Alibaba vs eBay chinese ecommerce brand war won by jackma
if you want to go out there and become a legendary entrepreneur this is for you.
The strategy that I’m about to teach you today is a strategy
that turned an ordinary English professor into a legendary businessman
who today, is known as one of the greatest business icons of his generation.
The story that I’m about to tell you today is the story of a man who got rejected by KFC.
And out of the 24 people who gave the interview, he was the only one who got rejected.
But 10 years down the line, today this man runs a company that is way bigger than KFC itself.
This is a story of a man who does not even know how to code a computer but today is the
founder of one of the biggest Internet companies in the world.
So,
the question is How the hell is it even possible for a man to do something this remarkable like this without actually having the skillsets
which are usually required to do something like this.
that’s where the business strategy that I’m about to tell you comes into play.
Begining of Chinese Ecommerce Brand War
Now, this is a story that dates back to the year 2004 when China was just opening up to e-commerce.
Now, back then people,
China was a very closed nation and as soon as China opened its gates to e-commerce
several multi-national corporates which were highly successful in the US had their eyes on China.
Why?
because China and India, both put together, we form half of the world.
So, if a company has established itself in China by default,
that company would become the most dominant company in their industry.
Now, out of these many multi-national corporates, one of the most successful and the most powerful company was eBay.
eBay : Global E-Commerce Giant
eBay was one of the most magnificent companies of that time because eBay had captured 16 countries
in UK and US in terms of e-commerce.
as soon as eBay declared a statement to come and conquer the Chinese market
every single expert in the business domain stated that eBay is going to very easily conquer the Chinese market.
But while the world was obsessively talking about how eBay is going to change the Chinese market
there was a struggling entrepreneur who decided to wage a war against this billion-dollar tech giant.
To put that straight,
eBay was a $30 billion company that had the perfect market recipe for success to come and conquer China.
They had all the money in the world, they had the most amazing talent on their team,
and most importantly,
because of their experience in e-commerce, they knew exactly how the market functioned.
Beging of Jack Ma
On the other hand,
if you look at this struggling entrepreneur he is none other than the legendary businessman and
the founder of Alibaba.com Jack Ma
Today many of you might know Jack Ma as a successful business tycoon
but back then nobody even knew that Jack Ma existed in the first place.
Jack Ma was struggling with his own company, that is, Alibaba.com
wherein he was not able to handle his own company’s revenue.
So the question is- In this situation,
what did Jack Ma think which gave him the confidence to defeat eBay in China?
the reporters asked the same question to Jack Ma in a very insulting manner
wherein they asked,
that you do not even know how to deal with the finances of your own company
how the hell are you going to wage a war against a company that is 100 times bigger than you.
And that’s when Jack Ma stated one sentence,
and today that sentence goes down as one of the most iconic sentences in the history of Chinese business.
Do you know what he said?
He said eBay might be the shark in the ocean
but I am the crocodile in the Yangtze River.
If we fight in the ocean we will lose but if we fight in the river, we will win
So the question is- What is so special about this one sentence
that it goes down as one of the most iconic sentences in the history of business.
Well that’s because, in the next 3 years, something magical happened
eBay went from having a 90% market share in China to completely quitting the Chinese market to never come back again.
How Jack Ma won the battle against eBay.
The question is- What exactly was the game-changing factor? And what was Jack Ma’s strategy?
As it turns out one of the most important factors based on which any e-commerce company’s success is determined that is the website.
Now Jack Ma and eBay, both decided to make a website to sell e-commerce goods.
But the way they designed their website played a crucial role in this business war.
eBay’s plans for china
Now, you know what eBay did?
eBay said that it’s going to go and do market research and it’s going to find out the most pressing problems that the Chinese people are facing.
So, when eBay officials went on to see how the Chinese market functions they observed 3 things.
Consumer Behaviour of China
The first observation they made was
they understood that people bargain a lot in the Chinese market.
So much so that time spent on shopping is lesser than that spent on bargaining.
So you know what they said
we are going to build a beautiful site wherein we are going to eliminate the pain of bargaining.
Quality of the products
The second thing that they observed was that
The Chinese market was filled with cheap goods with no guarantee or warranty,
which we all know. So,
they decided to make a site that would sell high-quality products for the Chinese market
The design of the Ebay website
third and most importantly they observed
that whatever small websites are present in China, they are so clustered and clumsy that
it’s hard to find out what will happen when you click something.
eBay decided that is the reason why they decided that they are going to build an absolutely clean site
which is going to have only a few buttons so that the customer has a remarkable experience.
Jackma’s plan for Alibab’s website
Whereas when Jack Ma was asked how exactly is he going to design the website.
He asked his team, specifically
to design a complete opposite of what eBay designed.
Jack Ma specifically asked his team members to put in a lot of pop-ups on the site to make the site look messy.
Cheap goods no guarantee or warranty
secondly,
Jack Ma said that our website is not going to sell high-quality goods at all
we will sell only cheap goods we will only sell goods
that do not have any guarantee or warranty whatsoever.
Customer should not shop without bargaining
third and most importantly
he said that bargaining should be mandatory for every customer.
No customer should ever shop without bargaining.
So, they designed a small window
where customers would specifically have to bargain with a shopkeeper to get the right price.
Response from Chinese Market
Now people,
on the outside, if I ask you guys which one of these two sites would you prefer?
Option 1,
a clean site that sells high-quality products and gives you a guarantee and warranty along with those products.
Or
Option 2,
a website that sells ultra-cheap products with no quality whatsoever.
And if I force you to bargain even on those cheap products
then, which site would you choose?
Of course, we will choose eBay, right?
Well, guess what?
That’s exactly what the eBay employees thought And that’s exactly the reason why they got defeated in the Chinese market.
So the question is why would anybody not like a clean site
why would anybody prefer a clumsy site which is going to force you to bargain?
Well, that’s where the business strategy comes into play.
JACKMA’s business strategy
while eBay was looking at things from the American perspective
and all the officials of eBay looked at the Chinese market as an external entity.
Jack Ma viewed the Chinese market as a resident of China.
he understood the mindset of the Chinese people more than anybody else.
The reason why he designed a clumsy website is that he understood that Chinese people are used to clumsy and dirty markets.
So if there is no bustle in the Chinese market and if no one is shouting in the Chinese market
from all directions then something is wrong with that market.
So the reason why it is important to show a clumsy market to a Chinese citizen
is because he/she has seen the market in that way only.
secondly,
the reason he decided to sell only cheap goods on the website is that he understood that
the very purpose that the Chinese people went to the market is to buy cheap goods,
Our Local Markets
right? Now,
I don’t know how many of you guys will relate to this but then we have a Pimpri Bazaar over here India
trust me guys all of us go to Pimpri Bazaar and people travel all the way tens of kilometres
to come and buy only a dearth of cheap products.
People come there to buy only first copy products and nobody would ever come there to buy a Nike shoe
because they know that if he/she has bought a Nike shoe from the Pimpri market then it is fake for sure.
as far as my understanding is concerned each one of us will know a market like this
where you get cheap, durable products and where we never expect quality.
And most importantly, we won’t go there to buy premium products.
Bargaining Tradition
last and most importantly, when it comes to bargaining,
let me give an Indian example
People you must have realized and you must have faced this with your grandmother or grandparents
that every time your grandmother asked you to go and buy, say, fruits from a fruit vendor.
Suppose you bought 1 kg apple for Rs 120. So when you brought those apples home
your grandmother would have asked you the price at which you bought the apples. You’d say Rs 120.
The second question that she will ask you is – How much did the vendor ask you to pay?
And by any chance,
if the price at which you bought was the same as the price he asked then you are going to have a terrible time at the house
and you are going to get scolded because she is going to tell you that you have been looted by the shopkeeper.
So if you look closely, bargaining in the Indian culture is a mandate.
And our older generation doesn’t even know what it is like to shop without bargaining.
If you shop without bargaining, they are going to assume that you have been looted.
that is exactly how the Chinese people viewed eBay.
Because there was no scope of bargaining and by default, they felt like that site (eBay) was looting them.
And that’s the reason why Chinese people did not go to eBay and
they came to Alibaba.com because it abided by their culture and by their norms.
lessons from Alibaba vs eBay business war
So from this story,
each one of you guys has 3 very important lessons to learn.
shark in the ocean crocodile in the River.
The first lesson is that the opposite company might be a billion-dollar company and
every time you face something like this, always remember
that company might be the shark in the ocean but you will always be at an advantage
because you are the crocodile in the Yangtze River.
the mere knowledge of consumer behaviour gives you an unfair advantage over any big multi-national corporate.
So always believe in yourself and your strategy of empathizing with your consumers.
Number two,
tomorrow when you go on to become a million-dollar company or a billion-dollar company,
always remember this time you might be the shark in the ocean and you have to be extremely careful about
the crocodile in the Yangtze river that you might be facing.
empathy and compassion
third and most importantly people,
always remember that empathy and compassion are two of those qualities
that can turn a commoner into a king.
And no amount of name, fame, or money can ever stop him from becoming one.
So be kind and practice empathy.
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