Why trust is your eCommerce company’s competitive advantage

“If there is a significant human potential that has not been realized, I believe mutual trust and credibility is the biggest undiscovered fortune. Only when we pay attention and care about ‘honour’, will we ‘honour’ ourselves.” — Jack Ma

As the founder of Alibaba, Jack Ma wants the same thing we all want in our relationships: trust. He understands that all beneficial human interaction is built on this single fragile currency.

He values trust and honor so highly that he once fired his top two salespeople for accepting bribes from vendors (a common practice in China at the time).

In so doing he walked away from 60% of Alibaba’s revenue.

Why was he willing to do this?

Because bribes are against his values. He and the early team decided they’d rather go out of business than compromise their principles.

Over time this thinking proved to help the bottom line as much as it strengthened their culture. Trust is the fundamental key that has propelled Alibaba to the levels of success it has achieved in the Chinese market and beyond.

Trust in an eCommerce Marketplace

Like any marketplace, Alibaba’s Taobao relies on 3rd party sellers. Like all marketplaces Taobao suffered from a ‘chicken and egg’ effect early on.

They needed to find quality 3rd party sellers to list new products while also stimulating consumer demand for those products. The only problem was that no sellers wanted to sell if there were no buyers, and no buyers would purchase if there were no products.

Jack knew that a very small number of negative customer experiences in the early days would significantly limit the company’s ability to grow both sides of this marketplace.

Unscrupulous sellers introduce all sorts of risk into eCommerce. They are more likely to sell counterfeit items, faulty products, or illicit goods. They are crafty at finding ways to bilk buyers out of money and inject fraud into exchanges. This leaves the marketplace left cleaning up the mess and salvaging the trust in their brand among consumers.

Jack realized that Taobao could significantly reduce the amount of fraud and seller deception if they optimized seller onboarding for trust. The first step in building this trust was to simply be able to prove that sellers are who they say they are.

So to verify the identities of sellers in the early days, the team sent agents out to the actual places of business of the seller applicants. It was only after an Alibaba agent physically verified him that the seller could begin selling on the marketplace. This worked well enough for some time, but it quickly became unwieldy as they scaled.

Scaling Up Identity Verification

Alibaba is growing well beyond China. They’re building a massive international business spanning dozens of cultures and economies. They’re doing it in a highly competitive and fast-paced climate with Amazon, Rakuten, Walmart, and eBay all fighting tooth-and-nail for the same dollars. This expansion presented the Alibaba team with a new challenge: how to verify sellers at scale.

The team noticed that other eCommerce marketplaces had created Trust and Safety teams (modeled largely off Risk and Compliance teams in financial institutions). The point of these departments is root out the unscrupulous sellers, keeping them off the platform. But the reality is that many of these sellers evade detection by inventing new identities or using someone else’s information to create a new account. They act as highly adaptable bacteria that evolve to sneak past any defenses that marketplaces mount against them. This is not good enough for a company who is as passionate about trust as Alibaba.

This is where real-time global electronic identity verification fits in.

How Electronic ID Verification Works

As part of the seller onboarding process an eCommerce marketplace using electronic ID verification takes information provided in registration (usually name, address, and phone or name, address, and date of birth) and checks it in real-time against independent reference data in the seller’s home country.

If the data elements match, the seller is able to proceed through the registration process quickly and with no additional friction. However, if the data elements don’t match, the application goes into exception processing. For most marketplaces this means prompting the seller to produce additional documents to prove his identity.

This creates variable friction in the onboarding process for potential sellers. It lets the proven vendors pass through effortlessly while adding checks for those sellers who can’t produce a match.

More importantly, it gives the eCommerce marketplace a quick and simple way to catch anyone pretending to be someone they aren’t. Companies like Alibaba find this approach allows them to trust each seller while still being able to scale quickly.

Trust: Your Competitive Advantage

Trust is modern currency. It is what brings customers back, it’s what drives repeat revenue. As a marketplace the trust of your brand is tied to that of your vendors.

It takes years of hard fought work to build trust. But a single bad seller can snap a customer’s trust in you forever.

At Global Data Consortium, trust is our business. Our real-time global identity verification solution gives eCommerce marketplaces the peace of mind that sellers are who they say they are. We’re protecting brands from being compromised by untrustworthy 3rd party sellers, and we’re doing it reliably at scale for customers all over the globe. Our technology allows any eCommerce site to verify sellers as accurately as giants like Amazon and Alibaba.

Like Jack Ma, we know that trust is a value that you can’t compromise. If you agree, feel free to send me an email.


Alibaba Looking to Make Cross Border Commerce between China and US a Two Way Street

I recently read and listened to an interview from Jack Ma (see below) that made it clear to me that he as a vision for Alibaba that goes well beyond simply enabling business to business or business to consumer trade in China. He intends to take on both the established e-commerce giants such as Amazon, Rakuten and eBay and also the brick and mortar players such as Wal-Mart.

Mr. Ma is pushing initiatives that will initially introduce US vendors to Chinese buyers of food products such as cherries, nuts and seafood. As his company learns from this experiment I expect that he will expand into other items to feed the Chinese consumers demands for products and services. In addition to US products, Ma also states his interest in bringing Russia to China, and Brazil to China, among others.

To enable and enhance these activities Alibaba has built an internal distribution logistics network and acquired mapping and location based services providers in China, thus locking up the best Delivery data information. Recently the company introduced a cross border Payment system that manages currency and disparate payment systems. This point of differentiation is a huge moat for those vendors who solely rely on the classic payment vehicles of Mastercard, Visa, American Express and Paypal.

Each of these moves makes the Alibaba platform a strong platform for vendors seeking entry into China commerce, to onboard, learn and transact. Further, Alibaba then learns more and more about the products and customers to figure out how to better enhance the services it provides to the market.

If you are an e-commerce vendor and you are not selling in China yet, consider the options and the opportunity. Using the GDC Worldview platform you can Validate a delivery address in China and over 200 other countries. Additionally you can Verify the Identity of a buyer before you ship product, thus reducing the risk of fraud. Improve Delivery, Reduce Fraud, Drive Revenue in Global Commerce. That is what we help you do at GDC.

Have a look and See the World more clearly.


Amazon Makes the Push into Alibaba’s Backyard

Amazon announced this past week that it would open a logistics warehouse in Shanghai’s Free Trade Zone that will allow it to expand the import and export of goods in China. Clearly this is a move to sharpen the competitive nature of things against its primary rival in Asia, Alibaba Group.

Amazon is moving quickly to become a player in the Chinese Cross Border Payment market. Further Amazon is increasing its ability to Deliver packages in China. Amazon current delivers to around 3,000 cities and counties in China.

Delivery, Identity and Payment are the three key underpinnings of global ecommerce transactions growth. Amazon is showing that it is capable of managing two of the three aspects via its platform in China.

Alibaba and others should be looking over their shoulder. Amazon is competing on all fronts and winning new customers in new markets.

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