1688.com, Alibaba’s domestic B2B platform in China, announced on September 5 2013, that the total amount of online transaction on September 4 2013 broke 4.19 billion yuan (USD 679 million). A new record in global B2B market.
On September 4, 2013, 230,000 sellers on 1688 made 2.52 million transactions, online transaction in single day mounted to 4.19 billion yuan(USD 679 million). Early this year, 1688 registered B2B members hit 100 million, doubled in 500 days. It was astonishing for the whole e-commerce market.
Since its delist from Hong Kong main board, it was privatized by Alibaba Group. The delist aimed to relief the pressure of transition. Later, 1688 disappeared from public for a while, and focused on turning 1688 from an information platform to an online trading platform. From last year, 1688 targeted at increasing new members, improving member authenticity, increasing buyer traffic and user experience, then promoting online trade.
One month after delist, Alibaba Group adjusted its business structure to seven businesses. Alibaba’s B2B was separated to International Core Business Unit (ICBU) and China Business Unit (CBU), namely 1688. ICBU, CBU, Taobao, eTao, Tmall, Juhuasuan and Aliyuan are the seven businesses in Alibaba Group. Based on the seven businesses, Alibaba was going to build CBBS system, which is the integration of Consumers, Channel Businesses, Manufacturing Businesses, and E-Commerce Service Providers.
In Alibaba’s CBBS strategy, 1688 targets at small business and is connected to Taobao platform. The core businesses of 1688 are wholesale, sourcing and social network for members. Wholesale is mainly for big manufacturers to sell products to Taobao small channel businesses. Sourcing mainly focused on engineering procurement and central purchasing for enterprises. 1688 social network is for letting business members to know each other, and be friends with people in the same industries.
In 2013, the goal of the whole year is to achieve 100 billion yuan (USD 16.2 billion) transaction amount, and to be the number 3 in the online trading platform.
B2B + Taobao
Taobao is far more than an online retailing platform. Online retailing is only an isolated part of e-commerce, Alibaba is going to connect 1688 with Taobao, to form a supply chain of manufacturing businesses, channel business and consumers. E-Commerce service provider will combine them together.
In last September, after the integration of Alibaba accounts with Taobao accounts, 1688 transactions amount had an prominent outbreak. Taobao businesses are extremely familiar with online trading, naturally, they would choose 1688 wholesalers to be their suppliers. What’s more, they are very good at managing trading platform, their feedback for products would help suppliers to improve efficiency.
At present, about 50%-60% of 1688 transactions are from Taobao platform, the rest are from offline buyers which are mainly consisted of three and four tier cities enterprises.
Taobao platform will lead Alibaba to logistics, and 1688 will lead to up stream supply chain, such as materials and sourcing. On one hand, B2B platform has the best manufacturers and suppliers in China. On the other hand,1688’s transition from an information platform to a trading platform will help Alibaba reach downstream supply chain.
Driving Power of 1688’s Transition
Online B2B trading need becomes stronger day by day, enterprises gradually adapted and adopted online transaction. The average daily transaction amount in May was 150 million yuan(USD 24.3 million), now it has grown to 250 million yuan (USD 40.5 million).
Since 2008, foreign trading has been sluggish, however, domestic trading growth remains a fast speed. More and more enterprises were going to invest in B2B. This was driving power of 1688’s growth.
Sourcing cost used to be quite expensive, because the professional sourcing markets are limited to certain regions. Enterprises would purchase a large sum at a time, it led to slow cash flow and inventory risk. 1688 has the online trading advantages, it breaks geographical limitation and allows enterprises to lower sourcing cost.
At present, 500,000 suppliers from 140 sourcing markets have been on 1688. Taobao small businesses could purchase at a relatively small amount each time, they could timely adjust the purchasing amount according to market changes.