Imagine a market of 800 million hugely empowered consumers. What sort of retailer will that produce?

Anyone who has been there will know this, but the data in Alibaba’s IPO documentation seems to confirm that the commercial impact of online transactions might be profound in China.

Despite the astonishing pace of change since Deng Xiao Ping first braved the potential of market-based economics, China has nothing like the brand depth typical of OECD countries. Huge numbers of undifferentiated traders operate in most sectors, and especially in retail. While this sounds like capitalist heaven, the absence of known brands in most sectors makes for a nightmare when it comes to value assurance. This is why the online effect is different.

Of course, online trading is hardly ideal for testing the quality or reliability of either product or vendor. But it does intensify like-for-like competition — and that, at least, is something the online user can apply with confidence. The next step to vendor assurance — as we know from eBay and others — is a relatively simple trader score, which assumes increasing significance when the channel becomes influential.

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The remarkable numbers in Alibaba’s case — a doubling of China revenues for 2013 on 2012, and a similar pattern for mobile usage — reinforce the impression that this is quite a phenomenon.

One of the more interesting outcomes will be the manner of brand-building created in a digital market starting from scratch, where the behaviours are fashioned by online capabilities. Exciting for Chinese, and maybe “interesting times” ahead for everyone else — assuming that the learnings of building a brand in a “pure” environment might be potent disruptive tools for those who branch from domestic Chinese to global markets.

About the author

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Michael Gill is Principal Advisor with ChangePond Technologies and Counsellor with global business advisory firm Dragoman.

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