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Alibaba to court consumers for U.S. retailers

2015-January-19       Source: Xinhuanet.com

China's Alibaba Group Holding Ltd. plans a major move to win U.S. business this year, by offering American retailers new ways to sell to China's vast and growing middle class.

China's Alibaba Group Holding Ltd. plans a major move to win U.S. business this year, by offering American retailers new ways to sell to China's vast and growing middle class.

Anchored by Alipay, the dominant Chinese electronic payments system that works closely with Alibaba and is controlled by its executives, the world's largest Internet retailer is using the calling card of China's consumers to attract U.S. partners, two sources close to the company said.

Long seen as the most potent threat to Amazon.com Inc. with US$300 billion in global sales, the moves add up to a conservative approach to expanding in the United States, contrary to industry speculation that the company may be plotting a direct assault on U.S. soil.

That considered strategy is intended to heighten awareness in the United States of what Alibaba does, gain goodwill in an important Western market, and lay the groundwork for a longer-term play.

At the heart of its push are Alibaba's and Alipay's trial deals to handle Chinese sales, payment and shipping for some of the biggest names in U.S. retail from Neiman Marcus Group to Saks Inc. Both confirmed the agreement but would not talk about how the pilots are faring.

The Chinese companies will also work with U.S. startup Shoprunner, an online mall for U.S. retailers in which it owns a stake, and retail services provider Borderfree Inc. to court Chinese consumers.

Alibaba is preparing a marketing campaign to raise awareness among U.S. businesses of its global business-to-business wholesale platform, Alibaba.com, so they can buy and sell to and from global suppliers.

"They own the toll road into China," said Michael DeSimone, chief executive officer of Borderfree. "What really puts the jetpack on things when you deal with an Alipay is, they're on the ground and they know the Chinese consumer so well."

Industry insiders point to just US$15 billion in annual U.S.-to-China, cross-border consumer sales now. But Daiwa estimates cross-border purchases, which exclude sales of American products within the country, can grow to 1.8 trillion yuan (US$291 billion) by 2020.

"It's not a big thing right now, but within the next 12 to 18 months what you'll see more of is bringing 300 million Chinese consumers to retailers in the United States," Alibaba vice chairman Joseph Tsai said last year. He laid out the broad plan, and sources have now described details.

Still, there's no guarantee of success.

China's middle class is over 250 million strong and growing, spurred by government policy to create a more consumer-driven economy. Apple iPhones and General Motors cars have become big-selling status symbols, but the market remains a challenge for Western companies, especially those lacking a global footprint. Home Depot Inc. decided in 2012 to shut all seven of its big box China stores, while in December, Best Buy said it will sell its struggling China business.

Alibaba's 10-month-old effort to help foreign retailers set up shop in China, Tmall Global, its business-to-consumer website, has had muted 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.

But there are signs of traction. Costco Wholesale Corp., which began selling on Tmall Global in November, saw sales of more than 40 million yuan in its first month of operations. And the site has attracted some 90 million unique visitors since launch, buying from 90 percent of listed merchants.

Part of Alibaba's aim is to counter official concerns about China's mega-corporations. In 2014, Alibaba hired James Wilkinson, former U.S. Treasury chief of staff, to help tailor its international strategy, and it has enlisted Korn Ferry to search for a Washington-based international government affairs chief.

Editor: Jecey

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