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Alibaba to open Italian sales office by year end in search of SMEs eager to tap foreign markets

by Luca Tremolada

“Why Italy and why Europe? We work with small businesses and Italy has tens of thousands of SMEs with high-quality products,” says Alibaba President Michael Evans. “In China our middle class has grown to 350 million people, who are all potential consumers of made in Italy. That’s why.”

Evans has worked in China for nine years, first at Goldman Sachs and then on the board of Alibaba as an independent director. Appointed in August as the president of the group, he was the man chosen directly by billionaire Jack Ma to lead the European campaign and the internationalization of this Chinese e-commerce giant.

The mission is clear: to bring companies, brands and products to the Chinese market through the technological and logistical infrastructure of Alibaba. Even the roadmap has been determined: by the end of the year, Evans told Il Sole 24 Ore, sales offices will be opened in Italy, France and Germany. The first to be operational will be the Italian “embassy.”

“Jack decided this,” the Canadian manager was keen to stress, “after a meeting with the Italian Prime Minister Matteo Renzi.”

It has not yet been determined, however, how many people will be working there.

“We have just decided upon the figure of the country manager. Together with him we will decide the number of personnel,” he said.

The acquisitions of start-ups, however, have not been ruled out.

“ Why not?” smiles the Canadian, a former gold medal winner in rowing in 1984. “We are not a private fund but we realize that in every country it is necessary to adopt a different growth strategy.”

And he remains close-mouthed about the choice of partners, limiting himself to pointing out that when they think of Italy, they think about food, fashion and wine. A classic partner then but with an approach that is far from a touristic one. Focusing on foreign markets has become a necessity dictated also by the financial markets.

Paradoxically, China, despite its immenseness, is no longer enough for Alibaba. According to Evans, domestic e-commerce spending has almost reached that of American e-commerce spending. Eight packages out of ten pass through their infrastructure. But to move the financial figures, new clients outside of national boundaries are needed. Clients and not products because Alibaba is a strange giant.

The company itself has a bit of everything: e-commerce, cloud computing, a search engine, telephone transmission.

But its main asset is its business model linked to sales. In this sense, Alibaba is not a traditional e-commerce company.

The Taobao portal puts the consumers directly in contact with each other. It is a marketplace, conceptually it is a showcase, a digital bazar conceptually similar to eBay. It hosts the companies on its portal and earns from the transactions, retaining a fee from the buyer. Unlike Amazon, it does not own products and does not manage warehouses and distribution centers.

From a financial perspective, its model makes it more profitable. Amazon must make huge investments in infrastructure, in the management of personnel and operates on a thinner profit margin.

Alibaba has a lighter model but less of a control on the quality of the product. Alibaba guarantees the quality of the producers and distributors, assigning the title of “Gold Supplier.”

In February 2011, a scandal broke out when Alibaba admitted to having granted this title to 2,236 suppliers who ended up cheating their customers. The scandal resulted in resignations but highlighted how the activity of Alibaba is based on the buyers’ trust in the suppliers, and on the suppliers’ trust regarding the value of the guarantees purchased by them.