Recently, I was discussing with a friend about Alibaba’s B2B market. While its new logistic platform is just a “joke” (see my earlier posting: Alibaba’s US$4.5 billion investment in logistic – just a plan only! ), its decision to raise membership fee can be a real driver to boost its bottom line.

It is just a simple matter of price elasticity of demand (PED or Ed), a term used regularly in economics. “Many Chinese businessmen think the lower the price, the more you can sell. But that is not always,” said my friend.

Alibaba lowered its cheapest membership package from US$5,000 to about US$2,900 (or RMB 20,000) , when its key competitor, Global Source cut its price by half, during the financial crisis in 2008. But, last September, it raised its price by 50%. The cheapest membership is now about US$4500 (or RMB 30,000)

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Sherman So

Author of Red Wired: China's Internet Revolution, the first book to completely survey the nature of China's internet. (http://redwiredrevolution.com/) She previously was the lead China technology reporter...