Alibaba vs. Ariba?

I've always been surprised by how many advertising-driven supplier directory models continue to position themselves as sourcing tools for procurement organizations. The closest that a provider has come to pulling this off is, but they remain a relatively small niche player. Yet when I read press releases such as this from Alibaba, announcing a new acquisition in what appears to be the consumer space, yet positioning itself as having significant "strength in sourcing," I must admit I'm a bit confused. If Alibaba's strategy is to be believed, it appears that they're on a collision course with Ariba, who through it's Discovery product (A Review of Ariba Discovery -- Part 1 -- and Could Ariba Discovery Finally Scale a Challenging Business Model? -- Part 2), appears poised to compete for similar supplier advertising dollars.

To be completely candid, my money is on Ariba despite Alibaba's size and presence, specifically in China. I fundamentally believe that to be a sourcing player that takes supplier revenue, you have to be on the buyer's desktop. Alibaba most certainly is not a true desktop sourcing application for anything but the smallest of ma and pop shops -- at best, based on my observations in the field, they're a book-marked site for very small buying organizations and individual hobbyists/entrepreneurs to research supplier information. In contrast, Ariba, with decent market share in sourcing in the middle market and up, is further along, despite the nascent volume and number of RFPs going through Discovery.

I do find it interesting that Alibaba is positioning itself in a very similar manner to Ariba, who talks about the "Commerce Cloud," for the smaller end of the market. To wit, Alibaba sees itself "building the world's first global e-commerce supply chain" whose "end-to-end network" will connect "manufacturers and wholesalers with e-tailers and consumers." In theory, this will allow "small businesses to easily source from suppliers all over the world." Yet I have a hard time believing that Alibaba will be able to let customers sustain the type of LCCS price arbitrage model it claims its collective acquisitions will enable (e.g., "a jewelry retailer can sell a silver bracelet with black agate stones for US$12 on eBay and make a profit of US$7.09 if he/she originally purchased their inventory on AliExpress [Alibaba] for US$4.91 per piece.") After all, the combination of markets becoming more efficient through a range of new price transparency tools such as this combined with lower inventory levels and the rising LCCS price (usually China price) could prove self-defeating in enabling trinkets and trash arbitrage.

Jason Busch

Share on Procurious

Discuss this:

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.