AliExpress Business Model & Revenue Model Explained

Often startup owners have to start their first businesses without any capital, technology, or team. If you find yourself in this position, then you might as well consider the AliExpress business model.  After all, that was how Jack Ma started the Alibaba Group – no money, no technology, and no team. He founded the company in 1999 in his apartment though he had the idea for it in 1995. However, he did find 18 investors. 

Today, his once-startup represents an ecosystem of businesses including an e-commerce platform, a series of brands (Alibaba, AliExpress, Taobao, TMall), a provider of cloud computing services, a digital media and entertainment center, a logistics network, and local trading services. In 2023, Alibaba Group achieved the following results:

• $131.52 billion in revenues;
• $11.14 billion in net income;
• $188.38 billion in market capitalization;
• And 204.89k full-time employees.

Looking at AliExpress in particular, it is important to highlight the emergence of the dropshipping business model. Initially, AliExpress evolved as an e-commerce B2C platform for global trading. The website focused on servicing small and medium-sized Chinese enterprises looking to sell their goods internationally. Having developed a wide variety of competitively priced goods opened the opportunities for a dropshipping model. As its popularity grew, tools like Oberlo and Dropified emerged. Later, AliExpress recognized the dropshipping business model and started creating functionality to support it. 

In this blog post, we’ll discuss the AliExpress Business Model and how it integrates the dropshipping business model within it. 

Starting Alibaba Group and AliExpress Origins

Before ALibaba’s success, Jack Ma faced his fair share of failure and rejections. Jack Ma received training to become a college English teacher after failing several times at entry exams for this specialty as well as others. Getting known for his English-speaking abilities in Hangzhou, he was sent on business to the USA by the Zhejiang government in 1995. At this time in America, just a year earlier Jeff Bezos founded Amazon due to a surge in Internet usage. Jack Ma was also impressed by this trend and took this idea home. 

Upon return, Jack Ma started his first startup – a B2B e-commerce website. Jack Ma called it the Chinese Yellow Pages. He borrowed the starting capital from his parents. The venture failed in two years. So he took a job with the Ministry of Foreign Trade and Economic Operation. There, he was responsible for creating a website for online trade. Then, he resigned from this position to give a shot at his own startup once again. 

So, in 1999, he and 17 investors who were mainly family and friends founded Alibaba.com. Overall, it is always possible to start a business such as an e-commerce platform without being a geek or having money for it, or even without having a team. But you always have to have investors. Startup Services often start with a package aimed just at that: finding investors.

The Rise of Dropshipping at AliExpress Business Model

The dropshipping business model appeared long before the Internet with mail-order companies in the 60s and 70s. When the first e-commerce Internet stores appeared, dropshipping moved there. But buying on the internet wouldn’t gain momentum for a while. People were skeptical. It is with the rise of Amazon that people started to take to buying online. So, when AliExpress came to be a global player with quite attractive prices, it was no surprise dropshipping quickly moved there as well. 

AliExpress business model started as a business-to-consumer (B2C) business. The model primarily focused on helping small and medium-sized Chinese enterprises to get to a global market. A large variety of Chinese sellers were able to offer a great variety of goods at much lower prices than global markets had available at that moment. 

A short while after the launch, some individual consumers started to realize the potential of the prices Chinese sellers were able to offer. In addition, AliExpress did a good job in terms of logistics. Even though it wasn’t fast, the costs were quite affordable. 

So, early AliExpress dropshippers would copy listings from AliExpress onto their stores. They would do their own SEO for their store and set their prices. They would accept orders from the customers, and then submit the order at AliExpress to the customers’ address. That was the process before any tools appeared. 

Once tools such as Oberlo and Dropified appeared, it allowed streamlining of the processes for dropshippers. Recognizing the rising trends, a lot of other plugins and tools for syncing outside stores with AliExpress appeared. Their main goal was to automate the import of listings,  synchronize inventory and fulfillment, and add a variety of extra features. Noticing how big the trend was getting, AliExpress developed its API for custom MVP app development. 

Dropshipping Business Model in Numbers

Here are some key statistics on the dropshipping business model:

• AliExpress is ranked as the #1 dropshipping platform;
• E-commerce stores that use dropshipping make 50% more than those who rely only on their online inventory
• Manufacturers who use dropshipping make almost 20% more than those who don’t;
• Dropshipping makes up 23% of all online sales;
• Electronics comprise 30% of the North American dropshipping market;
• Air fryer is the #1 item for dropshipping with 1.5 million weekly searches on Google and an opportunity for a good markup.

And here are the data and projections for the dropshipping market:

So, the dropshipping business model is a win-win for all participants of the process. 

• Customers can enjoy a wider selection and a range of shipping options. 
• Manufacturers and business owners can enjoy greater revenues. 
• The model is sustainable long-term with a healthy growth rate between 20%-30% annually.

AliExpress Business Model & Revenue Model

On the canvas below, you can see the AliExpress Business Model. It incorporates the integration with the dropshipping business model. In addition, there are many more business models to explore. You can browse the Top 10 Business Models to consider for your startup to discover other ones.

Value Proposition of the AliExpress Business Model

• For the sellers, the AliExpress business model gives Chinese merchants an access to the global consumer. The platform itself includes impressive support for a variety of languages and currencies. The logistics and shipping solutions are shared with Alibaba, but also AliExpress standard shipping was developed with a chain of warehouses around the world. It optimizes shipping costs and delivery times.  Integration of Alipay from Alibaba also securely streamlines transactions. Sellers receive the payments once the customer confirms the delivery.  
• For consumers, the AliExpress business model offers a large variety of goods available at affordable prices. 
• For consumers-dropshippers, AliExpress offers dropshipping support including required functionality, a help center, analytics, and integrations. 

Channels

The primary channels for delivering the value proposition are the AliExpress website and the corresponding mobile app. Aliexpress website launched its website in 2010. A couple of years later, Aliexpress launched its mobile apps for Android and iOS. In order to support integration with the dropshipping business model, AliExpress developed a range of integrations with third-party tools, plugins, and platforms. 

Customer Segments

Since 2017, the AliExpress has started to recognize three distinct customer segments:

• Individual consumers,
• Dropshippers,
• Sellers.

Customer Relationships 

AliExpress maintains relationships in a few distinct ways. 

The main entry point for maintaining relationships with AliExpress individual customers is via reviews and the help center with 24/7 online support.

In addition, there is a Buyer Protection program for dispute resolution. The program provides guaranteed refunds for three major scenarios: 

• the item doesn’t arrive,
• the item arrives damaged,
• the item arrives but doesn’t match the description. 

AliExpress introduced The Dropshipping Center in 2017 to support the dropshippers. It features tooling for product analysis, spotting trending items, and scores for seller reliability. 

Key Resources of the AliExpress Business Model

AliExpress is technologically-advanced in terms of opening up the global consumer to Chinese sellers. All of the resources facilitate this feature in the most sophisticated way. 

• AliExpress features Alibaba Cloud to scale its services and also provide cloud services to consumers. 
• AliExpress injected AI into its recommendation system. However, its main focus is to scale the international trade rather than delivering personalized experiences to consumers like Amazon does. 
• The fulfillment and warehouse system is yet another powerful resource. It aims to ensure affordability rather than speed like Amazon’s fulfillment network. 
• Alipay is integrated across AliExpress. It is widely supported in China and maintains a reputable and secure payment system internationally. 

Key Activities

All AliExpress activities to this day are streamlined towards supporting Chinese merchants in their reach of global markets. So if we compare Amazon’s and AliExpress’s maintenance and update efforts, there will be a huge difference. While Amazon focuses on customer service and corresponding user experience, AliExpress is all about scale and fast performance. Updating its servers, databases, and APIs to handle more transactions faster is especially relevant for the dropshipping model AliExpress implements. 

However, it won’t be correct to say that AliExpress does little for user experience. AliExpress also releases updates of search algorithms, improvements to the checkout process, and enhancements to its recommendation system. 

Since the brand is also a key element of AliExpress, it has a thorough seller vetting process. Each seller must go through identity verification and quality checks of the goods upon joining the platform. There is also ongoing performance monitoring. The latter is especially important for the dropshipping side of things. After all, AliExpress maintains a seller reliability score for dropshippers. 

Key Partners

• Chinese sellers are the key partners of AliExpress. Within the AliExpress business model, a lot of processes are lined up to ensure their success in global markets. Consequently, other partnerships center around this goal.  
• Also, there is a strong interconnectedness within the Alibaba Group ecosystem.
• In addition, to support the dropshipping business model, AliExpress partners with other e-commerce platforms that it integrates with. 

AliExpress Revenue Model: Revenue Streams & Cost Structure

Being a part of Alibaba Group, AliExpress has no separate revenue and cost data available officially. Overall, the revenue streams from AliExpress are:

• Seller fee charges based on each sale made;
• Transaction fees for processing payments;
• Advertising fees for seller promotion;
• Fees for extra services such as logistics support and premium seller accounts. 

Alibaba Group’s revenue structure is shown below. AliExpress operates primarily within the “International commerce retail” category and is marked as grey in the chart. It is not the main source of revenue for the Group as its mainland Chinese sales are much bigger. However, AliExpress does indicate a marked growth from 2023 to 2024. It grew from 5% to 8% over a year. Alibaba attributes this growth to the Choice initiative. The initiative celebrated its first anniversary in March 2024. It allows sellers to improve their supply chain and brings a better customer experience to the customers. With the Choice initiative, AliExpress refocuses its effort to improve the speed of delivery while carefully balancing the cost. 

In terms of the cost structure, it would be similar to other e-commerce businesses.

• Operating expenses that include maintenance of the platform, servers, and databases;
• Technology development that includes the development of the platform, adding newer features, R&D activities, and salaries of engineers;
• Sales & Marketing expenses that include all promotional activities, advertising, user acquisition
• Logistics support since AliExpress also incurs expenses that are not covered by the seller fees. Cainiao Logistics bears the expense of cross-border delivery.
• Customer service costs include the Buyer Protection program, dispute resolution, round-the-clock customer support as well as fraud prevention.

Other Companies Within The Dropshipping Business Model

The dropshipping business model engages a variety of businesses.

Shopify is an e-commerce platform that enables individuals to start their online stores. Its revenues come from subscription and transaction fees. However, the most substantial part of revenues comes from individuals who set up dropshipping stores. For this purpose, Shopify acquired Oberlo in 2017. Oberlo was an app designed by a Lithuanian startup specifically to work with Shopify. It imported product listings from AliExpress to Shopify and managed the shipping directly to consumers. However, 5 years after the acquisition, Shopify delisted its Oberlo app. 

SaleHoo is a platform that lists suppliers that work with dropshippers. SaleHoo makes its revenues from subscriptions paid to access its directories. They are all aimed at making sure dropshippers find reliable suppliers.

Modalyst is similar to SaleHoo but it also offers integration with Shopify and Wix. Also, its directory of suppliers available for dropshipping is global but it focuses on brands and indie merchants. 

Doba.com is yet another platform that provides a list of items for dropshipping with a range of integrations. Its integrations include the usual Shopify and Wix but also WooCommerce, Square, Walmart, eBay, Amazon, and others. Recently it added integration with TikTok Shop. Printful takes a different spin on dropshipping. This service is not about ready goods that are available for shipping. It is about goods that will be made for shipping. Dropshippers direct here orders for printing on T-shirts, mugs, posters, and others.

FAQ: AliExpress Business Model & Dropshipping