Alibaba is one of the largest B2B online marketplaces on the planet with over 190,000 distributor and manufacturer sellers and over 26 million active business buyers from over 200 countries and regions. It opened in July 2019 to U.S. sellers with a 70% increase in US buyers joining over the last year.
We spoke with Alibaba’s President of North America and Europe, John Caplan, about U.S. distributors using Amazon Business as an online marketplace and what their potential alternatives are.
We put some tough questions to Caplan in a recent Wholesale Change episode about Alibaba’s mission is to help small businesses grow and compete in the digital age. Here’s what Caplan told us about the differences between Alibaba’s and Amazon’s business models:
Distribution Strategy Group: What makes Alibaba’s value proposition unique for U.S.-based distributors?
John Caplan: Our mission at Alibaba.com is to help tens of millions of businesses get digital and go global by making it easier for them to do business anywhere. Distributors use Alibaba.com to source, to sell and to grow their business on their own terms. We don’t mandate the rules of the road.
We know the process for B2B buying and selling can be complex. There are lots of uncertainties especially when borders are crossed. That’s why we help businesses streamline their processes and focus on what they do best by digitizing points on the customer journey –inventory management, product display, cross-border translation services, and more – so that manufacturers can focus on making things while distributors can focus on customer relationships and growing with customers.
Distribution buyers use our platform to pull the pallets of goods into their warehouse so they can focus on their own value propositions for their customers. Sellers use it because they want to reach 190 countries, opening up the world and democratizing access.
DSG: A lot of distributors have no or very little experience with exporting. How does Alibaba provide tools to make international sales easier for distributors?
Caplan: Cross-border trade is intimidating, so we’ve done a few specific things to build a platform that has trust dynamics into it. First, if you’re a distributor and selling on our platform, real-time translation makes a big difference. For example, someone can type or speak to you in German and it translates into English for you.
We also have an escrow service so a buyer can feel confident that they’re getting what they ordered before the funds are released. Sellers can feel comfortable that the buyer is verified and is going to pay them. Alibaba will take good care of your customers while bringing them all the demand Alibaba.com offers.
DSG: U.S. distributors tend to think of posting their products online for U.S. customers, but that comes with a lot of complications. How is Alibaba’s value proposition different from Amazon Business’s value proposition?
Caplan: There are a few key differences between what we offer and what other marketplaces offer. First, we are actually a marketplace. We’re not a retailer who pretends to be a marketplace. So, we’re not in competition with distributors. We don’t sell any products. We aren’t here to take any business away from a distributor.
Alibaba is built for B2B trade, not retail. Our customers are businesses. The majority of the goods on our platform are customizable with B2B offerings and the technology is actually built for how B2B trade works. Additionally, sellers who join our platform get global demand. You don’t have to set up multiple storefronts in multiple different marketplaces.
Lastly, we put our money in our business model where our mouth is. Alibaba does not charge a commission on any order. Whether distributors sell a hundred million dollars’ worth of product on our platform or a million dollars’ worth of product, they pay the same fee. Our business model is built around being the ally of business owners globally.
DSG: There’s been a lot of issues around TikTok lately, with the U.S. wanting to act on potential data security issues because they are based in China. Do any of those concerns extend to Alibaba and how do you react to distributors and other customers who ask you about that?
Caplan: Protecting customer data is a top priority of Alibaba.com. We are incredibly focused on making sure our customers’ data is in the appropriate hands, which is their own. Our job is to help businesses sell and source to the world, and we’re doing that effectively.
DSG: It’s hard to imagine why any distributors think selling on Amazon Business is a sustainable model. Since Amazon Business is also a merchant, selling with them is a classic setup for disintermediation. Meaning, Amazon can analyze sales patterns, look at suppliers and take distributors out of the loop. The only way Fulfillment by Amazon (FBA) customers add any value is by supplying Amazon working capital for the inventory in their warehouse. All Amazon needs to do is send the next PO to that distributor’s manufacturer and the manufacturer wins, Amazon wins, the customer wins with a lower price, and the other two intermediaries split that distributor’s margin and come out ahead.
How can distributors be sure Alibaba is not going to get into the merchant business like Amazon?
Caplan: Since the company started 21 years ago, we’ve only invested in building more tools and more ecosystems to help businesses sell more products. We connect business buyers to business sellers.
Alibaba integrates third-party partners. We launched our freight program with Freightos and shipping program by building ShipStation into our platform. Our customers needed payment terms, so we partnered with MSTS. We also host online trade shows to connect multinational retail sellers on the Alibaba.com platform.
Alibaba’s business model is about helping business owners succeed on their terms. We don’t sell products.
DSG: It’s clear that Amazon Business is growing like crazy because they do what other marketplaces don’t. They integrate e-procurement systems and offer their own line of credit. They have the purchasing analytics that departments in big organizations need.
Can Alibaba match Amazon Business’s capabilities for large distributors?
Caplan: All of the work our team does is not about matching somebody else. It’s for the entrepreneur who is driving the Ford 150 to work every morning saying to himself, “I cannot believe how many orders I’m getting cross border that I never had before. It used to be intimidating, and I felt like people were trying to trick me by inviting me to come work with them only to compete with me.”
I spend all my energy thinking about our customers, not thinking about our competitors. That’s why we speak to customers non-stop and we prioritize their asks. Some of the capabilities you mentioned are at the top of the list of things our customers are asking for. We’re working as hard as we can to build and to make those capabilities possible for folks.
We want small businesses to find our little company, Alibaba, with this little platform, Alibaba.com, and see us working our tails off to connect buyers and sellers. We’re building what the distributors and entrepreneurs of America need.
DSG: There are a lot of distributors looking for a partner they can trust that offers some more traditional B2B procurement. The distribution community is eager for an alternative to Amazon Business, but Amazon’s value proposition is compelling for large customers. Distributors don’t trust them, and we don’t believe they should.
Can distributors trust selling products on Alibaba more than on Amazon Business?
Caplan: Trust is earned over time. I don’t assume that anybody should magically say, “Those guys are the good guys.” Trust us based on what we do, not what we say.
So the first thing I can say is for distributors to send me an email and get on my calendar and let’s talk about what your questions are and let me try to help you. If you don’t know Alibaba.com yet, or you don’t know someone at Alibaba but you want to talk to us, we’ll set up time for you to talk to me with our team and ask the tough questions directly.
Also, because both buyers and sellers are our customers, we’re building our platform on trust. We need both parties to be happy. It’s a self-reinforcing circle. As our business continues to expand, our trust continues to expand which is good for the community who is making all the margin on the platform.
DSG: Distribution is clearly missing alternative platforms. In some ways, Alibaba represents a beacon of hope for a solution that distributors can trust that has enormous size and scale.
Are there distributors using Alibaba successfully?
Caplan: Yes. I was talking to an entrepreneur in Fort Lauderdale who uses Alibaba to export his consumer goods business to countries outside the United States. The first time he did it, he thought it would never work and he would never get paid. A couple of million dollars in revenue later, he couldn’t believe 25% of his business is now cross border when it used to be none.
But Alibaba isn’t a get-rich-quick scheme. Being a distributor on Alibaba.com requires work to establish a profile and answer inquiries. Imagine going to a trade show. If you don’t go out and talk to people, you’re not going to get good results.
It’s an opportunity. If someone would like to learn about a company that sold a million dollars’ worth of product, send me an email and I’ll introduce you to them. Trust is earned. Alibaba is an ally to business owners, and we’re going to prove it to you.
Distributors are welcome to reach out to John Caplan at JCaplan@alibaba-inc.com to learn more and get connected buying and selling product on their platform.
As always, reach out to us with any questions and check out our research series with NAW on How Tech Will Transform Wholesale Distribution.