June 24, 2010, 5:59 PM

Alibaba.com’s U.S. market move

Alibaba.com has agreed to buy Vendio, a provider of e-commerce services to 80,000 retailers.

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China-based Alibaba.com has agreed to buy Vendio, a provider of e-commerce services to 80,000 retailers.

A unit of Alibaba Group, which also includes China’s massive e-commerce site TaoBao.com, Alibaba.com Ltd. already provides online services that enable retailers in the U.S. and throughout the world to buy products from wholesale site AliExpress.com and find merchandise suppliers among thousands of companies based in China on Alibaba.com.

By acquiring Vendio Services Inc., Alibaba.com will kick off a two-part strategy: Opening up its wholesale business supplier network and to tens of thousands of retailers that have yet to get extensively involved in online international purchasing and sourcing, and expanding its business model to provide retail e-commerce technology and services to U.S. merchants.

“This shows how important the U.S. online retailing market is to us,” David Wei, CEO of Alibaba.com, tells E-Commerce Technology Report. “We believe this will be a win-win-win for consumers, retailers and suppliers.”

Mike Effle, chief operating officer of Vendio, says the opportunity to broaden his company's exposure to international products and suppliers should improve the profit margins of Vendio’s merchants, most of which will be new to online international purchasing and vendor sourcing.

The acquisition of Vendio, which is expected to close next month, is part of a $100 million investment Alibaba.com is making in building out its AliExpress business, Alibaba says. More specific terms were not disclosed.

Once the acquisition is final, Effle is expected to become CEO of Vendio, which will continue to operate under its own name as a unit of Alibaba.com. Effle is slated succeed CEO Rodrigo Sales, who will become a strategic advisor to the company.

Vendio provides a software-as-a-service e-commerce technology platform on which small retailers can operate their own web store as well as build links to sell through eBay.com, Amazon.com and several comparison shopping engines.

Vendio provides a basic e-commerce platform, including a shopping cart, at no charge to merchants. It charges monthly fees ranging from $3 to $40 for add-on site features such as enhanced imaging, cross merchandising displays and web analytics reporting. It also charges a flat $10 monthly fee for connecting merchants to e-marketplaces and comparison shopping engines, plus 1% to 1.95% of all gross merchandise sales that its merchants sell through such third-party sites.

Following the acquisition, Alibaba.com plans to integrate Vendio’s e-commerce technology platform with the AliExpress.com and Alibaba.com web sites. This will enable Vendio’s merchants to directly and more quickly access the six million products sold on AliExpress.com and the more than 100,000 consumer products suppliers listed on Alibaba.com, Wei says.

Wei adds that Alibaba.com’s strengths are in providing products in apparel, fashion accessories, sports equipment and consumer electronics, and that it plans to build up its offerings in auto parts and accessories. Alibaba.com charges suppliers listed on its site 3% to 5% of the value of transactions. There is no to charge to retailers to use Alibaba.com to find suppliers.

Alibaba.com’s connections to TaoBao.com could also have long-term implications for U.S. retailers, Wei says. TaoBao has already opened up its site to merchants from Korea and Japan, and it may eventually extend that opening to U.S. merchants, he says.

 

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