Business Model of China’s E-commerce Enterprises

ABSTRACT

China’s e-commerce market is showing rapid growth. Currently, B2B-model businesses are being established as a profitable model. However, while the structure of B2C-model and C2C-model businesses have been introduced from overseas, a profitable model has not yet been established.

The business model of Alibaba, the leader in vendors of B2B e-commerce services, is e-market. More than superiority in its business mechanism, it is characteristic in that its business strategy fits with the Chinese market environment such as its brand-name strategy (creating customer attraction strength), sales strategy (creating profitability), technological strategy (creating technological strength), and providing added-value services such as incorporating Google’s methods and etc.

The performance-based fee system of BusyTrade, another B2B e-commerce enterprise, is innovation towards a profit model. The structure of Taobao, which became one of the leading Chinese C2C e-commerce vendors in less than three years, is a branding strategy (creating customer attraction strength) of free services and PR, providing escrows to establish business trust, the consideration of business practices as a result of introducing instant messaging tools, and the introduction of a “trusted storekeeper” cultivation system (creating profitability). On these points it is implementing a business strategy more detailed than other C2C sites, including Ebay (China). While its attempt at charging for a portion of tenant seats (selective fee-based service) ended in failure, they are experimenting with a fusion of the B2B-model, with its established profit model, and the C2C-model, with its customer attraction strength, to create a new B2C model.

As a suggestion for Japanese enterprises striving to enter the Chinese e-commerce market, the following are necessary: 1. Development of effective marketing to attract popularity. 2. Development of unique technology and know-how in business and profit models. 3. Collaboration with dependable local partners. 4. Innovation of structures that will raise profits.