China's visionary B2B: who says the dot-com era is over? Alibaba.com thrives as Chinese imports and exports boom. CEO Jack Ma has a vision: helping SMEs buy and sell goods through his sites - Upfront - Company Profile

Japan, Inc., May, 2003 by Sumie Kawakami

NOW THAT RED HERRING is gone, one may think all the buzz about dot-coms and dot-bombs is finally over. Not so fast. China-based Alibaba.com is not only alive and kicking, but also taking giant strides in tire global e-commerce industry.

Everyone knows China is becoming a huge exporter of manufactured goods and services, but how can an importer outside of China find reliable suppliers among the millions of Chinese manufacturers? Just click on Alibaba.com, boasts CEO, Jack Ma.

Founded in 1999, B2B e-commerce site Alibaba.com now claims to have 1.7 million users from more than 216 countries. Click on the site and you will find Chinese suppliers of automobile parts, jogging pants, electric scooters, UBS flash memories and even an educational toy that helps children learn the holy Koran. Buyers can browse company information and trade leads in 27 industry categories and 700 product sub-categories.

"Alibaba.com is getting stronger and stronger," the 39-year-old Ma proudly declares. "There are at least one million businesses in China wanting to sell things abroad." But most of them are small- and medium-sized enterprises (SMEs) that usually have no sales channels outside of their home country. "The only thing they could do before is travel around the world to open exhibitions or join trade fairs. That's too expensive for SMEs. For them, the Web is the best way to sell," explains Ma.

A significant part of the company's business lies in Chinese to Chinese interactions, which is yet another area of rapid growth. Alibaba.com has 1.2 million users in China alone.

In addition, Alibaba.com now has a Japanese site. In the first six months of its existence, the site boasts double digit growth in the number of Japanese subscribers. While backed by established Japanese partners such as Nikkei BP, Sumitomo-Mitsui Bank and the Japan External Trade Organization (JETRO), it has also raised fresh money from a Japanese venture capital firm, Japan Asia Investment Company (JAIC).

'Crazy' Ma

Asiaweek magazine once affectionately called Alibaba.com's energetic CEO "Crazy" Ma--perhaps quite rightly. Ma and his team of 18 founders raised $25 million from big-name venture capital firms--Softbank, Fidelity and Goldman Sachs, to name a few--smack in the middle of the dot-com bubble. From the beginning, however, Ma explained to his investors that Alibaba.com would make no money during its first three years, or until the company acquired 1 million subscribers. "I told them at the very first meeting, 'Don't push us. We know what we are doing,'" recalls Ma. And he flatly admits that his company didn't make money until 2002.

But Ma had reasons to believe his business model would work. For one thing, he already had Internet business experience by the time he and his colleagues founded Alibaba.com. Born and raised in Hangzhou, a two-hour drive from Shanghai, Ma was an English teacher who wanted to get into the business world. In 1995, the year Steve Jobs founded Amazon.com in the US, Ma personally raised $2,000 from his relatives and friends to launch Chinapage.com, which he says was China's first Internet company. Later, he was invited to help establish another Internet company by the Ministry of Foreign Trade and Economic Cooperation (MFYEC). That gave him hands-on experience in working with the government, but he called it quits after 14 months. "I realized that you can never expect a government company to grow. So I left to set up my own," says Ma.

Also, Ma knew China's accession to the World Trade Organization (WTO) would come eventually. "It wasn't whether we should go or not, but where we should go," he says. In 2001, the year China joined the WTO, that country's trade performance remained outstandingly strong for both merchandise and services trade. In the ranking of merchandise exporters and importers, China rose to number four, ahead of Canada, according to the WTO. In 2002, China's imports and exports exceeded $620 billion. Exports rose 22.3 percent to $325.57 billion, and imports grew 21.2 percent to $295.22 billion, according to Chinese customs statistics.

Perhaps most importantly, Ma argues that his company knows what its Chinese customers want: "In the dot-com days, everyone had beautiful Power Point documents. But they don't want transactions; they don't even understand what transaction means. They need C = customers, and B = business," says Ma.

Ma feels global companies tend to focus too much on big companies. "SMEs are the future of Asia, and the future of China. Many people believe in big companies, saying we should get more money from big companies, we should do transactions with them, et cetera. But I disagree. Asia is Asia. China is china. Unfortunately, in Asia, the market is too fragmented that we have no standard. There is no standard for e-commerce, SMEs, or B2B. Our job is to establish the standard. We cannot create beautiful Power Points, but we know how to listen to our customers." And the company does listen. Alibaba's sales staff is encouraged to go door-to-door to reach out to company managers and to inspect factories.