In Hangzhou, the influence of Alibaba Group is everywhere. If you've never heard of the company before, its ticker on the NYSE is BABA. Take a minute and go look at its recent performance. It's recently been on a tear. You may be asking, "But there's a trade war! How can that be?" Or you might be one of those that says, "Everything in China is a scam!"
Well, let me give you a little example of what Alibaba does to increase its revenues. Something that what most people think of as its American equivalent - Amazon (AMZN) - simply does not do. And will never do. That's because even though people often refer to Alibaba as the "Chinese Amazon" the reality of the situation could not be more different. In fact, they have completely different business models.
Take for instance this small mom n’ pop shop for selling drinks, snacks & household goods:
In any other Chinese city, these kinds of establishments are small, drab and a little dated looking. That’s largely because the family that runs the shop renovates the place when they first open for business, life happens, and then they never really get around to doing much updating afterwards.
They don’t realize it, but that passive approach drastically affects the revenue of their business.
In contrast, Alibaba partners with these small shops in a pilot program that started in Hangzhou, but one would imagine will soon extend across all of China.
They provide signage, lighting, displays, low-interest loans for visi-coolers and other vital equipment. They even consult on what inventory to stock, all of course sourced from Taobao Marketplace or Tmall.com & Tmall Global and other Alibaba platforms.
Et voila!
You have a bright, beautiful, enticing storefront that literally beckons you inside to buy stuff.
Recently, while on a business trip to Hangzhou, I went here to buy beer, snacks, and fruit. I honestly don’t think I would have even set foot inside the place had it not been “BABA-fied.”
Let alone written a blog post about it!
That's the power of the Alibaba business model. They truly want to cultivate lifetime clients for their services. What they provide to the Chinese economy is simply a BaaP, Business-as-a-Platform that provides end-to-end solutions for the entire business from logistics, inventory, payment, data analysis, accounting, advertising, everything. And every day, their offerings get a little wee bit more powerful from the avalanche of data that comes pouring into their datasets from all over China.
Alibaba is like a neural network for Chinese businesses. If you want to participate, it's easy. You just have to give up a little bit of your margin to BABA. I'm pretty sure that you will be more than compensated for what you give up.
