Business-to-Business (B2B): The Case of Alibaba

The business environment is constantly changing, and so are the associated elements. One of the elements of business that has seen a greater transformation in the recent past is marketing. As a result of the incessantly evolving customer needs and globalization, businesses have had to introduce innovative concepts into their marketing techniques to cope up with the ultimate competition. Among the products of such innovations was the business-to-business transaction, which adds to the generic business-to-customer mode of business. The concept of business-to-business denotes a mode of transaction in which one business involves directly with another business instead of customers. Business-to-business is typical of situations where, for instance, one business is outsourcing raw materials to be used in their production process, a particular business is in need of services of another business for purposes of operations, and a business enters into an agreement with the other to re-sell its products (Nanji 2016). In the B2B model of business, both the parties have relative powers of negotiation and involve their necessary staff and legal counsel in the agreement, which is converse to the B2C model, which is largely shaped by the information asymmetry economic implications. It is noteworthy that the entire B2Bs volume of business transactions is usually higher than that of the B2C, which is seen as the major advantage of this business model over the B2C model. Even with such merits, the business-to-business framework has had to grapple with challenges- some inherent, some typical- that have limited the use and effectiveness of this model. As one of the top B2B marketplaces across the globe, no business offers a better tale of these challenges than the Alibaba Group. Whereas Alibaba's growth has been significantly slowed by these challenges, its means of overcoming the challenges has been its greatest strength. Arguably, the challenges facing the B2B model can be minimized or completely overcome. Some of the top challenges facing B2B businesses such as Alibaba include building the market share, innovating products and services, acquiring and retaining the customers, ameliorating the customer awareness of the brand, keeping up with the stiff competition, and technological issues. The following discussion will delve deep into some of these challenges with reference to the Alibaba group and postulate on how to overcome the challenges.

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Overview of the Alibaba B2B Model

A comprehensive understanding of the challenges facing the B2B businesses is best gained through obtaining a prior understanding of the model as used by the biggest business-to-business marketplace in the world- Alibaba. Alibaba Group Holding Limited is an e-commerce company domiciled in China that uses the web portals to carry out business-to-business, consumer-to-consumer, and business-to-consumer sales. The company was founded as a business-to-business portal with the aim of linking the manufacturers in China with buyers from overseas. That is one reason why this discussion will use, and only focus on the companys B2B model. Bourenane (2014) that Alibaba, which is currently the biggest B2B e-commerce market in the world, has always acted as an intermediary serving to facilitate the transactions between the buyers and sellers through by linking the buyers and the sellers. The sellers and buyers are companies and businesses that have entered into an agreement with Alibaba. Alibaba forwards its operations through three major sites. Taobao, its largest and most busy website comprises more than 760 million listings of services and products from about 7 million sellers at one particular time (Zhe 2012). The merchants sell their products for free on Taobao making it particularly attractive for businesses as it reduces their marketing costs. Even so, they pay Alibaba for extra services such as advertising to ensure they are conspicuous from the long list of products on the site (Boudelaa 2010). Taobao mostly deals with small merchants with the bigger businesses using Tmall. The latter has relatively fewer clients, about 70,000, who pay Alibaba a deposit and a specific annual amount. Well aware of the challenge of imposters and cons, Alibaba runs a distinct rating system that shows the number of successful transactions of each seller to enhance credibility with the shoppers. Besides, the model provides a platform, the instant messenger software, where merchants and buyers can directly interact and answer some of the pressing questions from either side. It is a prerogative of the individual businesses to buy advertising from Alibaba to improve their sales. Alibaba primarily makes money through the advertisements in addition to other fees and commissions. Over the years, the challenges that the company has faced has made it implement some of the most radical measures to enhance their performance and support their growth. For instance, it came up with the Alipay system, an online third party payment framework that provides both payments and escrow services for financial transactions on all the platforms run by the Alibaba Group (Zhe 2012). The system protects both the buyers and the sellers from falling victims to cons who pose as either buyers or sellers on the site. It enhances the security of the transactions and assures both the merchants and buyers of safer transactions. Alibaba's B2B model is the embodiment of the challenges that face such models of business and how to overcome them.

The Marketing Challenges

The following chart offers a pictorial representation of the top marketing challenges that businesses face in the course of their marketing operations. It is worth noting that the challenges in the chart cover the years 2014 and 2015 but the consistency in their position reveals that they may stay so into the unforeseeable future. The chart is a product of the findings from a report by the B2B International, which used the data from several B2B marketers throughout the world. The respondents were prompted to list the major challenges of their marketing model.

Source: https://www.b2binternational.com

As evident from the chart, building the market share was the greatest nightmare for businesses both in 2014 and 2015 and most likely in the coming years. According to Nanji (2016), market share is the chief indicator that B2B companies use to gauge their performance versus their competitors. It denotes the percentage of sales or businesses that a particular organization gets from all their marketing operations in a specific market. Marketers calculate their share in the market through the sales units. Apparently, increasing the market share is always a challenging task for both the start-up and established businesses. The challenge particularly results from the difficulties that characterize the unique means of building the market share, and partly from the rigidity of the business model. Alibaba has particularly had to face the challenge of building the market share as a result of its complex business model. The business-to-business model mostly focuses on the businesses and do not involve directly with the customers. According to Sandhusen (2008, p.520), the B2C facilitates the building of market share as it supports direct involvement with the customers unlike in the case of B2B. Convincing the businesses that Alibaba is the right platform for improving their sales has been the hardest aspect of Alibaba's trial to build the market share. Most of these businesses, especially the established ones, have integrated marketing strategies, which they deem effective. It takes much effort to convince them that they require an intermediary in their marketing mix. An example is the Apple Inc., which just recently opened a store in Alibaba despite the fact that Alibaba has always been there. For small and medium businesses, it is relatively easy to convince them to join. This is the reason why Alibaba's Taobao has more users (huge market share) than Tmall, which deals with bigger merchants. The difference in the market share between these two portals is a stark indicator of the difficulty that marketers face in the course of their attempts to increase their market share, especially with the established businesses. Increasing the market share also depends on the company reputation besides their internal operations. Online businesses such as Alibaba are prone to hackers, cons, and imposters that create skepticism in the prospective buyers and sellers concerning the safety of their products and businesses. Similarly, convincing the sellers that their businesses are safe on Alibaba in the face of such insecurity has obscured the smooth course of marketing and attempts to increase the market share for Alibaba. While Alibaba is just an illustration of this problem, several other respondents interviewed in reports such as the one above admit to the fact that the very fabric of the B2B model is the greatest impediment to building their market share.

Innovation of products and services ranks second as a marketing challenge, especially for the B2B marketers. Fill, Hughes and De Francesco (2013, p.31) note that the B2B sellers have almost zero impact on the innovation of the products they seek to market- they can only control their range of products. Controlling the range of products a marketer sells does not equal innovation. It is the individual businesses that can include innovativeness into their individual products. For instance, an electronic seller on Alibaba will post innovative products and services from their company that they expect Alibaba to market, thus, Alibaba only markets the products that its users post without any say on the nature of the products. The element of innovation for B2B marketers is only evident in a case that, for instance, Alibaba decides to market only those products they deem innovative. This would be particularly detrimental to Alibaba in the sense that it will decrease their pool of brand and expose them to competition. Therefore, notwithstanding the angle from which one looks at innovation in the case of B2B marketers, it is entirely challenging primarily since the individual seller has no say about the nature of the products a merchant decides to sell (Fill, Hughes and De Francesco 2013, p.31). Even so, the B2B marketers can embrace innovativeness in their technology and marketing service provisions. For example, Alibaba came up with the Alipay system to enhance the financial transactions between their merchants and the buyers. A critical look at innovation from this angle reveals that the marketers can only do so much. Despite how much they do to improve their services, much of the focus of the buyers always lies in the end product. Therefore, innovation of products and services remains a central challenge for marketers.

Apart from building the market share and innovation, customer acquisition and retention is another challenging task for the marketers (Temporal 2005). This boils down to the already explicated claim that it is not easy to convince the prospective customers that they need you especially if they already have effective marketing strategies. For B2B marketers, this aspect is even more challenging since the individual businesses also have their online portals, some of which operate in the same way as Alibaba for example. Extraordinary marketing skills are required to bring customers on board. Alibaba's Tmall only has about 70, 000 users, a figure which has been relatively stagnant since the inauguration of the platform. This is a testimony that acquisition of customers for B2B marketers is an uphill task. In some cases, some of the customers only come to try the effectiveness of the platform vis-...