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Thu September 4, 2014
Dead Chickens, A Tiny Motor And The Story Of Alibaba
Originally published on Thu September 4, 2014 2:19 pm
Last year, Shawn Hector bought some baby chicks. He put them outside in a little chicken coop, but it did not go well. The chicks were eaten by hawks, foxes and raccoons.
Shawn decided the world needed a better chicken coop. He and a buddy, Steve Deutsch, should build it themselves. They figured there might be a market for a high-tech chicken coop, and dreamed of starting a little business.
The parts they'd need — motors, sensors — are all made in China. So if they wanted to start this business 20 years ago, they'd have had to fly to China, find a translator, and spend lots of time building relationships with people at Chinese factories.
Today, there's Alibaba, the Chinese company that's the biggest e-commerce site in the world. The company is about to be added to the New York Stock Exchange in what could be the biggest IPO ever.
One thing Shawn and Steve needed for their chicken coop: a little programmable motor, called a stepper motor.
When they got on the website and searched for "step," more than 50,000 results for stepper motors popped up. They placed an order with a company called Guangzhou, HongYi Automation Co. Ltd.
About 80 percent of the company's business comes through Alibaba, according to Zhong Cheng Cai, who works for the company. Zhong says he's surrounded by other factories — clothes, shoes, bags, electronics — that wouldn't exist without Alibaba.
But, he says, there is one problem: Now there are so many manufacturers on Alibaba that it's getting harder to make a profit. Which is why factories are willing to work with little clients — like two guys dreaming of a better chicken coop.
Shawn and Steve still have a long way to go before their dreams of automated chicken coops become a reality. But they won't have to fly to China or schmooze factory owners to get there.
DON GONYEA, HOST:
You may be hearing a lot about the Chinese company Alibaba in the next few weeks as it gears up for what could be the biggest initial public offering ever. Today, Steve Henn and Zoe Chace from our Planet Money Team are taking a look at how the e-commerce site has already changed the lives of entrepreneurs all over the world and maybe the lives of a couple of chickens in Northern California, too.
ZOE CHACE, BYLINE: That's where our story starts - Northern California.
STEVE HENN, BYLINE: Shawn Hector lives just outside of San Francisco and about a year and a half ago he bought some baby chicks.
CHACE: He wanted to put them outside in a little chicken coop hoping eventually he would get some eggs.
HENN: It did not go well.
SHAWN HECTOR: They were eaten (laughter) by numerous animals.
HENN: First they attacked from the sky.
HECTOR: Hawks which are interesting, they only eat the brain and leave the rest of the chicken so that's interesting to find.
CHACE: Then the ground...
HECTOR: Raccoons which basically ramshackle everything. You find nothing left.
HENN: The sneakiest...
CHACE: A fox in a hen house. This is not a new problem.
HENN: But Shawn is a Silicon Valley kind of guy. He designs semi-conductors for a living and he decided the world needs a better chicken coop and he and his buddy - Steve Deutch - should build it themselves.
CHACE: Maybe it could be the start of a business. Lots of people have chickens in their backyards these days; there is a market for a tricked-out chicken coop.
HENN: High-tech - it would count the chickens as they go in, lock the door behind them, send you a text about it, an infrared sensor to spot the raccoons.
CHACE: The parts for chicken coop like that - they are made in China.
HENN: And years ago it would've taken flights, a translator, dinners, probably karaoke to build a relationship with suppliers in China to go into the automated chicken coop business.
CHACE: Today there's Alibaba. Alibaba is the biggest e-commerce site in China - actually the biggest in the world - it sells almost anything you can imagine.
HENN: A used 747, an oil tanker.
CHACE: Steel beams, industrial cranes.
HENN: 500 million tiny screws.
CHACE: Yes. There are thousands and thousands of Chinese manufacturers on this website.
HENN: So the chicken coop guys decided to give it a try. They pull up Alibaba and type in the word chicken.
HECTOR: Poultry chicken eyeglasses.
HENN: Wow, poultry chicken eyeglasses?
HECTOR: They're six cents. Yeah.
STEVE DEUTCH: That's what we're talking, well.
HENN: Antennas - Steve found antennas. Those could be useful.
HECTOR: That's not expensive, Steve.
DEUTCH: That is not expensive.
HECTOR: That's cheap.
HECTOR: That's very cheap.
DEUTCH: That's a pretty big antenna to attach to a chicken, but, you know.
HENN: And here's where Alibaba's different from Amazon - you can actually chat online with manufacturers, get stuff custom-made. The main thing these guys want is a door that can open and close automatically and to do that they need a little programmable motor, something called a stepper motor.
HECTOR: Let's look for the motor first.
DEUTCH: So let's start with a stepper motor. And as soon as I type step it comes up with it.
CHACE: More than 50,000 results for stepper motors pop up. They find some they like and they place an order with a company called Guangzhou, HongYi Automation Company Limited. It says free shipping and 96.2 percent of buyers enjoyed this product - 28 votes.
HENN: And we were curious about exactly who was on the other end of this transaction, so we called.
(SOUNDBITE OF PHONE CALL)
CHACE: Hello is this Zhong Cheng Cai?
ZHONG CHENG CAI: Yes.
CHACE: Hello. Thank you for taking my call.
CAI: Yes. What's your name?
CHACE: He's 26, in charge of sales. He says his company's pretty new.
(SOUNDBITE OF PHONE CALL)
CHACE: How much of your business comes through Alibaba?
CAI: (Foreign Language Spoken).
CHACE: Around 80 percent, he says. He spends 10 to 12 hours a day on the site. It would be hard to find American clients without it. When he looks out the window of his factory he just sees a wall.
CAI: (Foreign Language Spoken).
CHACE: He's surrounded by other factories - clothes, shoes, bags, electronics. Without Alibaba, he says, all these manufactories would not exist.
HENN: If anything from his perspective Alibaba's been a bit too successful. He's got so much competition it's hard to make a profit these days.
CHACE: His company packed up the stuff the chicken coop guys ordered and off it went to the other side of the Earth.
HECTOR: Let's see, let's open this puppy up.
DEUTCH: I know it's a piece of electronics, it's anti-static.
HECTOR: That looks like the motor driver - the stepper motor driver.
HENN: Their first high-tech chicken coop is under construction. They're building it because they think it's a good idea, but also because it was pretty easy to do. I'm Steve Henn.
CHACE: And I'm Zoe Chace, NPR News. Transcript provided by NPR, Copyright NPR.