On Top of the e-Commerce World
Jack Ma's Alibaba.com helps 45 millions SMEs sell their goods in the global marketplace. Now he wants to help SMEs take their businesses even further.
On Top of the e-Commerce WorldBy Benjamin Chiang
From CommonWealth Magazine (vol. 437 )
At the Asia-Pacific Economic Cooperation (APEC) forum in Singapore in mid-November, heads of state hobnobbed and rubbed shoulders with corporate leaders.
In the wake of the global financial crisis, national governments were mulling schemes to boost consumer confidence.
Addressing a rather depressed meeting of business leaders at the APEC summit, the diminutive and wiry Jack Ma emphatically appealed to his audience that "all that small- and medium-sized enterprises need is loans of US$50,000, not US$20 million. I strongly urge governments and banks to establish a new financial infrastructure." Ma's remarks struck a chord with the more than 300 government representatives and corporate executives in the audience, triggering immediate feedback.
The 45-year-old Ma ranks among just a handful of Chinese entrepreneurs who have made it into the APEC Business Advisory Council, a private sector body that advises APEC leaders on business-related matters.
Within a decade, Ma, a former English teacher, built China-based Alibaba.com into the world's biggest online B-to-B commerce website. As many as 45 million small- and medium-sized companies in China and some 240 countries and regions around the world use Alibaba to connect to buyers and suppliers in China and abroad. In 2008, Alibaba's revenue topped 3 billion yuan, having quadrupled in three years.
As the Alibaba Group embarked on its exponential growth, Ma founded eBay competitor Taobao and AliPay, a third-party online payment system similar to PayPal.
"Ma's personality marries idealism with pragmatism," says AliPay President Shao Xiaofeng, who has been a close acquaintance of Ma's for almost 30 years. Shao describes him as an entrepreneur with passion and the ability to execute.
Young and Out of Luck
Originally Ma was just a young man out of luck, but he firmly believed in his dreams and would pursue them with firm resolve, never giving up on himself.
At the age of 18 Ma made his first attempt at passing the college entrance exam, but failed due to his extremely poor math scores. He made another futile attempt the following year before finally – barely -- making the grade in his third entrance exam a year later. At the age of 31, he gave up his secure job as an English teacher to found two companies that folded, but the failures did not extinguish his dream of making e-commerce big in China, which led to the founding of Alibaba in 1999.
In the company's early days, large Internet businesses from the United States and elsewhere tried to gain a foothold in China with similar business-to-business e-commerce services. But Ma, who believes in the motto "small is beautiful," was able to grow Alibaba at the expense of the foreign giants.
"Ma attaches importance to SMEs. He truly implanted customer values into Alibaba's DNA," notes Alibaba CEO Wei Zhe.
Alibaba creates service innovations based on customers' needs. In close succession, Alibaba developed a trust pass system, which helps SMEs establish their credit ratings and evaluate the creditworthiness of companies they trade with, and the "trade manager" application, which enables instant messaging and online conversations between trade partners. Both features have been a hit with Alibaba users.
"Ma is the best representative for China's SMEs. He understands the predicaments of small companies very well," observes Tong Guili, deputy mayor of Hangzhou, where Alibaba is headquartered.
"During the past decade we ran Alibaba for mere survival, but now we want to help SMEs get into the international market," says Ma. Having started out as a small business owner himself, Ma knows what SMEs are up against. "They can't borrow money and they don't have the ability to trade internationally," he says matter-of-factly.
Well aware of the lack of e-commerce skills among SMEs despite the Internet's explosive growth in China, Ma founded the Ali-Institute in September 2004 to train e-commerce workers. In cooperation with more than 500 schools, the institute has so far trained more than 50,000 people in new business startup courses and job-oriented training sessions. The institute plans to train as many as one million people in the future.
Ma is also eyeing the market potential of Taiwan's SMEs and their industrial supply chains. In July last year, Alibaba opened a Taiwan branch that assists small companies in marketing their products overseas.
Customer Needs Represent Market Niches
Now that Alibaba has become the biggest B-2-B website, all of China is watching Ma as he prepares his next step.
"Alibaba is zeroing in on small company loans. On the one hand it is helping its customers, but it is also raising its own profile," observes a business analyst with a Hong Kong-based foreign company. He notes that Ma's business model is based on providing services from the customer perspective.
Two years ago, Alibaba began to cooperate with banks, launching the Ali-Loan loan assistance program. Banks use the credit ratings that SMEs have built through their transactions via Alibaba's China Marketplace as a reference when reviewing loan applications. The program also includes joint liability loans under which several small companies form a group to jointly borrow money from the bank and mutually guarantee the loans. Ma proudly hails the program's success. "As of end of June this year, we helped more than 1,400 companies get loans worth a total of 2.6 billion yuan."
Promoting Financing for the Poor
In August this year, Ali-Loan expanded its financing services, gaining six more banks as cooperation partners in addition to Industrial and Commercial Bank of China (ICBC) and China Construction Bank (CCB). The company is also extending its feelers toward overseas markets.
Accurately observing the potential of India and other emerging markets in South Asia, Ma has teamed up with Nobel Peace Prize laureate Muhammad Yunus, who pioneered micro-loan community banking for the poor. Alibaba is getting ready to offer financial services in these emerging markets.
"Ma wants to establish a new financial system that allows financing services for the poor to reach every single person," Yunus points out.
In China, Ma is widely considered as a model entrepreneur in the SME sector. Whenever Ma addresses an audience, people are eager to ask him what it takes to become a successful entrepreneur.
"I am a crazy guy, you should never forget to believe in your dream from day one," is how Ma likes to encourage others.
While Ma impresses with his entrepreneurial visions, he does not forget his humble beginnings. The Alibaba headquarters may have moved into a technology park on the banks of the Qiantang River in Hangzhou, but whenever the Group launches a new venture, Ma gathers its top executives at his old apartment at Hangzhou's West Lake where Alibaba was born 10 years ago, lest they forget what the company's corporate vision was in the first place.
Translated from the Chinese by Susanne Ganz