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Interview with Mr David Wei

Mr David Wei
Mr David Wei
CEO
Alibaba.com (Alibaba Group)
Alibaba.com (Alibaba Group)

Headquartered in Hangzhou in eastern China, Alibaba.com (HKSE: 1688), a member of the Alibaba Group of companies, is one of the world's premier e-commerce brands. Jack Ma, lead founder and chairman, and 18 other founders launched Alibaba.com in his Hangzhou apartment in 1999. Originally Alibaba.com operated as a bulletin board service for businesses to post buy and sell trade leads, and later became a vibrant marketplace for small and medium enterprises around the world to identify potential trading partners and interact with each other to conduct business online. Mr David Wei is the Chief Executive Officer of Alibaba.com. He joined Alibaba Group in November 2006 as the president of the B2B business division and as an executive vice-president of Alibaba Group. Mr Wei was the president, from 2002 to 2006, and Chief Financial Officer, from 2000 to 2002, of B&Q China, a subsidiary of Kingfisher Plc, a leading home improvement retailer in Europe and Asia. Under his leadership, B&Q China grew to become China's largest home improvement retailer. From 2003 to 2006, he was also the Chief Representative for Kingfisher's China sourcing office, Kingfisher Asia Ltd. Mr Wei also served as the Managing Director and head of Investment Banking for Orient Securities Co. from 1998 to 2000, and as a Corporate Finance Manager at Coopers & Lybrand, now part of PriceWaterhouseCoopers, from 1995 to 1998. He holds non-executive directorship positions in HSBC Bank (China) Company Limited and the China Advisory Board of IMI plc, a FTSE 250 company. On academic front, Mr Wei holds a bachelor degree in International Business Management from Shanghai International Studies University. In Interview with Face2Face team, Mr David Wei shares his views elucidating potential of B2B vis-à-vis B2C segment.

What are the services offered by Alibaba in China, and in other countries?

Alibaba.com provides an efficient, trusted platform connecting small and medium buyers and suppliers from around the world. We operate two marketplaces: our international marketplace (www.alibaba.com) focuses on global importers and exporters and our China marketplace (www.alibaba.com.cn) focuses on suppliers and buyers trading domestically in China. Together our marketplaces form a community of more than 24 million members from over 200 countries and regions.

 

What are your future plans for adding more services for your customers?

We believe user loyalty and activity are critical to the success of our marketplaces so we will continue to develop and introduce new features and tools for both buyers and suppliers. Following are a few of the many features and services we are working on right now to add more value to our members and make doing business on the Internet even easier:
  • We will further facilitate communications among our users by enhancing our instant message service, online forums and other communication services.

  • China’s market is not just an export market, with a raising middle class it also offers huge opportunities for global exporters to sell into China. Alibaba.com will help SMEs in India and around the world tap into China’s domestic marketplace.

  • Our sister company, Alipay, operates China’s leading online payment service based on an escrow system. We will launch Alipay on Alibaba.com’s platform to help our members with small transactions, such as paying for product samples, which bank letters of credit traditionally don’t cover.

  • We will continue to expand our tradeshow partnership program which aims to unite the online and offline trade communities, providing global buyers and sellers with more opportunities to connect and trade. Alibaba.com currently partners with some of the world’s best tradeshow organizers including Kenfair, IFEMA, Koelnmesse and Hannover Fairs.

  • What are the growth strategies for next five years for Alibaba?

    In addition to enhancing the services and features on our site to further improve user loyalty and activity, a key growth strategy is to increase the size of our marketplaces by expanding our user base and active listings to leverage the network effect. We also plan to pursue growth through adding more paying members and increasing sales of value-added services, selectively expanding into international markets and acquiring complementary businesses, assets and technologies.

    Majority of Alibaba's present customers are Chinese suppliers. How will you accommodate other South East Asian suppliers?

    We currently offer two membership packages for suppliers of our international marketplace: Gold Supplier and International TrustPass. The Gold Supplier membership package is for suppliers based in China and Hong Kong, while the International TrustPass membership package is for suppliers based outside of China. We already have hundreds of paying customers in South East Asia, with India being our biggest market in that region.

    We had over 10,000 International TrustPass members at the end of June 2007, including a large number from India.

    How do you visualize the success of B2B vis-à-vis B2C segment? In your opinion, which will grow faster?

    Alibaba.com is focused on B2B e-commerce. Our sister company, Taobao.com, is China’s largest consumer e-commerce website and facilitates both C2C and B2C transactions. The Internet has become a powerful medium for content, communication and commerce in China and globally, and this is driving all forms of e-commerce activities. The number of Internet users in China has grown rapidly in recent years. According to China Internet Network Information Center, or CNNIC, the number of Internet users in China grew from 59.1 million in 2002 to 137.0 million in 2006, with Internet penetration rates increasing from 4.6% to 10.5% over the same period. This trend is expected to be further accelerated in the next few years with the growth of broadband access in China which will benefit both B2B and B2C marketplaces.

    What is the price structure for various services offered by Alibaba?

    International marketplace: Gold Supplier membership: RMB50,000 per year International TrustPass membership: US$589 per year China marketplace: China TrustPass membership: RMB2,800 per year

    Tell us more about how you plan to expand Alibaba in other countries.

    We are taking a cautious approach to international expansion. We intend to expand our sales and customer service capabilities, directly or in partnership with third party organizations, to acquire more members and sell premium service offerings in countries and regions outside of China. For example, we recently began offering the Gold Supplier membership packages to Hong Kong suppliers. Our first priority is to focus on key manufacturing and trading countries and regions in Asia, such as Taiwan, Japan and India.

    What motivates the customers to pay for the services offered by Alibaba and what is the retention ratio?

    Suppliers and buyers come to our marketplaces to establish their presence on the Internet, identify potential trading partners and interact with each other to conduct business online. We offer basic features and services to all users at no charge. We earn our revenue from suppliers who purchase premium services from us, including priority placement in search results, third party authentication & verification, and value-added services.

    While we don’t give out our customer renewal rate we can say that a substantial majority of our customers renew their contract with us. Our market leadership position creates a strong network effect that helps grow our community. The more buyers that the website attracts, the more suppliers it will get, and vice versa. This network effect coupled with our extensive sales force and customer service network, means we are able to maintain healthy rates of renewal.

    Alibaba has rewarded its shareholders and its customers very handsomely. What is your message to them?

    Our philosophy has always been that customers are No. 1, employees are No. 2, and shareholders are No. 3. This has not changed now that we are a listed company. The interests of our overall community of users is our first priority and drives everything we do.

    Is there anything that you would like to add to the interview?

    SMEs have been one of the key driving forces of the economies of China and India. They represent the largest engines of trade both domestically and internationally. It is estimated that there are more than 42 million SMEs in China and around 10 million in India. Currently we have 21 million Chinese SMEs on our marketplaces and over 240,000 of them, or around 1%, are paying members so there is a lot of room for us to grow. Alibaba.com is focused on capturing and serving this SME market in China and globally.

    Published on: 03/12/2007

    DISCLAIMER: All views and opinions expressed in this column are solely of the interviewee, and they do not reflect in any way the opinion of Fibre2Fashion.com.