Building materials might seem the least likely choice for any e-commerce venture. The conventional thinking is that a brick-and-mortar industry cannot sync itself with a virtual marketplace. But just don't try convincing Maggie Choo, director for international business development and marketing at Alibaba.com that this is the case.
The Hong Kong headquartered company is building up quite a faithful following in the Middle East for deals related to building materials through its portal during a phase when the region's construction and allied sectors are passing through an intensely trying phase.
Choo is convinced Alibaba.com's breakthrough in the region has to do with convincing portal users about the cost benefits that come with trading online, which multiplies when significant volumes are involved.
This holds true for any industry, even one as entrenched in brick-and-mortar as construction.
Gulf News spoke with Choo about the company.
Gulf News: The construction industry in the region is still coming to grips with the drop in project related activity. How has this impacted on your company's prospects?
Maggie Choo: Our trading platform launched in 1999 and has been open for global business since that time. We support more than 44 different types of industry categories. Given this level of diversity, overall success of our business is not dependent on the success of a single industry category.
As of September 30, our Middle East member numbers increased 39 per cent year-on-year to more than 818,000.
In the past year, we have seen the volume of construction-related inquiries originating from the Middle East increase by more than 95 per cent, a sure sign that Middle Eastern construction materials buyers are looking to overseas suppliers to support their business.
We feel that this growth, given the drop in project-related activity, also indicates that both buyers and suppliers in the construction industry are seeing that e-commerce can help them be more efficient in difficult economic times. By trading through e-commerce, both buyers and suppliers are saving money, enabling them to be more competitive for the most coveted contracts.
What sort of transaction volumes are you recording on a monthly basis?
Because Alibaba.com is not a transactional website, we cannot break out the actual order information — buyers and suppliers meet on our website and take their business transaction off-line. However, we are able to monitor enquires to Middle Eastern suppliers from global buyers and what type of inquires Middle Eastern businesses are sending to suppliers around the world.
For example, the top five product categories that Middle East buyers are looking for via our website are: doors and windows, timber, quarry stone and slabs, bathroom accessories and masonry materials.
Not only have construction-related inquiries increased from the Middle East, but globally we are seeing a significant increase in construction-related inquiries from 2009 to 2010 which is always a clear indication of increased confidence in the sector.
Where are the bulk of the region's members coming from?
The top three markets on our site are the UAE (23 per cent), Iran (19 per cent), and Saudi Arabia (16 per cent). The UAE has added an average of 4,200 new members a month since the beginning of 2010.
Do you see sellers willing to offer deep discounts on the listed prices to lock in sales on your portal? Are transactions dictated by the buyer?
Our goal is to increase profit for both the buyers and the suppliers. We do this by reducing the marketing cost for suppliers to reach customers around the world, and by reducing the sourcing costs for buyers looking for unique products.
By reducing the marketing and sales costs, we can help our suppliers keep their costs low to meet global pricing demands without sacrificing profit.
Your business model comes up against an entrenched brick-and-mortar business as far as building materials is concerned in these markets. Has this made a breakthrough more difficult?
We see our e-commerce platform as a way for traditional businesses to experience the benefits of international trade via the internet. We do not compete with brick-and-mortar companies, we support them and provide an on-line international trading platform that allows suppliers to find customers, and buyers to find the best value for the products they are searching for.
We have more than 56 million registered members on Alibaba.com globally, with approximately 8.2 million supplier storefronts worldwide.
In this business, we know that face-to-face contact is still important in working with suppliers. We can help by allowing buyers to pre-screen and select suppliers from all over the world, to understand who might offer the best product at the best price before they ever get on a plane.
It makes sourcing more efficient because you have more information about your prospective suppliers and their products, before you sit down with them to finalise which supplier is best for you.
Do you see sellers based in this region able to feed into demand from outside of these markets? Or do you think shipment and freight costs would come in the way for regional traders to seek a wider global footprint?
We have seen a significant increase in construction-related inquiries globally when comparing 2009 to 2010 data from our website, which is always a clear indication of increased confidence in the sector.
Not only are Middle East buyers becoming more active and increasing their construction-related buying inquiries, regional construction suppliers are also benefiting from this trend.
Construction-related inquiries to Middle East suppliers from foreign markets have increased by more than 28 per cent when comparing Q3-2009 to Q3-2010.
Shipping and freight companies are responding to the changing global business dynamic by offering better rates and more flexible pricing. Their business depends on people using their services and it is in their best interest to make sure that shipping costs for businesses are not a roadblock to success.
Many shipping companies are forming mutually beneficial relationships with e-commerce companies such as ours. Alibaba.com has brokered relationships with FedEx and UPS on behalf of its customers to make international shipping a much more simple process for business owners.
Are there any major issues the portal is coming up against in this part of the world?
While Middle East membership has been growing on our site, we still feel that there could be greater engagement with e-commerce in this region.
We believe it is the small business sector that has helped China to become the No 1 exporter in the world.
While large Chinese companies cannot yet compete with the likes of BMW or Siemens, its smaller businesses are robust, entrepreneurial and hungry.
