Alibaba's trade assurance program boosts B2B deals

Zhou Dongmei (left) and Gu Yueyue, two fresh graduates, set up their own business in Nantong, Jiangsu province, by using Alibaba’s ecommerce platform. XU CONGJUN / FOR CHINA DAILY

Company's credit program makes cross-border deals between buyers and suppliers a breeze

Ai Baozhong, a trade manager with Xiamen Brandnew Color Steel Forming Co Ltd, is glad India's global conglomerate Tata Group, after much thought, has finally placed a big order, thanks to Alibaba Group Holdings Ltd's trade assurance program.

A few months back, Tata had planned to buy steel forming equipment from Xiamen Brandnew, Ai said. But, even after two months of negotiations, Tata could not make up its mind.

Its comfort level with Xiamen Brandnew was not high. From Tata's perspective, the Chinese company was an unknown commodity dealer. The conglomerate had never done a deal with the company.

It had concerns about Xiamen Brandnew's product quality, its ability to deliver products on time and after-sales service.

That's where Alibaba, the business-to-business or B2B e-commerce platform, came into the picture. Ai informed Tata that Xiamen Brandnew is covered by Alibaba's trade assurance program.

The scheme promotes trust between buyers and merchants in cross-border trade.

Buyers get Alibaba's protection coverage in the event of sellers or suppliers failing to provide the right product quality or failing to deliver on time.

By becoming part of the program, sellers or suppliers offer reliability to buyers and enjoy increased coverage as Alibaba includes only reputable companies in its program. Alibaba also extends a line of credit to sellers.

By promoting trade on its platform, Alibaba becomes even more popular.

When Tata officials saw merit in Alibaba's program, they decided to buy the equipment from Xiamen Brandnew. "Alibaba's trade assurance program is good for both buyers and sellers," said Ai. "It will become the norm as credit is vital in international trade."

Wu Minzhi, vice-president of Alibaba and president of Alibaba's B2B unit, said the group's trade assurance program had extended more than $3 billion in credit to Alibaba-registered suppliers in 2015.

That, in turn, encouraged global buyers to place more than 1.2 million orders through Alibaba.

The trade assurance program was launched in 2014. Since then, more than 100,000 suppliers have benefited from the program's credit facility. A single supplier could receive up to $1 million in credit.

The Alibaba assurance is extended only after a thorough analysis of a seller's trading data. Based on it, a risk-control model is designed to calculate the credit quota.

If there's any problem between a seller and a buyer, Alibaba will pay the buyer as per the seller's credit quota.

The credit service also applies to buyers. Alibaba, in association with banks and other financial institutions, offers credit to buyers as well.

Wei Qiang, head of Alibaba's trade assurance program, said the scheme is becoming increasingly popular among overseas buyers.

"In 2015, 15 percent of overseas buyers with credit guarantee services were new clients of our platform," said Wei.

"The foreign trade orders in the past six months increased 51 percent year-on-year. I believe trade assurance plays an important role in Alibaba's efforts to transform and upgrade business.

"It not only helps suppliers on our platform to win the trust of overseas clients and improve their efficiency but helps us in accumulating international trade data."

Wu said data are key to e-commerce, particularly cross-border e-trade. For, there is not much data available on e-trade of the past 10 years.

To fill that gap, Alibaba acquired Shenzhen OneTouch Business Service Ltd in 2014. OneTouch is a leading Chinese online platform providing professional business process outsourcing services to China's small and medium-sized cross-border trade enterprises.

OneTouch has accumulated much cross-border trade data. Alibaba's trade assurance program was developed based on OneTouch data.

"Online trading value on OneTouch totaled $15 billion in 2015, and we expect it will total $50 billion this year," said Wu.

Wang Chong, executive deputy director at the leading office of China (Hangzhou) Cross-border E-commerce Comprehensive Pilot Area in Hangzhou, Zhejiang province, said: "We appreciate Alibaba's innovation in trade assurance, which promotes the development of foreign trade."

Wang further said the pilot area will cooperate with Alibaba to make foreign trade convenient for companies.