With Alibaba’s IPO completed last week, payments leaders are realizing the huge potential impact on B2B payments.
Much more so than Amazon, Alibaba has focused on B2B operations and has proven itself adept at tapping that lucrative space, reports Fortune.com.
“Through Alibaba.com and 1688.com, the company provides to people everywhere access to the Chinese supply chain. This means tinkerers, builders, entrepreneurs, and small businesses can order custom motors and parts from Chinese factories without having to travel there, find a scout, and forge a relationship with a manufacturer before doing business,” the story said. “It opens up the world of international suppliers to people who wouldn’t normally have access to it. They can buy in bulk through Alibaba, which acts as a trusted third party, vouching for the transaction.”
Not only does Alibaba have that B2B advantage, but it can use it as an effective competitive weapon against Amazon.
“Alibaba has an advantage here because of its proximity to so many of the world’s manufacturing assets. The reason Amazon hasn’t focused on it? Because it doesn’t have access to those sellers,” said the Fortune piece, which quoted RBC Capital Markets E-Commerce Analyst Mark Mahaney saying, “Much of it is representative of the differences in their markets and where Chinese products have typically fallen in the supply chain. Amazon and eBay simply have access to different wholesale and B2B products than Alibaba does.”
B2B activity accounted for almost 12 percent of Alibaba revenue in FY 2014, with much of that from buyers outside of China, the story reported. “It is a small piece of Alibaba’s portfolio, relatively speaking, but that’s only because the company is such a behemoth. Alibaba’s wholesale revenue in fiscal 2014 was $1 billion, versus $8 billion from its retail operations,” Fortune said.
The story also pointed out how crowded—and difficult—the B2B space can be. “B2B e-commerce startup Chemdex flamed out spectacularly in the fallout of the dot-com bubble, and was blamed for taking the entire sector down with it. In 2013, B2B ecommerce hit $559 billion, according to Oracle estimates, a far cry from the trillions once predicted,” the story said. “In recent years, a number of U.S. startups have sprung up to fill the gap. Joor and NuOrder do it for the fashion industry. Handshake and Tradeshift do it for a variety of businesses.”