Alibaba and the Smart Business of the Future

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In 1999, when Jack Ma founded alibaba.com, retail and the Internet in China were in a deplorable state. Twenty years later, Alibaba's sales have exceeded one trillion yuan, and its owner has become the richest man in the Celestial Empire. What explains such phenomenal success? Professor Zeng Ming, Jack Ma's right-hand man, responsible for the company's strategy, who was directly involved in its development, shares key secrets that every entrepreneur can adopt. Here is a summary of the book "Alibaba and the Smart Business of the Future" from Smart Reading.

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Alibaba and the Smart Business of the Future 1



How a miracle works
Until 2009, November 11 was a normal autumn day in China. The Chinese jokingly called it Singles' Day: the date is made up of only a few. But in 2009, everything changed - Singles' Day turned into an online shopping day, when all of China is obsessed with shopping. On this day, everyone buys everything, and every year the number of orders only increases. This transformation happened thanks to Alibaba.

Every year, the company breaks its own records. It seemed that the peak was reached in 2016: 175 thousand orders and 120 thousand payments in one second! A year later, Zeng Ming was sitting in front of a computer monitor in the company's office and waiting for midnight - the start of the sales holiday. The time on the clock reset to zero - and then Zeng Ming witnessed the incredible. The numbers on the monitor began to flash at incredible speed. Within 11 seconds, sales immediately increased by 100 million yuan - $ 15 million. After 17 seconds, they exceeded a billion yuan! And 12 minutes after the start of sales, the first parcel was already in the hands of a Shanghai customer. During the day, 812 million parcels were formed, which were to fly around the world. If you put them side by side, they would go around the globe 1,200 times. At the same time, Alibaba is not a retailer, the company does not have its own warehouses where mountains of goods are stored. The parcels came from all over the country and will be distributed throughout the country thanks to carefully thought-out logistics.

The numbers and speeds are mind-boggling, and for a moment Zeng Ming himself thought he was witnessing a financial miracle. But as Alibaba’s chief strategy officer, he also knew that this miracle was the result of careful planning, based on a few solid principles.

What is smart business
How it all began

Alibaba began in 1999 when a young teacher, Jack Ma, gathered several of his friends in Hangzhou and suggested that they create a website that would help serve small and medium businesses. He suggested naming the website after the hero of the fairy tale “One Thousand and One Nights.” In 1999, Jack Ma’s proposal really did sound like a fairy tale: the Internet in China was only available to 1% of the population, and retail trade in a country that had only recently climbed out of its social hole was extremely underdeveloped. Most of the trade was regulated by the state, which had not yet paid attention to small companies, which is what Ma decided to focus on.

Ma understood that in the current circumstances, he and his comrades had to create the entire retail industry in a huge country from scratch, and on a new – online – basis. However, what seemed to be the main obstacle turned out to be the main factor of success: having come with his ideas to an empty place, Jack Ma was free to act. He did not have to force more agile competitors out of business – there were none. He did not create warehouses for goods and a fleet of vehicles to deliver parcels to customers (and this shrewd decision was the future advantage of Alibaba over Amazon). Instead, Alibaba invited merchants to itself, promising them conditions for business. It simply offered them a virtual storefront in which merchants could display their goods, and a guarantee that no one would break this storefront. In addition, sellers could register their goods for free – this was Alibaba’s advantage over its main competitor eBay, which eventually gave in and left the market.

Back in 2003, Alibaba introduced the Taobao platform, which means “treasure hunt” in Chinese, and the name was true: the goods on Taobao were very diverse, which could not help but attract the attention of customers. Back then, Taobao was just a forum where merchants posted photos of their goods to attract the attention of customers. Today, it is a place where more than 10 million sellers do business, selling their goods to 400 million interested buyers. And in 2010, the international AliExpress website was launched, connecting Chinese entrepreneurs with the whole world: another 60 million active buyers and $10 billion in turnover.