Summary of Alibaba by Duncan Clark

BookSummaryClub Blog Summary of Alibaba by Duncan Clark

Have you ever heard of Jack Ma? He is the smart man behind Alibaba, the famous e-commerce platform. What he accomplished is nothing short of remarkable. He started off as an English teacher but he saw potential in Chinese consumerism when no one was really paying attention. His journey to success has been an inspiration to the many that followed in his footsteps. 

So, why is Jack Ma’s story something you should know? Well, not only does his story document the ups and downs of starting an innovative online business but it also documents the power of resilience and believing in something. 

In this book summary readers will discover: 

  • The beginnings of Alibaba
  • It wasn’t always smooth sailing, but it worked out in the end
  • Alibaba’s core services are the secret to its success

Key lesson one: The beginnings of Alibaba

Jack Ma was an ordinary English teacher with no business experience. The realization that he wanted more was when he saw an older colleague who had been a teacher for decades but was still living with a very tight budget. Jack did not want the same future, he wanted a better life. He realized that his only option of making that a reality was to come up with a groundbreaking idea. 

This was in the early 90s and Jack started looking at the relatively new concept of the internet. He founded his first company in 1995 and was one of the first online businesses in China at the time. It was called Hangzhou Haibo Network Consulting and it created homepages and websites that had a directory of other Chinese businesses. Jack knew that anyone with access to the internet had the potential to be a customer so he sought to make Chinese businesses more visible and accessible in the United States. Together with his business partner, they bought an internet domain in the US called 

You can see the brilliance behind these moves now. However, at the time, Jack was a bit ahead of his time. Internet connection back then was not exactly reliable. Furthermore, in the 90s, not everyone had access to the internet and businesses were reluctant to building an online presence if they could not be certain they would reach customers. Jack was persuasive though and even managed to get his friends to use the service. He managed to gain some success. For example, the website he created for Lakeview Hotel in China resulted in it becoming quite popular with people travelling from America. It was the only hotel they could find online and therefore the one easiest to book.  

Jack had to work hard to overcome these initial setbacks. He eventually started looking to Silicon Valley for inspiration as China had very few pro-internet businesses. Jack already had his next idea of an online retail store ready to go, he just had to find the right name. It was on a trip to San Francisco that he was at a restaurant and started thinking about the collection of stories called Arabian Nights. He recalled the story of Ali Baba and the Forty Thieves. When the waitress came to take his order, he asked her if she knew the story. She actually did and even remembered the use of the secret password being open sesame. Jack continued to ask people he came across the same question and to his surprise, everyone knew of Ali Baba. That was how he decided that the name would be a good fit for his new online store. 

He hit a slight roadblock though. Somebody already owned the domain name. Eventually, the man agreed to sell the domain to Jack for $4000 and was launched in February 1999. Due to Jack’s clear vision for Alibaba, it was very evident right from the start that it was designed for small businesses. Jack and his business partner were fortunate enough to have found the right investor for the business as well. Shirley Lin worked for Goldman Sachs and was looking to invest in companies like Alibaba. She travelled to Hangzhou and met Jack and his team. They were nothing but a group of guys in a tiny apartment, but Lin was convinced by their determination. She went back to the States and convinced her employers that Alibaba would be a good investment. She managed to secure $5 million in start-up funds for them and Alibaba was on its way.

Key lesson two: It wasn’t always smooth sailing, but it worked out in the end

Alibaba began in 1999, just a year prior to the dot-com crisis of 2000. However, whilst most Silicon Valley businesses were annihilated, Jack saw an opportunity for Alibaba to get ahead. Internet companies in China were also affected but for Jack, it meant that more than half of Alibaba’s competitors would be out of the picture. With less competition in the marketplace and only a fraction of their funding spent, they were in a great position to take over online retail. However, they still faced one major hurdle, generating a profit. 

By the end of 2000, Alibaba had half a million users but still was not making enough money. They attempted to generate income by charging a fee for building sites but this did not cover their expenses. In addition, Jack had used this time to expand Alibaba to Europe and the United States and hired more people. Even though it was the right time to make this move, it further exacerbated their money problems. In 2001, in an attempt to recover, Jack and his partner Joe Tsai brought in Savio Kwan as their new Chief Operating Officer. Kwan wasted no time and set about on his mission to make Alibaba a profitable business. He achieved this by immediately decreasing expenses and streamlining the company’s scope within the Chinese market. 

Alibaba began slowly climbing the mountain ahead of them. They were still gaining traction when they had to go up against online retail giant, eBay in 2003. eBay attempted to take over the Chinese market but they had not taken Alibaba into account. Their strategy was to purchase a Chinese company similar to them. They found one that controlled 90 per cent of the online consumer-to-consumer business in China and renamed it eBay EachNet. Jack did not back down though and used every advantage he had to fight eBay. He first created another site called Taobao. The site focused on online haggling for consumer sold products targeting the same audience as eBay. The best part was that no one knew that Taobao was owned by Alibaba. Jack utilized his knowledge of Chinese culture and what appealed to the Chinese market to challenge eBay. Eventually, in 2004, eBay EachNet moved to a US host. It was losing the battle in the Chinese marketplace and besides the competition from Taobao, the Chinese government themselves were putting up firewalls against foreign content that made them slower to load. This further pushed customers to Taobao and at last, Alibaba was making loads of money. 

Key lesson three: Alibaba’s core services is the secret to its success

Once Alibaba was firmly rooted as China’s main online retail site, they set themselves apart from their competitors. They gained much popularity for offering free services to the merchants on their site. In fact, a small business or merchant can use Alibaba’s site Taobao as their online storefront for free. They only pay a fee for advertising if they want their products to have a prominent display on the site. This is the main source of Alibaba’s income. 

It also knows that in order to keep making money, they have to keep their customers happy which is why they offer excellent customer service. In fact, the company goes by the mantra – customers first, employees second and shareholders third. The site is also monitored by a group called the xiaoer which means servants in Chinese. The group basically keep an eye out for any issues between customers and vendors and acts as a mediator. They also have the power to delete the profiles of vendors who do not follow the site’s rules and regulations. 

Taobao gained quick popularity due to its interactive features. The site allows vendors and customers to chat in real-time and haggle over costs. The competition between vendors is fierce and they will try to outdo each other by offering free samples of gifts for their customers. This does not happen on other retail sites. 

Jack has been determined, right from the start to keep his customers happy. He refers to the small businesses that use Alibaba’s services as shrimps and he works hard to get the shrimps exposure that they would not achieve anywhere else. Jack refuses to be pushed by shareholders into generating short-term profits and keeps his customers first. His loyalty to his shrimps can only be compared to the commitment he has to his employees. Jack believes in motivating his employees so that they also stay loyal to Alibaba. The employees also have their own campus, kind of like a mini Google complete with gyms, coffee shops, a man-made lake and organic food stalls. The fact that Jack looks after his employees have resulted in many of them still being with him after many years. And happy employees are behind Alibaba’s continued success.

The key takeaway from Alibaba is:

Jack Ma did not have a business background. All he had was the determination for a better life and the wisdom to look into developing technology. Jack used both the consumerism present in China and the connectivity of the internet to start his online businesses. Even though businesses in China were reluctant to take up his services, he looked to Silicon Valley for inspiration and Alibaba was eventually born. Jack Ma had a clear vision for Alibaba and refused to be deterred by shareholders and competitors. He used his cultural knowledge to his advantage and has not looked back since. 

How can I implement lessons learned in Alibaba:

Don’t be distracted by the prospects of short term profits. The key to a successful business is to keep your customers happy. Jack Ma set out with a mission to give small businesses a way to trade that was not available to them without a great cost. He continues to offer free services that allow this to happen. In turn, his customers stay loyal to Alibaba because they know they would not be able to get the same services elsewhere without a hefty price tag.

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