Narrative and Numbers: The Value of Stories in Business (Columbia Business School Publishing)

by Aswath Damodaran

Chinese conditions but played a key role in the evolution and growth of the Chinese e-commerce market, as China has become the second-largest online market in the world. One key difference between the Chinese e-tailing market and U.S. online retail is that the former has historically been much more dependent on online marketplaces (as opposed to retailer-based online sites), largely because of Alibaba’s influence. 2. Differentiate and dominate: The story of how Alibaba beat eBay and Amazon is grist for strategic storytellers, but at its core, there are three reasons why Alibaba won (and eBay lost). The first is economic. By charging no transactions fees initially and depending entirely on modest advertising charges, Alibaba made itself a bargain to retailers, relative to competitors. The second is that Alibaba molded its offerings to Chinese culture and consumer behavior. The Economist’s characterization of Taobao as an online bazaar is apt, since the site is set up for online haggling between buyers and sellers. Third, the site is also attuned to the fact that the Chinese retail market is splintered, with thousands of small and midsized retailers who lack visibility, credibility, and payment-processing skills online, and Taobao offers all of those. The visibility comes from the traffic on the site; the credibility from Alibaba’s system of independent verification, paid for by sellers; and payment processing from Alipay. In 2013 about 75 percent of all online ...