Online Sellers Can Use PayPal to Source Product on Alibaba's AliExpress

Alibaba announced it would begin accepting eBay's PayPal payment service on AliExpress, its product-sourcing marketplace that officially launched in the U.S. on Monday. Retailers making purchases on AliExpress may pay with Visa or Mastercard if they do not wish to use PayPal.

When asked if there were any plans to extend such an agreement into China, an Alibaba spokesperson said the agreement only pertains to AliExpress and said she did not have any information about any other potential plans.

The deal reveals a thawing from eBay, which had excluded Alibaba from promoting its product-sourcing services to eBay sellers beginning in 2005 due to fierce competition in the C2C auction space in China. In fact, eBay introduced its own product-sourcing site in 2005 to help PowerSellers source inventory from China. eBay closed the Reseller Marketplace last year as part of CEO John Donahoe's budget-slashing campaign.

The Wall Street Journal said the PayPal-AliExpress deal is significant for both companies, as it puts AliExpress among PayPal's largest merchants, with three million products listed from at least 40 categories. However, PayPal won't gain the AliExpress merchants themselves as customers, since Alibaba processes the payment and releases it to the supplier once the buyer has received the goods.

PayPal is trying to expand in China, and recently made a deal with China UnionPay. Alibaba operates a major online-payment service in China, AliPay.

Alibaba said on Monday it would invest over $100 million in the development of AliExpress.