While most readers are familiar with China’s ecommerce giant Alibaba, many Americans are hearing about the company for the first time after it went public last week on the New York Stock Exchange, raising $21.8 billion in the process. On Friday, Alibaba shares rose38%, giving it a market value of $231 billion.
Alibaba has 81% market share in China with its two consumer shopping marketplaces, according to Brian Nowak of Wall Street firm Susquehanna. But it might have been a very different story for Alibaba if eBay had been able to prevail in China in the mid-2000’s.
With the tables turned, will Alibaba set its eyes on competing with the likes of eBay and Amazon in the U.S.?
Alibaba in the U.S.
Despite its success in China, Alibaba has moved slowly in the U.S., concentrating on getting retailers to use its B2B marketplace to source goods from around the world to sell here themselves. In 2010, it launched AliExpress to make it even easier for small U.S. businesses to source products on a smaller scale with less commitment.
Alibaba also acquired two U.S. companies in 2010 that offered tools to eBay sellers, Auctiva and Vendio. But it took Alibaba another three years before it made a serious move in the U.S. Last year, it acquired a stake in ShopRunner (a subscription-based service that gives its members unlimited free two-day shipping from its member stores) and began working with merchants on a U.S.-based marketplace, 11 Main, as we reported in February.
What might come as a surprise to some is that Alibaba is not using 11 Main to sell goods from Chinese sellers. On the contrary, only small U.S. sellers can list products on 11Main.com. The marketplace is curated and still appears to be feeling its way.
Alibaba vs. eBay in China
Alibaba launched as a B2B marketplace in 1999, helping businesses around the world source products from China and elsewhere. In 2003, it launched a P2P marketplace in response to eBay’s entry into China in 2002.
It was fascinating to watch eBay’s early efforts in China, as Alibaba’s charismatic founder Jack Ma appeared to be the only one to present a challenge to juggernaut eBay as it expanded its presence geographically. Ma was fond of calling eBay a shark in the ocean, while comparing his own company to a crocodile in the Yangtze River. “If we fight in the open seas, we lose – but if we fight in the river, we win,” to paraphrase.
eBay fought to win – it signed exclusive advertising agreements with the three main portals in China to make it difficult for Alibaba to advertise its TaoBao consumer marketplace. But, the scrappy company used other methods to advertise its services.
In 2005, Alibaba.com had gained share, and it made a commitment to keep Taobao free for buyers and sellers for three more years – a savvy PR move. As we reported at the time, Ma cleverly called on eBay to join it in making its services free for Chinese users: “We call on eBay to do what’s right for this phase of China’s ecommerce development and make your services free for buyers and sellers in China. Cutting prices is not enough – it’s time to make your services free and affordable for all of China’s entrepreneurs and consumers.”
eBay shot back with its famous line, “free is not a business model.”
TaoBao was a success, and Alibaba continued to expand its services, including its payments service Alipay, which unlike eBay, enjoys regulatory protection in China; and TaoBao Mall (Tmall), a shopping website that allows major brands and retailers to sell directly to Chinese consumers. It also operates a group-buying marketplace and cloud-computing service in China, and participates in a joint venture logistics business.
What’s Next in the U.S.?
Whether Alibaba’s dramatic debut on Wall Street will change its approach to how it does business in the U.S. is unclear. Sellers have been uncertain of what 11 Main is about, and sellers discussing Alibaba’s IPO in recent days remain somewhat mystified.
Susquehanna is bearish on 11 Main – Nowak sees Alibaba instead getting large third-party sellers in the U.S. selling into China on its platform. In a pre-IPO report this summer, he didn’t speculate on whether Alibaba might look to buy its way into the U.S. market.
An analyst told Internet Retailer Alibaba could open a premium brand store marketplace in the U.S. similar to Tmall.
One thing that we’ve learned from the soft launch of 11Main.com: U.S. sellers may complain about having to compete with merchandise from China on marketplaces like eBay and Etsy, but many sellers are willing to work with a Chinese-owned marketplace if they think it has the potential to provide a profitable selling environment.