Consumers or Businesses – who is going to be your target audience?
Is there any difference in the development of B2B and B2C marketplace?
Today, in eCommerce, Alibaba is the largest business-to-business platform, and Aliexpress is one of the most popular business-to-customer platforms. These Chinese platforms are real magical caves of treasures with their secrets. Wouldn’t it be exciting to uncover some of them?
Then, just say ‘Open Sesame’ and follow us inside the article!
1. Alibaba vs Aliexpress: What’s the Difference?
More than a decade ago, it all started with Alibaba.com, a website created by Jack Ma, a former English teacher. Jack borrowed money from 17 of his friends, former students, and colleagues and with the sum of $60,000, he started this revolutionary business that eventually brought him and his investors billions of dollars.
Today, in 2019, the Alibaba Group is a conglomerate of platforms for Retail, Computing, FinTech, Entertainment, and other services. It controls 56% of the Chinese online retail sales and 8.4% of the global retail eCommerce. To compare, Amazon holds 13.7% of the global market.
BABA is represented by several eCommerce platforms each with its own strengths and peculiarities to successfully cover different customer segments:
But here, we’ll focus only on Alibaba.com and Aliexpress.com.
Alibaba is a business-to-business marketplace where overseas businesses order large volumes of products manufactured specifically for them.
Aliexpress initially was started as a business-to-business portal but quickly expanded to the business-to-consumer and consumer-to-consumer platform. It is open to international retail consumers who buy any number of ready-made products from Chinese sellers.
The main differences between platforms:
|Annual revenue||$1.2 billion||$17 million|
|Suppliers/Sellers geography||International||Mainland China, Russia, Spain, Italy, Turkey, France|
|Target market||Small and medium-sized businesses||Customers and businesses|
|Minimum order quantity (MOQ)||Wholesale, MOQ is required||Retail, no MOQ|
|Nature of products||Mostly custom||Ready-made|
|Shipping||Arranged by Buyer||Arranged by Seller|
|Business model||Membership fee and advertisements||Commission fee, membership, and advertisements|
|Payment method||Mostly Letters of Credit, bank transfer, Western Union||Alipay that partners with 65 financial institutions including MasterCard and Visa|
Do you need to build a B2B or B2C marketplace?
2. The Business Models of Alibaba and Aliexpress
Before designing a website like Alibaba or Aliexpress, you need to consider how the platform will make money.
Aliexpress charges sellers a commission from 5% to 8% of the transaction value. In addition to this, Aliexpress also takes a fixed $1500 for starting or changing the store on the platform. Moreover, advertisements bring around $7 million a year to Aliexpress. The overall estimated annual revenue of Aliexpress is $17 million. Now, the founders try to attract American companies to sell on the platform.
Alibaba.com, on the contrary, does not take fees for listings or transactions. They allow anyone to register for free and the platform plays the role of middleman, regulating the relationship between buyers and sellers. Such an approach allows them to quickly create a huge supplier base that in turn draws new customers to the platform.
In 2019, Alilbaba.com made $1.2 billion. How?
Alibaba’s primary revenue source is paid advertisements and member subscriptions.
Alibaba’s users can stay on a Free subscription package and post up to 50 listings. But because there are so many suppliers with almost identical goods, they are all trying to be higher ranked when customers search for items.
Therefore, many businesses buy a Gold Supplier subscription for several thousand dollars per year. Such a subscription provides access to advanced features and services such as the product showcase, VAT, the refund of payments and other logistical solutions. In addition, Gold status assures customers that the suppliers are serious and trustworthy.
3. Core Features of a Website like Alibaba and Aliexpress
Do B2B and B2C marketplaces have different functionality?
Even though the target audience is different, in general, the features are the same. The exception is the way people fulfill deals – payments and shipments. In other respects, B2B customers expect almost the same user experience they have on B2C platforms. For example, instant online payments (instead of waiting for invoices), smart search (to find the best-suited suppliers) and plenty of ratings and reviews and personalized recommendations so they feel confident in their purchases.
“In China, there are so many small businesses that people don’t make a clear distinction between business and consumer. Small business and consumer behavior are very similar. One person makes the decisions for the whole organization.” – said Jack Ma about B2B marketplace specifics.
Let’s review the core features of most websites like Aliexpress and Alibaba, whether they are B2B or B2C.
1. Registration, Login and Account Creation
New users of sites similar to Alibaba should be able to register in the system by email or social media and at once have an account created. Don’t make customers go through a long registration process that might discourage them from continuing with the purchase.
At Alibaba, each user can be both buyer and seller, so the account easily changes interface depending on the role the user wants to be at the moment. However, ‘sellers’ are usually required to provide their business details which must be verified by the platform Administration. While ‘buyers’ need only to confirm by their emails.
Aliexpress provides separate buyer and seller portals but it is simple to switch back and forth without an additional login. To become a buyer, you can easily register through email and start shopping at once. But to sign up as a seller, you need to provide VAT number, company operating license, the ID number of company legal representative, and to create an account at Alipay. The verification process takes up to two days.
2. Product Listings Creation
One of the biggest differences between ‘seller’ and ‘buyer’ accounts is the ‘Products’ section where sellers post and manage their listings. To start posting listings at Alibaba, sellers need to go through verification providing ‘qualified contacts’ with whom the user has frequently interacted and who are also verified buyers or suppliers with over 2 years’ membership on Alibaba.com. When the connections are confirmed by the referrals, the user can create listings. Such an approach limits the number of fraudsters and increases the trust and security of the platform.
To create a new product listing, a seller should add the Product Name and Description, enter Keywords, upload Photos, select Categories, Payment methods, Delivery time and Packaging details.
At B2C marketplaces, users usually search by products. At B2B marketplaces, users can also lookup for suppliers by entering keywords in the search bar. At Alibaba, there is also an option to search by uploading an image into the search bar which is useful if the user does not know how to explain what she is searching for, or wants to find a similar product quickly. Filters and sorting help users narrow down their search.
Suppliers may search among the requests from buyers who post ‘Request for Quotation.’
4. Checkout Process and Payments
The checkout process should be intuitive and quick. It’s best to provide customers an option to complete the deal without registration. At the same time though, the advantages of becoming a platform member should be clearly explained.
Implement a variety of payment methods but give the first priority to those that are the most popular in the location. Many global eCommerce companies that tried to enter the Chinese market failed because of difficulties using PayPal (due to currency conversion and governmental restrictions). Alibaba then presented its Alipay, which is safe and easy to use in China. Based on the escrow method, Alipay plays the role of intermediary that holds money in a special account and the seller receives the payment only after the buyer confirms that quality items are satisfactorily received.
The payment process at B2B and B2C is different and presents certain challenges to those who want to make a website like Alibaba.
While Aliexpress provides instant online payments through PayPal, Union Pay, Visa, Mastercard, etc., payments at Alibaba are performed through bank transactions or letters of credit. This means that after confirming an order, the buyer and seller have to agree on the payment process via email or in the Alibaba chat. But such manual methods are time-consuming and insecure. Companies usually deal with hundreds of invoices which ends up generating huge costs. Today’s businesses want to minimize costs and waiting time by having an opportunity to pay instantly like at B2C marketplaces. If you are going to build a website like Alibaba, you should consider this and maybe enhance the user experience.
Moreover, the shipment options and costs must be crystal clear before checkout so that the customer will not have to search for the terms elsewhere.
5. Order Management
This is an obligatory section for both buyers and sellers that allows them to track the order details like amounts, status, refund requests, and reviews.
It is very important to create a communication channel between buyers and sellers that will give them an opportunity to quickly ask questions and clarify transaction details. As a rule, marketplaces like Aliexpress use an inner chat. This allows customers and sellers to remain on the site and provides them support in case of any disputes where they can use the message thread as proof.
7. Ratings and Reviews
Reviews are extremely important for online marketplaces. As a rule, suppliers provide similar goods but the price may differ greatly. Customers, therefore, have to check the reviews to find if the seller is reliable.
Because there have been many cases of fraudulent reviews, users are suspicious of feedback. Thus, when you create a website like Alibaba, don’t neglect different methods to verify reviews. These include canceling multiple reviews from a single user or IP-address. For example, we implemented such mechanisms into our client’s review website for local businesses in New Zealand. We separated all unauthorized reviews from the registered users’ reviews.
Ratings also can be assigned automatically by summarizing the transaction history showing how much a supplier has already sold on Alibaba. This is an additional indicator of the trustworthiness of the supplier.
8. Support and Disputes
When you make a website like Alibaba, it is very important to provide technical support for both buyers and sellers, to regulate disputes and to offer other necessary assistance. You can implement a chat or email form to connect users to support members. Customers should be able to raise a claim if the ordered products do not correspond to the description. In such a case, buyers need to have an easy-to-use form that will be delivered to the support team responsible for resolving disputes.
Depending on the business model, there can be different ways of how to set up the monetization process. For instance, if there is a commission-based model, a certain fee should be automatically deducted from each transaction and sent to the marketplace’s account. If it is a subscription-based model, there should be a mechanism that automatically gives access to a certain set of features that control expiration deadlines, notifications, and auto-renewals.
Do you need to estimate your online marketplace project requirements?
4. Secrets of Success and Unique Features of Aliexpress & Alibaba
There are many factors that everyone who wants to start a website like Aliexpress should consider. The demands of the audience depend highly on the economic situation in the country, local traditions, and purchase behavior of customers.
China differs greatly from the US and Europe in its customers’ purchase behavior. It is explained in detail in the book by Duncan Clark “Alibaba: The House That Jack Ma Built.” To sum it up, the main factors that facilitate Alibaba’s success in China are:
- Expensive land that makes life difficult for brick-and-mortar retail chains and makes online platforms more attractive to merchants.
- Chinese online retailers are more customer-centered than Western sellers providing the best shopping experience: bidding on prices, giving discounts, willingly communicating in chat on any questions, putting samples and gifts to the order box, and giving refunds easily in case of negative feedback.
- The grocery market in China was terrible. Alibaba now offers next-day delivery of refrigerated products in more than sixty cities.
- China is known for counterfeit goods, many of which are of excellent quality and are in great demand. In spite of the piracy problem, Chinese replicas contributed a lot to the rise of eCommerce.
- Jack Ma’s deep understanding of cultural peculiarities that differ from the western patterns. That’s why neither eBay nor Amazon could penetrate and stay in the Chinese market.
‘You’ve got to have a set of products uniquely designed for this market by Chinese. It is not a market where you can take a product or a system that works in Europe or the United States and export to China.’ said Meg Whitman, former CEO of eBay.
Alibaba’s founder gained a huge advantage from his knowledge of the local cultural and economic specifics. Alibaba created a whole ecosystem around their websites to provide a seamless online shopping experience — from searching for products to purchase and delivery.
Jack Ma said that Alibaba’s success was based on the ‘iron triangle’: the competitive edge in e-commerce, logistics, and finance.
Here is how these principles are mirrored in the unique features that allow Alibaba and Aliexpress to be at the top:
- Logistics Services
When Alibaba was launched, many delivery firms saw a great opportunity to serve the eCommerce industry. They created a logistics firm called Cainiao with a proprietary information platform that manages logistics, warehouses, and distribution centers across China.
Low-cost delivery made a huge contribution to Alibaba’s growth. Unlike Amazon, Alibaba does not carry warehouses. That allows them to significantly cut operational expenditures. As a result, they can increase their net revenue:
|Total revenue, $||Margin, %||Net revenue, $|
|Amazon||232 billion||3||10 billion|
|Alibaba||53 billion||17||9.2 billion|
Another important success factor is free delivery.
An estimated 61% of shoppers prefer free shipping above all other features and can abandon their cart if the delivery means extra cost.
Aliexpress offers free shipping on more than 75% of its products. The only downside to Aliexpress’ shipping is long delivery times, but even this doesn’t discourage the clients who appreciate low prices and a big selection of goods.
At Alibaba, the situation is different. There is no free shipping and customers are obliged to settle the logistics issues by themselves. Today’s customers are highly demanding and lazy in a good sense. They have gotten used to having all tools online and easy to find. Thus, wholesale customers are expecting a seamless experience that is almost the same as at retail platforms. But they usually buy big volumes of items at the B2B marketplace which is more difficult to ship. When creating a B2B marketplace, the founder should consider easy-to-use shipping and logistics solutions. Thus, Alibaba has a special ‘Logistics service’ that helps buyers pick the proper shipping method and get quotes online.
- Local Payment Method
When eBay and other western juggernauts of eCommerce tried to step into the Chinese market they encountered a serious problem. Payments through PayPal, that had been the main transaction method, were hard to establish in China. The Chinese government regulated all international money transfers to ‘prevent overseas criminals from money laundering through this method.’ The currency conversion was also difficult. Thus, customers could not rely on the marketplaces that used westerns payment methods. Alibaba used this to their advantage and created Alipay – a national payment method that uses the escrow approach for reliable transactions that are easily performed inside the country.
- Product Inspection
When ordering from abroad, not all customers have the opportunity to go and check the product themselves, and when buying from unknown suppliers there is always the risk that you will not receive what you expect. For that reason, Alibaba offers the customer to order an independent inspector to visit the factory, monitor the process, and confirm that the products satisfy the requirements. The inspection is ordered and paid for at the website like other services. Alibaba keeps the money until the instructor provides the report to the customer. The inspection is performed by professional third-party inspectors to avoid any conflict of interest.
- Order Protection
Aliexpress provides ‘Buyer Protection.’ That means that there is a certain period of time during which the order should be delivered and the customer should confirm that everything is suitable. Only then will the system transfer the money to the seller. In case of any problems with the products or a delay in the delivery, the customer can ask for a refund. At B2B marketplaces, payments are mostly transferred in advance. Alibaba addressed this issue with their Trade Assurance feature, a built-in service to protect online orders. If the products purchased from suppliers who participate in the Trade Assurance program are delivered unsatisfactorily, the platform will reimburse the payment to the customer.
5. How to Build a Platform like Alibaba or Aliexpress
What to start with?
To build a website like Aliexpress you need to think about what your product aim, how it will function, and how it is monetized. You might even start working on the list of features and wireframes. It may be frightening and demotivating to see how many features and logic you need to consider. But don’t give up! You don’t need to do everything at once.
Actually, it is advisable for any startup is to verify that its idea truly rocks. You may start with MVP to first prove your idea without large investments.
To create an MVP, you need to choose a basic feature set (for ex., use the list of core features described above), make an effort to promote your startup and launch as soon as you have a minimum viable product. This will allow you to check how it is received by consumers and quickly make improvements in the succeeding versions. The features described above can easily be your MVP list to start with. Just add a touch of uniqueness to your concept!
How to technically implement the project?
To make an eCommerce website like Alibaba or Aliexpress, you can either choose to create it by yourself using one of the website builders or hire a development team to build the platform from scratch. Let’s review the pros and cons of each approach:
Off-the-shelf development is good for those who:
- Need to launch quickly to test their hypothesis and then move to a custom website
- Find that the features provided by the platform cover at least 80% on business needs.
Custom development is good for those who:
- Have already proved their idea and are ready to build a platform that will serve for years to come
- Need more than what is available from existing off-the-shelf providers
anticipate growth and frequent modifications.
- Require a high level of security
- Need unique features and integration with other systems like CRM, ERP, or accounting systems.
6. How to Apply This to Your Business
Creating an eCommerce platform like Alibaba or Aliexpress. — Is it a dream or reality? We hope that after reading this article, you can answer this question with confidence.
It is enough to start with MVP to minimize the cost to build a website like Alibaba or Aliexpress before you verify the idea. To stand out among competitors, you need to add unique features that exceed the customary level of service. Consider your business model and marketing strategy to make your business profitable.
You can use the features provided in this article to identify your high-level requirements.
For implementation, you can choose either custom or off-the-shelf development. Today, you can choose among a wide variety of development companies. Ukraine is one of the top IT outsourcing regions with high-quality specialists and moderate rates.
At Greenice, we have been providing custom development services for more than 10 years. Our team consists of Front-End and Back-End Developers, Project Managers, Business Analysts, QA Engineers, and AI Specialists. eCommerce is our area of expertise and we are ready to discuss your next project!
Need to develop a B2B or B2C marketplace?