How Alibaba’s Taobao solved the trust problem in China and changed the way people shop

From humble beginnings as a local platform going up against then-incumbent eBay, Alibaba is now the clear leader in China’s vast US$1 trillion e-commerce market

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The rapid ascent of Taobao Marketplace and Tmall has helped nurture billion-dollar courier companies like SF Express and ZTO Express, which are capable of delivering packages from Shenzhen to Beijing in less than 24 hours. Photo: Agence France-Presse

Zen Sooin Hong KongandLi Taoin Shenzhen

Published: 7:30am, 24 Aug 2018Updated: 11:48am, 24 Aug 2018

Every month, some 634 million consumers – nearly half of China’s population – pull up Alibaba Group Holding’s Taobao Marketplace and Tmall e-commerce apps on their smartphones. Whether you are a farmer after crop fertiliser or a new homeowner looking to spend 18,000 yuan (US$2,630) on a 15-piece, Victorian-style furniture set, there is something for everyone.

In China, Alibaba has become synonymous with e-commerce, while its Taobao and Tmall platforms are household names. The Hangzhou-based firm, which is the parent company of the South China Morning Post, has a market capitalisation of about US$460 billion, making it the world’s second most valuable e-commerce company after Seattle-based Amazon.com.

The rapid ascent of Taobao – which translates to “searching for treasure” in Mandarin – and Tmall has helped nurture billion-dollar courier companies like SF Express and ZTO Express, which are capable of delivering packages from Shenzhen to Beijing in less than 24 hours. Taobao is Alibaba’s consumer-to-consumer platform, while Tmall is a business-to-consumer platform where brands sell directly to consumers.

Scattered across the country are more than 2,000 so-called Taobao villages, where residents depend on Taobao for a living by producing and selling their home-grown produce and wares on the platform, according to the China Internet Report co-authored by the Post, its tech news site Abacus and San Francisco-based venture capital firm 500 Startups.

On Thursday, Alibaba reported a 61 per cent increase in revenue to 80.9 billion yuan (US$11.8 billion) for the quarter ended June 30, driven by the company’s main e-commerce business even as it steps up investment in on-demand local services and other activities under its “New Retail” strategy.

“Our New Retail initiatives are substantially growing Alibaba’s total addressable market in e-commerce,” Joseph Tsai, executive vice-chairman at Alibaba, said in a conference call on Thursday. “Alibaba’s three-pronged consumer offering in retail, entertainment and local services will be the long-term drivers of value creation, as the Chinese middle class expands and more of these consumers demand a higher-quality lifestyle.”