Alibaba Group Holding Ltd., the king of e-commerce in China, is moving to expand its empire into the United States.
Katie Evans , Managing Editor, International Research
Alibaba Group Holding Ltd. has gotten plenty of ink in the press recently for announcing its plans for an initial public offering of stock, not in Hong Kong, but in the United States. The expected Alibaba IPO has been a hot topic on Wall Street, and analysts have projected Alibaba could be valued at between $100 billion and $150 billion when it does go public. For comparison, eBay Inc. has a market value of about $74 billion and Amazon.com Inc. $173 billion.
But a U.S. IPO isn’t the only major stateside move the e-commerce giant has made recently. Alibaba has steadily been expanding to U.S. retailers valuable services already widely used by sellers on its massive Tmall.com and Taobao.com online marketplaces in China, as well as by Chinese consumers. It’s also working on the launch of its own U.S. marketplace called 11Main.com after acquiring Vendio and Auctiva, two companies that offer selling tools for eBay merchants.
Last year, Alibaba began promoting acceptance of its Alipay payment option to U.S. retailers eager to sell to Chinese shoppers, who last year bought $305.74 billion online, 42% more than the $215.31 billion they purchased in the prior year, according to Beijing-based Internet research firm iResearch Consulting Group estimates. Alipay, the payment unit of Alibaba that is similar to eBay Inc.’s PayPal is widely used by Chinese shoppers to pay for goods in China. It’s used not only on Tmall and Taobao, which host more than 7 million sellers and attract 100 million shoppers daily, but also to pay for bills and other goods and services throughout China.
RevolveClothing.com is one U.S. retailer that began accepting Alipay last year, and its Chinese sales have doubled since adding that payment option, says David Pujades, chief operating officer.
Following up on expanding Alipay to the United States, Alibaba says it is now in talks with several large U.S. web merchants to help them display on their e-commerce sites the full costs for orders shipping to China, and to handle delivery of orders placed by Chinese consumers. U.S. retailers that accept Alipay can use the Cainiao (pronounced: TsaiNow) logistics network that taps into hundreds of couriers throughout China, enabling delivery to even the most remote locations, Alibaba says. Before, Alibaba only offered this service to Chinese sellers on Tmall and Taobao. Alibaba’s new offering links a U.S. merchant’s order management system to the Alipay payment infrastructure and, via that connection, to Alibaba’s Cainiao logistics network. This integration means that when a Chinese consumer elects to pay via Alipay on a U.S. site, the Alipay system can manage a large part of the fulfillment.
Using data generated by the merchant’s e-commerce platform, Alipay first calculates the shipping cost and customs duties on the order and collects the total from the consumer in China in Chinese yuan, remitting it to the merchant in U.S. dollars. The merchant ships the order to a U.S.-based Cainiao warehouse; there are several, including in Los Angeles and New York. Cainiao finds the customer’s verified address on the Alipay database and uses it to generate a local Chinese shipping label—avoiding any confusion around China’s notoriously complex addresses. It finally dispatches the order to China by air. Once the item arrives in China, Alibaba hands off the package to a local courier for home delivery.
Alibaba says it has an agreement with the Chinese government that customs officials will open and inspect no more than 5% of shipments coming from Alibaba’s U.S. warehouses because all the customs and duties will be prepaid. This enables U.S. merchants to guarantee packages will arrive at Chinese consumers’ doorsteps within 10 days. And most will arrive more quickly, Alibaba says.
“It has always been a challenge for global brands to establish in China,” says Jingming Li, group vice president and head of Alipay U.S. He says using Alibaba’s services can help U.S. merchants build trust with Chinese consumers because Alibaba is a household name in China. “You enter the market as a trusted seller and you get to leverage your existing online infrastructure to minimize your investment,” he says.