After its hugely successful IPO in 2014, Alibaba cemented itself as King of the Hill in the Chinese manufacturing & ecommerce field. Without a doubt, every company or individual that sources, imports, and sells private label products from China on any ecommerce platform knows the name Alibaba. In fact, Jack Ma, the founder of Alibaba is worth about $34 billion as a result of the staggering popularity of his company. But is Alibaba getting pushed off the top of the hill by the scrappy upstart?
Before we address the new kid on the block, let’s not forget the company that started it all, and is still going very strong: Global Sources.
The fact that Global Sources has been around for about 47 years may come as a shock to most people . It was started in 1970 by Merle Hinrichs and Joseph Bendy. In its earliest iteration, Global Sources was a print catalog of Asian factories and trading companies. The current directory format they offer wasn’t launched until 2003, at which time they also started to dabble in putting on trade shows and conventions. To this day, Global Sources organizes Spring and Fall summits that usually coincide with the Canton Fair.
Attending these trade shows & summits gives potential buyers the opportunity to meet and vet suppliers as well as evaluate their products in person. Sam Boyd, founder of Guided Imports typically speaks at these events and each year they seem to get more popular, which makes them a great place to network and build relationships with suppliers.
The overall consensus among buyers and importers is that Global Sources offers higher quality and better vetted suppliers. They also have more experience in the export market and tend to be a bit more helpful when dealing with international buyers.
Since Global Sources was founded by Americans, it has a more familiar feel and user experience to most Western buyers. Another reason why Global Sources is perceived as a better B2B directory is that they are focused on specific sectors: electronics, fashion and accessories, and home and gift items. This means that they are experts in those areas. Whereas Alibaba falls under the category of “jack of all, master of none”.
Alibaba, while still the 800 pound gorilla, has seen a bit of a decline in market share lately due to both competition and the fact that they were added to the “blacklist” by the United States Trade Representative arm of the government.
After being taken off the list 5 years ago, they were added back on in December of 2016 due to having an unacceptable level of counterfeit and pirated goods.This can be the kiss of death for many companies, but to Alibaba’s credit they are going all-in on trying to fix the problem. They are aware they have an authenticity problem, especially in the fashion niches, and they are spending tens of millions of dollars hiring specialized employees to combat this trend.
However, it has been a recurring theme with Alibaba, and when Jack Ma, Alibaba’s founder, boasted in 2014 that fakes were often “better quality and better price than the real names” — it didn’t exactly bode well for Alibaba’s chances of staying off the Blacklist.
Another knock on Alibaba is they oversimplify the sourcing process. A lot. Inexperienced buyers often times end up losing a lot of money because of: poor quality products, dubious supplier quality claims, in-house sourcing agents who barely speak English, and just overall confusion regarding the process.
There is also the matter of the controversial “Gold Supplier”. Many buyers perceive this Gold “rating” as a vote of confidence by Alibaba itself, when in reality it’s not so much a rating as a designation that any supplier can buy outright. Granted, they now have to go through an Onsite Check before they can get a Gold rating, but this does nothing to verify quality.
The New King of the Hill (sort of)
Getting back to the scrappy upstart, the new kid on the block, the up-and-comer: ok, this was a bit of hyperbole. This company has been around 10 years and they are FAR more like Amazon than they are Alibaba. But that may be changing. Jingdong, or JD as they are commonly known, captured 25% of the B2C market last year, 2nd only to Alibaba. And as you can see from the chart below, they have actually surpassed Alibaba in revenue and are trending in the right direction.
JD is essentially the Amazon of the East. Their business model is much more like Amazon than it is Alibaba. In fact, JD uses drones to deliver packages and has their own version of the home assisted speaker like Echo and Alexa: the fantastically named DingDong A1!
JD also has their own logistics and shipping companies, fulfillment warehouses, and even an FBA-like program for 3rd party sellers.
While Alibaba ad JD operate on fundamentally different business models, it is not too far fetched to say that their will be overlap between them very soon, as one, or both of them, moves into the other’s niche in the near future.
B2B product sales, like Alibaba and Global Sources focus on, are slowing while B2C product sales, like Amazon and JD, are growing. It would make sense for Alibaba to reach further towards JD’s bread and butter with one of their companies: Taobao or Tmall.
Another hot topic in ecommerce is product quality: one of Alibaba’s less-than-stellar perceived qualities. Aside from being recently added the the US trade Blacklist, they have been chided for not more tightly controlling the quality of the suppliers they and products they list. Granted, they have thousands of suppliers listed on their site and Taobao has hundreds of thousands of products for sale.
Nevertheless, quality will, it seems, always be a point of contention with Alibaba. JD, on the other hand, operates almost entirely in-house. They have a reputation for delivering quality goods and delivering them quickly. By managing the entire supply chain, JD states they ensure authenticity and quality and slo offer better service than their competitors. So far, it’s looking like they are spot on.
In any case, it will be interesting to watch what happens in this sector as competition heats up and the big boys try and stake their claim as King of the Hill in the ecommerce industry as it relates to China sourcing.
