Baidu, Alibaba and Tencent (BAT)

Baidu Alibaba and Tencent (BAT) check list

The BAT is the Chinese name given to the following internet and software companies in China.

 

The giant BAT companies' internet business profiles are in the main work along the same lines as Google, Microsoft, Amazon, etc.

The BAT companies are estimated to directly or indirectly control over 70% of the internet business and transactions in China.

There is a significant difference between China and the rest of the world in the way business approaches the Chinese internet. Most Chinese companies are part of an existing B2B or social media platform and do not have a business website.

The BAT companies domination of the internet in China is in part due to:

• the histrionic concerns in publishing internet contents in China. By using Chinese platforms does not need ICP certification,
• speed of implementation,
• the cost of developing a website in China is 100% to 200% higher than the USA or Europa,
• the lack of experience IT skills in Chinese businesses,
• BAT overall control of the markets,
• • The integration of the services: website, messaging, social media, payment processing, within each of the BAT platforms.

The e-Mall, e-Commerce platforms, have been very successful as they bring together the online store processes with business processes, e.g., storage, shipping of the goods, returns, etc. Every much like the services supplied by Amazon outside China.

Each BAT company started with a big success in a single Chinese platform;

• Baidu search engine
• Alibaba B2B services
• Tencent Messaging

Each of these businesses has a substantial user base to grow new services;

• Baidu - search engine and marketing and IT services,
• Alibaba – B2C services and e-Commerce (Taobao, Tmall, etc.),
• Tencent – Social media, APPs, e-Commerce (WeChat, JDBuy).

Now each of the BAT businesses operates in each other market as their market share and success changes up and down monthly.

On the next page is a summary, not a complete list, of the services supplied offer by the BAT companies.

When you look at this list, you may conclude that Tencent is the more substantial business or the business with the highest potential with their hugely successful WeChat platform.

Alibaba's strength is in the e-Mall market; Tmall, Taobao. Their successful expansion into Email markets outside China is provining very successful.

Please note; Not all the businesses in this list are owned by the BAT companies; some of them are JVs, partners, etc. The BAT companies have been smart by creating groups of services that make the best use of their extensive user base.

In some cases, the BAT companies have created new services that take control of existing distribution channels, in many cases changing commercial and retail practices throughout China within months. An example of this was taxis booking services like Uber, except created many years before Uber popularity grow.

The taxi App first significant implemented was in Shanghai. Both customer and the taxi driver received a payment for each booking. The App for many months was losing money. The BAT companies were purchasing a market share. Within six months, they control the taxi business in Shanghai.

Following this, over the next five years, many startup venture capital companies were created using raised on the Chinese investment markets. Today, there are many excellent taxi services in China. Most Chinese taxis today are booked on-line. If there is an issue, the taxis market has become overcrowded with too many taxis.

Form this example there are a few points of interest;

• the BAT companies' resources give them durable purchasing power. If they move into a market, change will quickly follow,
• if taking an IT service to China, do not enter into a market area in China where the BAT companies already have control of the market,
• the BAT companies have financial resources like and Google or Microsoft. These resources are used to purchase businesses when a company is taking/creating an online market share.

Histrionically, rest of the world, about 75% of on-line purchases are performed directly on supplier websites. In the rest of the world, supplier websites are being replaced / complemented with e-Malls, i.e., Amazon, where one company is supplying the end to end purchasing, payment, and shipping service.

In China, the BAT companies control e-Commeric platforms, enabling Chinese businesses to sell to the end consumer and international business to sell the Chinese market. Somewhere between 60% to 70% of the online store trading is through the BAT Company's platforms.

Often people see European products been sold on-line in China at 100% plus a higher price. While this may look like an excellent opportunity for overseas suppliers, these are the net price which includes all costs of supply, i.e.,

• all local and international shipping,
• import duties,
• Chinese sales tax,
• bonded warehousing storage,
• e-Mall transaction fees,
• e-Mall listing fees.

Besides, BAT companies store cost is high. The effect of this is to push the price higher.

In our view, there is not a large margin to be made e-Commeric selling a few products in China. There is a significant market return based on the volume of sales.

The exception is where your business is the large wholesaler or manufacture of the foreign product. Additional margin is available as many different products in the Chinese e-Malls are sourced from international retail shops.

Looking ahead

Alibaba will continue its growth outside China with its Lazada e-Mail platform. Currently operating in South Asia; Indonesia, Malaysia, Singapore, Vietnam, Thailand, Philippines. Africa we excepted will be the next area of expansion.

In China, more businesses in the consumer market are to operate outside e-Malls through the Weixin Mini Apps (Tencent owned). Weixin Mini Apps platform enables companies to create their online store / APP. There are now many independent on-line stores in the Weixin platform. Weixin platform is fully integrated into WeChat social media platform.

The impact of Covid-19 has dramatically changed the markets in China, like in the rest of the world. During January, February, March 2020, 95% of all retail transaction was completed on-line. While this will reduce in part now the “lockdown” at the end of April 2020, will believe that retail the market will remain at above 80% for the foreseeable future.

Chinese people, like most of the world, will not be travelling international on holidays. The demand for global retail products will still be high; therefore, there will be a high demand for global products online in China.

The Covid-19 impact has created needs for contact tracking APPs. Currently, each city/region have their dependant systems. The BAT companies will need to continue their development into Big Data and Artificial Intelligence (AI) systems at a faster rate if Covid-19 is going to be contained in China.

Last modified: 4 May 2020 - Version 1.8.