Doing Business in China: Alibaba Taobao Case Analysis

This case study analyzes Alibaba Taobao, focusing on its value proposition, business model, customer segments, needs, and pricing strategies within the Chinese market. The analysis explores how Taobao, a C2C platform, and its B2C counterpart, TMall, have achieved dominance. It examines the company's business model, which includes advertising revenue and the use of Alipay for secure transactions. The study also details the customer segmentation based on geographic, demographic, and psychographic factors, highlighting the focus on millennials. Furthermore, it discusses Alibaba's pricing strategy, which emphasizes wholesale prices and economic ranges, contributing to its global success. The conclusion summarizes Alibaba Taobao's value proposition in terms of convenience, accessibility, brand, risk reduction, and customization, and highlights its unique, scalable, and profitable business model.

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Business case analysis

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Table of Contents
Introduction................................................................................................................................2
Value Proposition Analysis........................................................................................................2
Business Model of Alibaba Taobao.......................................................................................2
Customer Segment.................................................................................................................3
Needs Focus...........................................................................................................................3
Price Focus.............................................................................................................................4
Conclusion..................................................................................................................................4
References..................................................................................................................................5

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Case Analysis on Alibaba Company
Introduction
Alibaba Taobao (search for treasure) has various fixed price seller running C2C (Consumer to
Consumer) online marketplace in China. Nearly 299 million people imitate to the daily active users of
Taobao making it one of the most trafficked website globally (Smith, 2020). In 2008, Taobao also
presents its B2C (Business to Consumer) platform called as TMall so as to complement its C2C
marketplace. Taobao was more emphasized towards small individual entrepreneurs and sellers
whereas T-Mall takes on the accountability of bigger organisations.
Value Proposition Analysis
In relation to value proposition analysis of Alibaba Taobao, it is important to explore its
business model, customer segment, needs and pricing. A value proposition is a promise of value to be
delivered, communicated, and acknowledged. It also helps a brand to achieve competitive advantage
in a greater saturated market and era of globalisation (Matthyssens et al, 2016).
Company analysis reflects that the company has been providing the biggest online business
platform to not only to the customers but the retailers as well to offer the range of goods by also
eliminating the domestic boundaries. Other than this the value reflected through offered customisation
to the customers. Moreover, At present, Taobao is the biggest website of Alibaba lists hundreds of
millions of products and services from lots of sellers and design its categories as per the typical
structure of a Chinese departmental store, with discrete sections for men’s and women’s departments.
Business Model of Alibaba Taobao
Developing a business model concerns with drawing out the course to make ongoing value
for the consumers. It helps an organisation to align its activities by understanding the potential trade-
offs. One of the key factors that contributed to Taobao growth is its business model and when it
comes into Chinese market, it was the first platform of such type in the country. Taobao is a
marketplace, not a seller and this makes its similar to eBay rather than Amazon, however, Taobao
does not take commission from the sellers alike eBay and this is one of the reasons of company
tremendous contribution to its achievement in the Chinese market. In addition, the business model of

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Alibaba Taobao is selling advertisement rather than taking of commission. Alibaba Taobao also
emphasis efforts on huge promotion and earned its goodwill in collaboration with the media that was
extended in China before the internet (Zhang & Wang, 2018). To spread its business mission, Taobao
also associates with leading TV shows as well as movies.
Earlier, Taobao only covers Consumer to Consumer market (C2C), however, the company
strengthen its business model in 2008 by introducing itself as TMall with offering B2C platform in the
country. The website of Taobao also generates revenue with proposing promotional and other services
that assist seller to standout from a crowd of other groups, however, with introduction of TMall, there
was a change in the revenue model as targeting towards bigger sellers while charging various fees
together with the deposits, a yearly fee and a per transaction commission (Zhang & Wang, 2018). In
addition, Taobao also used built-in secure payment system of Alibaba known as Alipay so as to make
safe online payments as this system provides both the seller and the buyer a assurance of good product
and payment.
Customer Segment
With the constant rise in consumer expectations, brand and sellers required to adapt their
strategies to drive awareness, engagement and consumer loyalty.
The customer segment of Alibaba Taobao (both B2C and C2C) is stated below in the table –
Needs Focus
Here, the focus of Alibaba Taobao has moved to millennials with the existing demographics
and now considering for the most of shoppers and 30 percent of traders on the platform. According to
Geographic Lidl
Region More than 200 countries
Density Rural and urban
Demographic
Gender Male and Female
Age 18 and older
Income Group Higher and middle income
group
Psychographic
Social Class Upper, Middle class, working
class, lower class
Personality Easy-going, striving and firm
Lifestyle Submissive, Explorer, Aspirer,
Succeder, Mainstreamer and
Crusader

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the marketing chief of Alibaba, the new generation has transformed the approach individuals use
Taobao, which no longer a place for bargain purchase, however, a platform to home customised and
unique produces. In the Taobao marketplace, young people are the key constituent where the widely
held shoppers come from post-80s and post-90s generations and this number are rising day by day
(Long, 2017). Furthermore, the Alibaba group also come up with major structural changes to the
business with focusing on rising customer to manufacturer (C2M) business.
Needs and wants that are predicted for the customers of Alibaba are large range of products
along with high quality product for economical ranges. The customer are looking for most of the
product at one platform in reasonable prices. Moreover, the customer needs also reflect innovative
and interesting products which may be unique and available delivery in all the nations
Price Focus
According to Liu (2019), Alibaba goals to serve 1 billion consumers a year by 2024. There is
a lower relative price focus in case of Alibaba Taobao as on its platform, traders to sell products in
masses at wholesale price to small or medium-sized companies world-wide, who then resell them for
a revenue in their local marketplaces. In addition, the company have a much lower price on the
website than its competitors attracting a lot of customers around the globe.
The company has considered the strategy of easy pay and lower prices. The company believes
in offered economic ranges to the customer and this has tended to increase the number of sales figure
to the company. Considering the pricing model, it can be said that one of its competitor is eBay and
amazon due to similar pricing model. However, it has been identified that the gross merchandising g
value of Alibaba was quite higher that than of amazon and eBay.
Conclusion
Alibaba is a famous global trade facilitator in China and various other nations and the only
cause for Alibaba achievement is because of its e-commerce business inside China: TMall and
Taobao. The business model of Alibaba is really unique, scalable and profitable with increasing
momentum together with the advantages in the newer markets. In short, Alibaba Taobao value
proposition can be understood in terms of convenience, accessibility, brand & status, risk reduction
and customization.

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References
Long, D. (2017). Alibaba’s Taobao shifts focus to China’s 900 million millennials as it taps into
maker culture. Retrieved from https://www.thedrum.com/news/2017/08/15/alibaba-s-taobao-
shifts-focus-china-s-900-million-millennials-it-taps-maker-culture
Lui, E. (2019). Alibaba Aims to Serve 1 Billion Customers a Year by 2024. Retrieved from
https://www.barrons.com/articles/alibaba-aims-to-serve-1-billion-customers-a-year-by-2024-
51569349858
Matthyssens, P., Bocconcelli, R., Pagano, A., & Quintens, L. (2016). Aligning marketing and
purchasing for new value creation. Industrial Marketing Management, 52(1s), 60-73.
Smith, C. (2020). 30 Amazing Taobao Statistics and Facts (2020) | By the Numbers. Retrieved from
https://expandedramblings.com/index.php/taobao-statistics/
statista.com. (2019). Annual revenue of Alibaba Group from 2010 to 2019. Retrieved from
https://www.statista.com/statistics/225614/net-revenue-of-alibaba/
Zhang, Q., & Wang, Y. (2018). Struggling towards virtuous coevolution: institutional and strategic
works of Alibaba in building the Taobao e-commerce ecosystem. Asian Business &
Management, 17(3), 208-242.