Alibaba fixes sights on Korean market
_ World’s 13th-largest economy has potential to become e-commerce powerhouse
By Kim Jae-kyoung
Korea ranks 9th in the world in terms of export volume, but the world’s 13th-largest economy is lagging far behind in international online trade with only a few small- and medium-sized enterprises (SME) in the cyber marketplace.
A global business-to-business (B2B) e-commerce expert said that although Korea is developing slowly, the country has great potential to emerge as one of the fastest-growing markets, citing its high Internet usage and quality of Korean products by SMEs.
“Korea already has full internet penetration nationwide and relatively high e-commerce adoption. With a sophisticated e-commerce infrastructure already in place, Korea has great potential to grow in this sector,” Timothy Leung, channel sales director of global sales at Alibaba.com, told Business Focus.
“This, coupled with the generally high quality, trendy design and competitive pricing of Korean products, gives Korean SMEs an edge in the global market,” he added. “We find that Korean SMEs are building competitive products that should be very attractive around the world.”
However, he stressed that Korean SMEs need to make significant and persistent efforts to keep their customers happy.
“While technology has brought many changes, one thing remains true. You need to invest time and effort into the business in order to achieve success.”
Against this backdrop, Korea is one of the key markets Alibaba is focusing on, and the world’s largest online platform operator with over 65 million members worldwide is seeking to expand its business here, according to Leung, who recently visited Seoul to work out programs with local partners.
“To do that, we will continuously introduce localized services to meet the needs of small Korean firms by working with local organizations, including government bodies and trade associations.”
Alibaba.com, the flagship firm of Alibaba Group, signed a memorandum of understanding (MOU) with the Small and Medium Business Administration in September 2010 as part of efforts to help Korean SMEs grow into online export leaders.
Founded in 1999, Alibaba Group is a family of Internet-based businesses that include B2B international trade, online retail and payment platforms and data-centric cloud computing services. It says it has operations spanning more than 240 countries and regions.
The following is an excerpt from the interview
Q: Alibaba.com has been growing rapidly for the past few years. What are the success factors behind your growth?
A: There are many factors behind our success, but perhaps the most important one is our focus on SMEs, which are the driving force of most economies, especially in Korea. SMEs usually don’t have the resources to run their own marketing and sourcing platforms, or even to have their own website, so they are grateful to have a B2B marketplace like Alibaba.com that is dedicated to helping them.
Q: Can you explain Alibaba’s three business principles _ customers first, employees second and shareholders third?
A: The value of a company comes from its customers. Customers participate in our business and pay us money. So they are the first value of our company. And our employees, server of customers, make sure that customers gain the benefit of platform. It’s not that shareholders are not important. They are third in the rank. They input the value from the benefit chain. We don’t forget the shareholders. We know that if we serve our customers well and pay attention to our employees, we will run a very healthy business. Consequently our shareholders will reap the benefits.
Q: Can you tell us about your profit model?
A: We have paying members who pay annual fees. They have more benefits compared to free members. For example, the number of products they can post on the Internet and when the buyers want to make inquiries, the paying members can see it right away. The free members need to wait seven days. Also they have better opportunities to search and display in front of the buyers. All these benefits go to the paying members. We don’t take commission, not a single penny from transactions between buyers and suppliers.
Q: How much do your paying members pay?
A: It’s $2,999 for a full year. I would call it very inexpensive. This is for trade. If you need to go to Singapore or Hong Kong for just one trade show (from Korea), you have to buy plane tickets, buy the booth, set up the booth and send people there for three to four days. There are advantages in going to exhibitions but if you ask me which is most cost effective, I would say Alibaba.
Q: What would be your advice for Korean SMEs to succeed in online trade?
A: One soft factor that would help Korean SMEs is improved English skills. Some buyers prefer to go through trading companies when sourcing Korean products because they see language issues as an obstacle. This then adds to the overall cost of sourcing from Korea. Overseas buyers are more likely to deal directly with Korean exporters if they can spend less time and money on communication issues.
Small suppliers in Korea also need to look at export markets other than traditional ones like China, Japan and the U.S. According to the Ministry of Knowledge Economy, about 55 percent of Korean exporters sell their goods and services to only one country (China), and are therefore exposed to the potential risks of unexpected market changes in their one-and-only export market.
Q: How competitive are Korean products overseas?
A: To name some examples, beauty products, electronic goods, automobiles and machinery are popular. We are seeing demand on our platform that buyers want Korean goods. Because of the traffic on our platform, with our buyers coming from over 240 countries and regions, sometimes when they file inquiries, they specifically ask for Korean products.
Also with Korean culture being so popular in greater China or Asia, we see that a lot of Korean fashion is very attractive because they have their own design and good quality. And beauty and health products definitely are moving as well _ in Hong Kong we always see Korean products. So all this, compared to the price competitiveness of your product, they are competitive in the world.
Q: How do you see the future outlook of the online trade industry?
A: In today’s challenging economic climate, the value of e-commerce will become more apparent both in Korea and elsewhere. With businesses everywhere looking to cut costs and reduce travel expenses, an increasing number of people are turning to the Internet and e-commerce to lower sourcing and marketing costs and look for new buyers and suppliers around the world.