Marketing_Management_14th_Edition-min

440 PART 6 DELIVERING VALUE
Jack Ma has been the visionary
force behind the highly successful
Chinese online marketplace and
auction site Alibaba.
Alibaba The brainchild of Jack Ma, Alibaba began in 1999 and grew over the
next decade to become the world’s largest online B2B marketplace and Asia’s most popular
online auction site. Its numbers are staggering. The $9 billion company has 43 million
registered users (35 million in China and 10.5 million internationally) and hosts more than
5.5 million shop fronts; at any moment, more than 4 million businesses are trading. At
Alibaba’s heart are two B2B Web sites: alibaba.com, a marketplace for companies around the globe to
buy and sell in English, and china.alibaba, a domestic Chinese marketplace. The Chinese powerhouse
has a nationalist agenda: to build markets for China’s vast number of small and medium-sized
businesses. Alibaba enables these businesses to trade with each other and link to global supply
chains. To establish customer trust, the company set up TrustPass, in
which users pay Alibaba a fee to hire a third party that verifies them.
Users must have five people vouch for them and provide a list of all
their certificates/business licenses. Anyone on Alibaba who has
done business with a user is encouraged to comment on the firm, in
the same way buyers comment on sellers in Amazon.com’s or
eBay’s marketplace. Businesses are even starting to print “TrustPass”
on their business cards, a true sign of Alibaba’s B2B credibility.
Global growth has become a priority. Home pages in Spanish, German,
Italian, French, Portuguese, and Russian were launched in 2008 to
complement Chinese and U.S. options. After its IPO of $1.7 billion in
2007 (second only to Google’s among Internet firms), Alibaba, says
Jack Ma, will “create the e-commerce platform for 10 million small
enterprises creating 100 million jobs around the world and providing
an online retail platform to supply the everyday needs of 1 billion
people.” 75
The effect of these mechanisms is to make prices more transparent. 76 For undifferentiated
products, price pressure will increase. For highly differentiated products, buyers will gain a better
picture of the items’ true value. Suppliers of superior products will be able to offset price transparency
with value transparency; suppliers of undifferentiated products will need to drive down
their costs in order to compete.
Brick-and-Click Companies
Although many brick-and-mortar companies may have initially debated whether to add an online
e-commerce channel for fear of channel conflict with their offline retailers, agents, or their own
stores, most eventually added the Internet as a distribution channel after seeing how much business
was generated online. 77 Even Procter & Gamble, which used traditional physical channels of distribution
exclusively for years, is selling some big brands such as Tide, Pampers, and Olay online, in
part to be able to examine consumer shopping habits more closely. 78 Managing the online and
offline channels has thus become a priority for many firms. 79
Adding an e-commerce channel creates the possibility of a backlash from retailers, brokers,
agents, and other intermediaries. The question is how to sell both through intermediaries and
online. There are at least three strategies for trying to gain acceptance from intermediaries.
One, offer different brands or products on the Internet. Two, offer offline partners higher
commissions to cushion the negative impact on sales. Three, take orders on the Web site but
have retailers deliver and collect payment. Harley-Davidson decided to tread carefully before
going online.
Harley-Davidson
Harley-Davidson Given that Harley sells more than $860 million worth
of parts and accessories to its loyal followers, an online venture was an obvious next step
to generate even more revenue. Harley needed to be careful, however, to avoid the wrath
of 850 dealers who benefited from the high margins on those sales. Its solution was to