The week before last, I blogged about the “take rates” associated with various B2B Commerce Platforms. The two key points were that take rates:
- depend on the services that the marketplaces offer
- marketplaces that connect buyers and suppliers who were previously unknown to each other can “take” 1-10%–the low-end of the range being for goods and the high-end for unique services
Alibaba’s Take Rate
Last week the Wall Street Journal ran an interesting article on Alibaba’s take rate. Of course, Alibaba has a B2B marketplace (that is how they started), but the take rate they report is not based on the Alibaba B2B marketplace, it is based on Tmall which is B2C (like Amazon) and Taobao which is C2C (like eBay). Still, Alibaba’s take rate is still interesting to watch as analysts are paying close attention to it.
Alibaba Says Focus on Growth, Not Take Rate
For its part, Alibaba makes it clear they are focused on maximizing Gross Merchandise Volume (GMV) and buyers not take rate. Alibaba is saying it is focused on growth, not margins. (This is, in part, because the take rate is falling!). But here is the WSJ’s chart of Alibaba’s take rate over time and by user type.
As the WSJ points out in a follow-up article today, Alibaba’s take rates may be so low (they are lower than eBay’s and PayPal’s) because they are locked in a battle with JD.com on the B2C part of their business. And Taobao did not charge transaction fees to start, just advertising fees for merchants.
The pressure on most take rates in marketplaces is inexorably downward as they battle for dominance. Their hope is that once they gain dominance and drive others out of the market, they can perhaps wield that market power to raise rates. The credit card networks succeeded in that strategy for a while until the merchants and government started to get involved.
Expect this pressure on take rates to continue. You will know when there is a winner when the rates starting going up!!