June 26, 2014, 5:05 PM

Why U.S. retailers need to pay attention to Alibaba

Alibaba isn’t just planning an IPO in the United States—it’s also planning to invest a lot of the proceeds in becoming a big e-commerce player in the U.S., says Jim Tompkins, CEO of Tompkins International.

What do you know about Chinese e-marketplace Alibaba?

As news continues to spread about the company, little has been discussed about just how significant Alibaba’s U.S. expansion will be—and how this will affect U.S. retailers.

For instance, did you know that Alibaba does 80% of the online business in the largest e-commerce market in the world? Or that the company makes 43 cents profit of every dollar of revenue?

I recently sat down to discuss this in my new video The Alibaba Effect, which explores the Chinese e-marketplace’s success and how its eminent move into the U.S. market will affect all businesses. Here are the top five things you need to know about Alibaba:

1. Alibaba is about to descend upon the U.S. commerce market.

Alibaba and its founder, Jack Ma, will soon hit the ground running in the U.S. We can expect to see explosive changes to how the entire world views commerce. This will be a huge change for retail and business as a whole.

2. The company has some big plans up its sleeve.

Alibaba is planning to invest more than $20 billion in China logistics over the next eight years. In the U.S., we can expect to see a rise in patents, mergers and acquisitions, and major investments made by Alibaba. The company recently launched 11 Main, an e-marketplace tailored exclusively to the U.S. And of course, its IPO is scheduled to launch in New York City sometime this year too, which I predict will be the largest IPO in retail history.

3. Founder Jack Ma is thinking about the grocery business.

I predict that Alibaba will enter the U.S. online grocery industry in 2015—and will do so very successfully. Jack Ma knows that online grocery doesn’t make sense for China, but it does for the U.S. We can expect to see his investments in this business come out in full force.

4. Alibaba is showing us that it is better to be a large retail “platform” than a large retailer.

Jack Ma is truly becoming the first “global” retailer by taking products from all over for Tmall to sell through China and later the U.S. Most of today’s retailers are international and sell to other countries, but not to the extent of Alibaba. Jack Ma has an uncanny ability to take others’ strengths and leverage those strengths for mutual success. For instance, he knows mass merchandising is a strength of the U.S. market.

5. Alibaba will either be your biggest competition or your biggest ally. You have no choice but to respond.

Your response to Alibaba’s “invasion” into the U.S. will ultimately determine whether you see Alibaba as friend or foe. Don’t respond defensively. A successful response requires a smart counter-offensive strategy. Businesses need to address omnichannel (e.g., channel strategy, transparency for customers, personalization) and the “Get Local” concept (e.g., distribution/fulfillment network, lean logistics, local/regional delivery).

From my point of view, U.S. retail as we know it is about to change. The Alibaba Effect video gives in-depth insights into the top five things I discuss above, plus even more on what we can expect from Alibaba in the future and how this affects all businesses.

What you will hear in The Alibaba Effect video is not only urgent, but has also never been discussed in detail from a supply chain perspective. Watch the video today and start thinking about your game plan for responding to The Alibaba Effect.

Jim Tompkins is CEO of Tompkins International and a globally recognized supply chain authority. He has written or contributed to more than 30 books and writes the Creating Supply Chain Excellence blog. Contact him at jimtompkins@tompkinsinc.com.


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