---
title: "Liu Qiangdong and Jack Ma Enter the B2B Arena: What Are They Really Up To?"
description: "Jack Ma's announcement in late 2015 that 1688 would pursue cross-border e-commerce was not news, as it was the 'unfinished business' of Alibaba's two major strategies for 2015. Liu Qiangdong's announcement that he would enter the B2B sector, and personally oversee it, was news, but his stated reasons were puzzling. If Ma and Liu's previous C-end e-commerce 'disintermediation' removed all middlemen to reach consumers directly, then this new B2B wave only removes agents (distributors) while retaining retail stores. If the benefit to C-end consumers was 'cheapness,' then what is the benefit to retail stores in their B2B efforts?"
author: "刘春雄"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2016-01-20"
language: "en"
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---

# Liu Qiangdong and Jack Ma Enter the B2B Arena: What Are They Really Up To?

> Jack Ma's announcement in late 2015 that 1688 would pursue cross-border e-commerce was not news, as it was the 'unfinished business' of Alibaba's two major strategies for 2015. Liu Qiangdong's announcement that he would enter the B2B sector, and personally oversee it, was news, but his stated reasons were puzzling. If Ma and Liu's previous C-end e-commerce 'disintermediation' removed all middlemen to reach consumers directly, then this new B2B wave only removes agents (distributors) while retaining retail stores. If the benefit to C-end consumers was 'cheapness,' then what is the benefit to retail stores in their B2B efforts?

Jack Ma's announcement in late 2015 that 1688 would pursue cross-border e-commerce was not news, as it was the 'unfinished business' of Alibaba's two major strategies for 2015.
Liu Qiangdong's announcement that he would enter the B2B sector, and personally oversee it, was news, but his stated reasons were puzzling.
**If Ma and Liu's previous C-end e-commerce 'disintermediation' removed all middlemen to reach consumers directly, then this new B2B wave only removes agents (distributors) while retaining retail stores.**
**If the benefit to C-end consumers was 'cheapness,' then what is the benefit to retail stores in their B2B efforts?**
**C-end slowdown leads to B2B?**
Let's start with the rural e-commerce that both companies were pushing in 2015, because Liu Qiangdong's B2B e-commerce is based on rural retail stores.
**In 2015, Alibaba had two major strategies: cross-border e-commerce and rural e-commerce.** Cross-border e-commerce basically didn't get off the ground, and rural e-commerce, even if not a failure, can be called a setback. JD's rural e-commerce was not much better.
In fact, both companies knew that C-end e-commerce was reaching its peak and needed new alternative strategies, otherwise they would lose their voice like Lei Jun did recently. Both have large research teams, so we don't doubt their research capabilities.
Since it's a strategy, it must be comparable in scale to the original strategy, otherwise it's a chicken rib. To be blunt, rural e-commerce is a chicken rib for them.
**First, scale.** The total retail sales of goods in rural areas is only one-sixth of urban areas, and in 2016, e-commerce sales might equal the total retail sales of goods in rural areas. This scale is too small to support their strategies. Even if successful, what's the use?
**Second, difficulty.** Since farmers lack the ability to place orders online, 'purchasing agents' are needed. What is a 'purchasing agent'? It's recreating a retailer. This is much harder than 'ground promotion' in cities, because it's hard to imagine setting up 'purchasing agents' in such dispersed rural areas across the country.
**Third, product suitability.** I once summarized the products suitable for C-end e-commerce: first, high value or high added value; second, non-immediate consumption. Rural retail goods are exactly the opposite. That is, rural e-commerce replaces not rural areas, but farmers' urban consumption.
**The setback of rural e-commerce shows that the last incremental space for C-end e-commerce is blocked.**
**Still 'disintermediating'?**
If there were still incremental space for C-end e-commerce, would Ma and Liu do B2B? I think they are forced into B2B e-commerce.
Ma made his fortune from B2B, but the current B2B is different from Alibaba's B2B.
**The current B2B is more based on traditional channel players, optimizing traditional channels, improving efficiency, and saving costs.**
**In 2015, many B2B e-commerce platforms were established. Their commonality is that they don't subvert or disintermediate, but use internet platforms to optimize existing channels and management. This is welcomed by channel players and manufacturers. At least, they didn't disrupt the original price system.**
Ma and Liu's B2B e-commerce still uses their specialty: disintermediation. But this time, the target is agents.
Ma's cross-border e-commerce is also easy to understand, because cross-border e-commerce originally lacks agents close to retail, or the agent network is not well-established, only national agents. National agents should welcome cross-border e-commerce because it provides a platform to increase sales.
However, cross-border e-commerce also faces a problem: without regional agents, there is no regional promotion capability, forcing national agents to do regional promotion. This is basically impossible.
This round of cross-border e-commerce generally involves non-well-known brands. Well-known brands have already established national networks, and multinational companies respect the interests of agents.
If cross-border e-commerce lacks well-known brands, how can it promote? Will cross-border e-commerce also engage in price wars like Tmall and Taobao? Without price wars, how can it attract retail stores to stock up?
Fortunately, consumers have quality trust in cross-border e-commerce, at least for now.
**Which manufacturers are willing to give up agents?**
Which manufacturers are willing to give up agents?
What will Liu Qiangdong's B2B look like?
At the annual meeting on January 16, Liu Qiangdong gave an example when talking about B2B e-commerce: 'Mom-and-pop stores are hard for other formats to penetrate. For example, in every village in rural China, there is at least one small shop. We went to towns to research, and users felt it was too far to buy from JD, including Taobao and Tmall. Wang Wu in the town sells phones. He has been selling phones in the town for 15 years, selling well and providing good service. Any problem, they can find him to solve. They rely on social connections. In a small community, they have a unique survival model. It's hard for us to compete with them. This goes beyond price, quality, and service.'
Liu Qiangdong admitted that it's hard for him to compete with community retail stores, so how can he compete with agents?
**In traditional channels doing B2B e-commerce, delivery and ordering functions may gradually be handed over, but customer relationships and new product promotion functions need to be strengthened.**
Liu Qiangdong's B2B e-commerce certainly cannot provide customer relationships and new product promotion, so these functions must be done by manufacturers. In that case, who would be willing to hand over their products to JD?
You know, China is now in a critical period of product upgrades and continuous new product launches. Who would be willing to 'remove agents'?
Such situations do exist. Since the channel sinking in 1997, well-known brands have gradually withdrawn from wholesale markets. I originally thought that after well-known brands withdrew, wholesale markets would end or become retail-wholesale markets. However, unexpectedly, wholesale markets still thrive, mainly as distribution centers for small brands and small products. Provincial and municipal wholesale markets rely on this, and provincial agents also rely on this. However, these products generally cannot be placed on supermarket shelves and can only be sold in mom-and-pop stores.
If JD's B2B competes with wholesale markets, then it's better not to take this business, as it will only cause trouble for JD. What troubles Ma most is the quality of Taobao (C2C). Would Liu Qiangdong find a business that causes trouble?
Conclusion
**Conclusion**
**Disintermediation in the C-end is feasible in certain product areas, and the original middlemen indeed have inefficiencies. At a critical moment of product upgrades and structural adjustment, how many manufacturers are willing to 'remove middlemen' is a big question. If they still wave the banner of disruption, they might be disrupted by new agents who have awakened and been armed with the internet.**
**-END-**
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