It's our turn to copy China
Chinese companies are known for copying from the West and adapting products and business models to the local Chinese market. This practice is known as ‘Shanzhai’, a word used mostly...
Although, for example, Alibaba adopted aneBay-like model at first, it transformed instantly. Back in 2003, eBay enteredChina by acquiring the Chinese EachNet - at the time China’s top e-commercesite. At that point eBay/EachNet owned 75% of the Chinese ecommerce market,while Alibaba just launched Taobao that same year. Three years later, Taobaohad 75% market share and eBay China fell back to 7%.
This had little to do with marketprotectionism as is often said of Chinese internet copycats. The real secret ofAlibaba, on the contrary, is exemplary of how Chinese companies have outsmartedWestern companies in China so far, and how they will logically now ‘copy’ theirown model for success in our own backyard – Europe. Their model has depended ontheir ability to add continuous micro-innovations, which is touching the livesof hundreds of millions.
As early as 2003, Jack Maintroduced 4 business concepts that were almost opposite from businesspractices in the West and unveils 4 best-practices of how hundreds of Chinesecompanies have managed to stay ahead through smart innovation.
1. Start with trust
Back in 2003, China wasa pure cash-money society. Credit cards, as used by eBay, were unpopular as local banks wouldlevy a 15% interest rate. Chinese bank managers didn’t believe in onlinebusiness either, so no one would give Alibaba a banking license.
But Jack Mawas determined that without trust in payments, ecommerce would simply not bepossible. With that vision, he decided to set-up Alipay, like a true bandit. Itwas 100% illegal and he faced a high probability of imprisonment in China. Hemade deals with all Chinese banks and China Post to allow Taobao clients toopen and deposit money in their own Alipay account. The money was released tothe seller after the buyer had received the goods in good order. One by one,Alibaba earned the trust of millions.
2. Enrich your customers
Jack knew Alibabafirst had to help customers make money before they could make money themselves. eBay’sbusiness model was to charge the sellers to post a listing, whereas Alibabamade online listings free, which flooded the Taobao site with many moreproducts. Alibaba’s business model was not to take the money from the smallersellers, but charge for Ads to big brands who could afford it. As for buyers,Alibaba offered them to invest time. Buyers could give feedback and ratesellers, and hereby earn discounts on goods, services or shipping. Buyer andseller were either saving or making money on Taobao, and at same time creatingmore transparency to enhance the trust of suppliers, once again.
3. Comfort as a Service
For a communistcountry, it could surprise to hear how customer centric China has become.Chinese companies understood early on that customers are the lifeblood of thecompany, and they need to be at the centre of the business. In the West,customers that need to go through a maze of phone dial-in options beforetalking to a real person are not an exception. Customer service is not our corebusiness we tell ourselves and our shareholders.
Alibaba instead created in2004 Aliwangwang, an instant messaging system to connect buyers and sellerswith each other. Because business is about people first. Alibaba provided free business trainings tosellers and offered a special code system to manage all their online shops. Tobuyers they gave a 7-day free return policy, which is more common today. But 15years ago, Alibaba already set the standard for China for customer service andkeep doing so today for example by providing a loan in matter of seconds toconsumers solely based on purchasing and credit history. Chinese companiesthink of what the customer likes and dislikes as a quest for innovation andcreating new services.
4. Ecosystem venturing
With the customer atthe centre of the business, Alibaba has been constantly seeking innovative waysto facilitate their operations and give customers a better shopping experience.That mission was the basis to expand its businesses. Unlike western business,we often see an ecosystem as partners and alliances we need to keep happy andinformed. Alibaba, in contrast, constantly builds or invests into businessesand industries affecting the customer journey. Examples are Alimama asadvertisement platform, Taobao Ke facilitates external sales teams for clients,Video promotion is done through Youku-Tudou, Ali Micro-finance provides smallloans and Cainiao is a Smart Logistics Network to make deliveries moreefficient for consumers. The benefit of having skin in the game by gettingdeeply involved in the ecosystem gives Chinese companies a much better sense ofwhat is really going on in the overall industry and where money can be made, ornot. Chinese companies act like octopi with a grip on every moving part intheir habitat, while Western companies are divesting ever more businesses.
These four key opposing mindsets Alibabadeveloped to fight and win against eBay in China are common to most Chinesedigital companies today. It makes them strong, smart and agile. Just like Chinacopied the Western business models, maybe now it’s time for us to copy theirsand ask ourselves these questions:
- How can we get customers to trust us more?
- How can we enrich them?
- How can we give them more comfort?
- How can we invest tounderstand them better?
(Picture by leighklotz on flickr)