A new marketplace always has the problem of what comes first, the chicken or the egg?

In Alibaba’s case, Jack Ma knew that China needed a website that showcased China factories to the world. In the past, if any overseas buyer wanted to find a factory in China, they had to employ a sourcing agent in China, or travel to trade fairs - that was the only way. There was so much demand from International buyers to find factories within China, so buyers was the easy part.

Alibaba’s problem was getting the sellers to actually list their products on Alibaba’s website. The internet was in it’s very early days and it was barely heard of within China at that time (being a communist country). Chinese people are very paranoid about competition and they didn’t trust the internet at that time, as they thought that their competitors would steal their information. It wasn’t until the SARS outbreak (around 2003?) that no International buyers travelled to the China trade fairs. Parts of China were in quarantine. This forced the Chinese suppliers to actually list their products “online”, which gave Alibaba traction from sellers.

Then Alibaba had the issue of trying to charge the sellers to use Alibaba. It wasn’t until they came up with “Gold Supplier” status, which offered suppliers to be listed above others in the results search that they then started making money. Over time Alibaba had big problems with fraud. Some companies that were supposed to be verified by Alibaba and their “Gold Supplier” status, were actually fake and fraudulent.

Take a look at Alibaba’s website and eBay’s website. They still look surprisingly similar even today. Alibaba was created in the early 2000’s and essentially copied what eBay were doing in the West.