After Alibaba raised $25 billion in one of the biggest public offerings in the U.S., many believed the Chinese company was plotting a major American retail presence.
But that’s not the plan, at least not initially.
Rather than compete head-to-head with Amazon.com on its own turf, Alibaba is courting some of Amazon’s competitors by offering them a way to sell merchandise in China, according to Reuters, which learned about the company’s strategy after interviewing Alibaba executives.
While Alibaba has been open about its U.S. approach, it has not been entirely clear how much momentum the plan had until now.
Reuters reports that a small, but high-profile list of retailers and brands have begun working with Alibaba. The names include Neiman Marcus Group, Saks, Macy’s, Bloomingdale’s, Ann Taylor, Gilt Groupe and Aeropostale. Alibaba is also working with Borderfree, a retail services company, and Shoprunner, a company that competes with Amazon Prime (and is partially owned by Alibaba).
Today, while the amount of U.S. goods being sold to Chinese consumers is relatively small, amounting to $15 billion in annual revenues, sales are predicted to increase to $291 billion by 2020, according to Reuters.
That makes the partnership all that more enticing to U.S. retailers.
One way retailers will be able to enter the Chinese market is through Alibaba’s Tmall Global marketplace, which doesn’t require brands to have a local warehouse or Chinese business license like the original Tmall site required. We’ve written about the 10-month old marketplace before, including a recent announcement by Costco that said it was expanding more heavily into China after it sold $3.5 million worth of goods over a 24-hour period on the platform.
Some retailers are finding Alibaba’s services helpful when entering the market, including assistance with payments, shipping, and cultural nuances, like what fashion trends are currently popular there. But not all retailers are seeing Costco’s level of success. Of 5,000-plus brands and 650 merchants that now sell on that site, just 30 have accumulated more than 10 million yuan in sales ($1.6 million), the company said.
Reuters said Alibaba plans to get the word out about Tmall Global by launching a marketing campaign to raise awareness among U.S. businesses.
While this seems to be the company’s dominant U.S. strategy, and is a way to differentiate itself from Amazon, it is experimenting with ways to sell directly to Americans, as well.
Last summer, Alibaba launched 11Main.com, a collection of online boutiques selling goods from the U.S. But still, even while that site is primarily aimed at Americans, it too is attracting Asian buyers. An executive at 11main.com told Reuters a quarter of its products can be shipped to Asia, and that eventually they hope to help sellers gain access to Alibaba’s huge footprint in China.
What is not clear is whether this is the extent of Alibaba’s approach to the U.S. Reuters hints that by working with prominent retailers here, Alibaba could be gaining awareness and goodwill for another play.