba has become the leading platform for global wholesale trade and serves millions of buyers and suppliers around the world.
Initial barriers for growth
The small business owners in Zhejiang province were mostly “mom and pop stores”. Most had no education beyond middle school, if any education at all. Although they had made some money during the economic boom, doing business on the Web was completely foreign to them. Realizing the need to educate customers about the Internet, Ma sent his team out to knock on the doors of the mom and pop stores teaching them about the internet. In addition, Alibaba provided services that ranged from setting up Internet connections to registering on the Alibaba Web site.
Another problem Alibaba faced was trust. China had no credit checking system, and there were no rules or laws governing these small stores. Cheating and lying were the norm in doing business. To ensure that people were willing to do business online, Ma and his team built a “trust system” called TrustPass. When people registered on the website, for a small fee Alibaba would hire a third party to verify their business licenses, physical addresses, bank accounts, and so on. This system was a huge help in building e-commerce infrastructure in China.
Alibaba’s presence in U.S. – part of global strategy
Ma greatly emphasizes the importance of Alibaba’s presence in the US as part of company’s global strategy. Heis looking to attract more and more small & medium sized companies to his e-commerce platform so as to sell US products to a growing Chinese middle class. This comes after Ma declared his plan to get 2 billion customers in the next decade.
In an open letter to US businesses, farmers and entrepreneurs, Ma said that he wants to make it easy for American small business owners to take advantage of the Chinese market where there is a high demand for luxury goods and beauty products from US.
INCEPTION OF TAOBAO
Combating competition in China
“My belief is that you have to repair the roof while it is still sunny.” – Jack Ma
In 2003, Ma created a new company, Taobao, stepping into the consumer-to-consumer online marketplace (Chinese: “searching for treasure”). At that time, the American company eBay, in collaboration with the Chinese company EachNet, had a market share of 80 percent. Ma had realized that eBay, sooner or later, would start coming after Alibaba’s customers as eBay grew in China. To combat that potential threat from eBay, Ma assembled a small group of Alibaba employees and sent them to work on a secret project: an online marketplace that could directly compete with what eBay was offering. That was how Alibaba built its famous Taobao marketplace that currently handles huge volumes of transactions each day.
The internet commerce was still in its nascent stages at that time and Ma felt that eBay-EachNet’s policy of charging users a transaction fee was a weakness. Taobao did not charge such a fee but made money from online advertising and providing additional services to users. Ma’s intuition proved correct; by 2007 Taobao had a 67 percent market share, and eBay conceded the majority ownership of its Chinese operations to the Chinese language media company TOM Group, which created the subsidiary TOM EachNet.
Taobao’s split: Need to adopt changes
In 2011, Ma realized the need to offer consumers more sophisticated and customized services and announced that Taobao would split into three companies: Taobao Marketplace, where individuals could buy and sell goods and was meant for small consumer-to-consumer transactions, online auctions; Taobao Mall, an online shopping portal for major retailers and internationally known brands; and eTao, a shopping-related search engine. Explaining the move, Ma wrote that “We have developed into a big company so rapidly in a short period a time, but competitive advantage is not about size. We must continually test new organizational structures in order to discover new approaches and models that fit the development of Internet businesses. That’s how we stay innovative and stay on the cutting edge.”
Taobao is now one of the top twenty most visited websites globally.
Dummy test strategy
Ma calls him a ‘tech dummy’. With no educational background in technology, his IT knowledge is famously minimal. According to him, Alibaba survived because he knows nothing about technology. Any new tech product is first run by him, and if Ma can’t understand it, the common man can’t either. For a consumer internet company, nothing is as important as keeping it simple, especially in e-commerce. Because, most people are, well, tech dummies.
FUTURE RETAIL STRATEGIES
Online sales in China still account for just 15% of all retail. Shoppers continue to demand physical stores—to touch and feel, socialize, ask questions, and have an experience that can’t be replicated online. According to Ma, pure e-commerce will soon be replaced by the concept of “New Retail” which according to him is the integration of online, offline, logistics and data across a single value chain. Alibaba is already working on development of this model in China and has made bold steps in expanding its retail capabilities.
Over the past 2 years, Alibaba has invested as much as $8 billion in brick and mortar stores by acquiring stakes in local supermarket chains. The company has also started the local supermarket chain under the Hema Xiansheng brand in China’s biggest cities. Shoppers can scan barcodes with the Hema app for product information and pay with the Alipay e-wallet. The app records purchase histories and can make personal recommendations accordingly. Each Hema store also functions as a mini fulfilment center, delivering customers’ online orders within half an hour. This enables building faster supply chains that are free of layers of distributors.
Ma explains that the idea is to develop algorithms to analyze customer data such as brand membership information, purchasing history and store visit time to better understand shopper preferences and predict changes in consumption habits. The results can then be used to adjust product offerings, design fresh marketing campaigns.
GLOBAL VISION OF JACK MA
Ma has introduced his grand vision of making small businesses from all corners of the world trade freely and securely on Alibaba’s platform and has been flying to dozens of countries to meet business leaders and head of states to realize his vision. Ma recently told in an interview talking about his vision that by 2036, he expects Alibaba to serve 2 billion customers — one-third of the world’s total population, while supporting 10 million businesses on its platform economy.
Research and Content Writing
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