Online Retailing's Relationship, Marketing, And Customer Loyalty in China: Alibaba

ONLINE RETAILING'S RELATIONSHIP, MARKETING, AND CUSTOMER LOYALTY IN CHINA: ALIBABA
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Table of Contents
 TOC \o "1-3" \h \z \u  HYPERLINK \l "_Toc507154658" Introduction  PAGEREF _Toc507154658 \h
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 HYPERLINK \l "_Toc507154659" Online Retailing Relationship Marketing Strategies  PAGEREF _Toc507154659 \h
4
 HYPERLINK \l "_Toc507154660" Utility of Online Platforms in The Chinese Market  PAGEREF _Toc507154660 \h
4
 HYPERLINK \l "_Toc507154661" Consumer-oriented operations  PAGEREF _Toc507154661 \h
6
 HYPERLINK \l "_Toc507154662" Internal Flow Management  PAGEREF _Toc507154662 \h
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 HYPERLINK \l "_Toc507154663" Diversification of the Online Customer Relation Platforms  PAGEREF _Toc507154663 \h
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 HYPERLINK \l "_Toc507154664" Adaptation to The Four-Stage Loyalty Model  PAGEREF _Toc507154664 \h
16 HYPERLINof\l "_Toc507154665" Conclusion  PAGEREF _Toc507154665 \h
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 HYPERLINK \l "_Toc507154666" Reference List  PAGEREF _Toc507154666 \h
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Online Retailing's Relationship, Marketing, And Customer Loyalty in China: Alibaba
Introduction
China has experienced an exponential growth in e-commerce since 2003, with an average of 120% growth annually. The growth has catapulted China to the second position in e-commerce as of 2017 globally (PWC, 2017). The success in establishing the intensive online market is credited to hyperactive developments of the vanguard online platform, Alibaba, who are the leading competitors of the globally acknowledged Amazon. The firm has actualized their vision “New Retail” spearheading change in the manner how e-tail is conducted in China. The Chinese retail on e-commerce platform accounts for 64% of the total retail in China while Alibaba controls 80% of the market (PWC, 2017). The success has been achieved through a close execution of the 4Rs in relationship marketing and diversification of their services and the business model to offer innovative services in new industries as well as collaborating with international firms.
Alibaba has integrated the use of social media to attract new consumers, develop relations with consumers, retain the existing consumers, and maintain the relationships for the long-term. Their online retail marketing and loyalty programs are customized to suit the consumers’ preferences. Both online retail marketing and customer loyalty programs are heavily reliant on mobile applications, which are a subsidiary of the mother firm, to promote the brand's reputation and earn the consumer’s allegiance. These strategies have been successful since 70% of the total sales made on all e-commerce platforms begin their inquiry at Taobao, which is the organization's search engine for products on e-tail in the country (Jin, Cheng, and Lihua, 2016).
Alibaba has been successful in establishing an indomitable market control and consumer loyalty by consistently changing to adapt to the changing landscape in e-commerce. The focus of diversification has always been to improve customer satisfaction, eventually promoting the customer loyalty to the brand (Jin, et al. 2016). The leading global competitors such as e-bay and Amazon have been conservative with the diversification of their business models. The leading competitor in the Chinese market has been Tencent, who recently acquired the second runners-up, JD.com, who are fiercely innovative and creative to capture a wider market share in China (Jourdan, 2017). The intent of this essay is to analyze the online retailing, marketing and customer loyalty strategies that have been employed by Alibaba to create the modern indelible e-commerce force of the firm in China and globally.
Online Retailing Relationship Marketing Strategies
The bulk of e-commerce in China is transacted on smart mobile phones, which accounts for 52% of consumers and globally 14%. The mobile application, Tmall, was launched in 2010 (Yazdanifard and Hunn li, 2014). In 2016, only 6% of the e-commerce consumers relied on the application, the trend had changed with 80% growth in consumer’s reliance on the application to transact business by 2016. Heavy reliance on the application has made the desktop application almost obsolete, with very minimal business being transacted on the platform (Yazdanifard and Hunn li, 2014). The reliance on the internet for retail’s relationship marketing and running business has contributed enormously to the adoption of mobile applications by vendors and consumers. Discussed below are some strategic relationship marketing strategies employed by online retailers in China and Alibaba as the industry leader.
Utility of Online Platforms in The Chinese Market
Unlike the United States and Europe, online retail took off before distribution stores. In Europe and the United States, distribution stores of well-established brands came before e-commerce, and this presents a range of challenges that are unlikely in the Chinese market as well as opportunities (Olander, Hurmelinna-Laukkanen and Heilmann, 2015). E-tail rollout in the European and the American markets took off slowly before the platforms gained mass appeal, e-tail, and e-loyalty. Identifying markets, establishing relationships, and developing the relationships with consumers who were accustomed to offline retail stores was a slow process that took time before consumers adjusted (Xiao Huang, 2015). The biggest impediment to market penetration was winning customers trust on the platform, delivery systems, and the cash transfer platforms (Jin, et al. 2016). In China, online stores and retail stores were pioneered on web applications by Tencent in 1994, and later on, Alibaba in 1998. The platforms took off impressively, with Alibaba overtaking Tencent and recording the highest transactions on an online platform globally seven years later.
The market in China presented a lucrative market, which Alibaba’s founder Jack Ma was keen to capture. China is the most populated country worldwide with over a billion people, and half of the population being the youth (Xiao Huang, 2015). These presents a huge potential market for the Chinese retail market, making it necessary for a platform that suited these needs; online retailing stores. The emergence of the online platforms in the late 20th and early 21st centuries in China met the market needs for a variety, quality and timely needs of the market (Yazdanifard and Hunn li, 2014). This led to the overwhelming fast growth of the e-commerce industry in China, which is estimated to reach $1.6 trillion by 2020 (The International Trade Administration (ITA), 2017).
The exponential growth of the online retail industry in China has been achieved through capitalization on the opportunity presented by the high population and low retail stores coverage. Coupled with the creative and innovative approach of Alibaba in the industry, China has surfaced as the trailblazers of the e-commerce industry. Unlike the European and the American markets, there were no strong brands and retail store networks in the country, which made it easy for the e-commerce to command distribution (Yazdanifard and Hunn li, 2014). The greatest opportunity for e-commerce in the market was the diversity, being a country where distribution and supply were lagging behind compared to the first world countries and other leading middle-income countries.
Establishment of e-commerce platforms in China provided the Relevance in the 4Rs of the marketing theory. The e-commerce industry met the basic necessity for elaborate distribution channels that supplied products to the large consumer base. Besides the necessity for establishing a customer base, there was a need for delivery of services and goods. There were no firms which had established brands to reckon with in the Chinese retail market. The pioneers, Alibaba and Tencent, have therefore seized these opportunities to establish brands on their platforms by collaborating and forming mergers with affiliates who share the same vision in e-commerce or the firm's subsidiaries. Additionally, Alibaba’s management has been successful in establishing and managing their relations with the large consumer base in China. Further, they have expanded their services to a global market by ensuring their ventures and platforms resonate with the consumers.
Consumer-Oriented operations
Alibaba has been the pioneer of customer-oriented e-commerce in the Chinese market. The firm has been iconic by developing a business model that is adaptive to the dynamic business environment. Ma, the founder of Alibaba, in an e-commerce summit commented, “your business model, it should create value and be good to society,” he added “If it hurts the environment, it’s not good for society, so just don’t do it, business should focus on their beliefs and hope as the reasons they got into business and the way they satisfy their customers rather than focusing on profits and margins” (Yang and Huang, 2015). He has been emphasizing on the necessity of the development of a platform that is accommodating of community values, welfare, and creation of value for the customers. In order to do so effectively, generation of information for analysis is essential. It is necessary for planning, strategic business development, and decision making. Alibaba has been in the forefront of diversifying of business model to accommodate changes in the industry. The Chinese government has formulated legislature to protect the intellectual property and innovations, and legislature to control the online marketplace.
Alibaba’s business model varies from the custom e-marketplace in that it offers a wide range of online enterprises for small and medium entrepreneurs (Wang, 2012). The variation from the custom online retail platforms, where the online retailers have warehouses or offline retail outlets for sales, gives Alibaba a competitive advantage to their global competitor, Amazon. Amazon’s business model is limited to the distribution of goods and the sale of the products in their storefront at a small markup. The goods are stored in the wide networks of the organization’s warehouses. The business edge of the Amazon is buyers visiting the online platform with an expectation of availability of the desired goods, delivery services, and low order processing time. The products available on the platform are either obtained from manufacturers or bought from users who no longer need them, provided the products are in good form (Wang, 2012). Recently, Amazon has democratized their platform to allow retailers to sell their products, they act as an intermediary between Amazon and the buyer. This is an effort by Amazon to relinquish stocks that are expensive, which could remain in their inventory for long. It is an effort to avoid the dissolution of their profit. The organization, however, does not charge an access fee for their retail partner for items listed in their portals. However, they retain a percentage of the total earnings from the sales made by the retail partners as a commission.
Unlike Amazon, Alibaba has a more diversified business model. Alibaba’s stem business model acts as an avenue for buyers and sellers through their extensive online platforms. One of the online platforms is Taobao, which is their largest e-commerce web application. The platform is a free marketplace for vendors and buyers, where no commissions or assess fee is charged. Vendors pay for search engine optimization on the platforms search engine, earning Alibaba revenue from advertising (Tong, 2010). Taobao is a platform that is custom designed for SME’s and startups, which is basically a consumer to consumer platform. In order to meet the demand for similar services for well-established retailers, they have Tmall which caters for reputable brands such as Apple, Gap, and Nike. Although the platform has a significantly smaller number of users compared to Taobao, the platform earns the organization revenue from annual user subscription fees and commissions charged to listed retailers.
Other subsidiaries of the organization that are essential to its success in e-commerce include Alipay. It is an online financial platform that was established in 2004. The service was established following consumer concern for online money transfers, security and the validity of such transactions. The platform offers escrow services to consumers, which renders the users with security while making a purchase by giving them room to get the products delivered and examine if they met their expectations. The escrow service helps protect consumers from being disenfranchised on the platforms by sale of goods that are not up to standards. Alipay has been pivotal for Alibaba by gaining e-trust (Gui and Gong, 2016). People are confident while making an online transaction on Alipay, which is reflected by the daily transaction of US$ 3 billion on a daily basis. Information on the management has been instrumental in the tackling of challenges, making it possible for the management to determine the organizational ventures and strategic direction.
Alibaba has been keen to develop and diversify their business based on the consumer’s desires and changes in the industry. As illustrated earlier, Ma is committed to establishing a long-term relationship with consumers in each venture and subsidiary of his company. The organization is founded on responding to market demands and the development of a suitable approach to the management of change to sustain growth. Contrary to Robert’s (2008) contextual assertion that relationships that do not earn profits should be terminated, Ma has proved that a customer-oriented approach to business is critical. Alibaba’s executives have gone on record stating that they purpose to make a business decision that will guarantee Alibaba will still be thriving in a century. As a goal, it can only be achieved by responding consistently to customer’s ideas in a timely manner. The approach in business is responsive to the market rather than a speculation of what might work. Employing this approach acts as a relationship marketing strategy, which results in stable and long-term relationships between consumers and the firm.
Ma has consistently retaliated the necessity for the development of organizational services that deliver value to the consumer as the motivating factor towards boosting the organization’s revenue (Gui and Gong, 2016). Relationships are therefore responsible for the organization’s success internally and externally. Customer oriented services enable the organization to establish e-loyalty with the consumers. However, the external loyalty to the firm has to be equally matched by the loyalty of employees internally to actualize success. The organization, therefore, has to make compelling efforts to gain the loyalty of the employees by setting up structures to establish a balance in the organization’s external and internal trust and loyalty (Elliott and Yannopoulou, 2007). Their structures have to establish a platform that will complement the consumers will by timely responding to their ideas. The strategy falls in line with Elliot’s (2001) recommendation that organizations should prioritize listening to the markets and responding in a timely manner. Alibaba has mastered the practice, which has led to their dominant market control by meeting the consumers’ hopes and aspirations appropriately.
Internal Flow Management
Alibaba has matched their consumers and affiliates trust and loyalty internally by capitalizing on human resource planning. This has made the organization reinforce their commitment to operating in a customer-oriented business by streamlining their internal flows. These have been instigated in the organization by implementing custom human resource management. Customized human resource management focuses on developing and managing customer relationships, according to their desires. In this regard, employees are also perceived as consumers in the organization. Thus, the needs of employees are met with the same urgency and gravity as that of customers. The objective of this strategy is to promote personalized human resource development, employee loyalty, employee’s belief in the firm, employee recruitment and employee retention levels (Liu, 2010). While lowering the overall turnover of employees, the strategy effectively works to ensure better customer satisfaction, consequently garnering customers and employee’s loyalty.
As established previously, Morgan and Hunt (1994) deduced that relationship marketing is founded on trust. It has been exemplified in Alibaba’s custom human resource management and reliance on the development of a suitable organizational service. Employees are therefore committed to working towards the realization of organizational goals once trust is established between the employees and the organization’s commitment to the appraisal of their careers (Liu, 2010). Customized human resource management purposes a personalized career appraisal for employees, personal career interests, and growth in aptitude (Tong, 2010). Integration of the employees in the customer-oriented human resource management functions at Alibaba acts as a point of integration for the employees and the internal stakeholders’ work and families. Implementation of these structures has enabled Alibaba to increase self-ma...