EcommerceBytes-NewsFlash, Number 2557 - June 03, 2011     4 of 6

Sellers No Longer Able to Use PayPal to Source Products on AliExpress

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In a surprising move, PayPal announced Friday it was ending its relationship with Alibaba's AliExpress wholesale marketplace after just one year, saying the decision came "following a routine annual business review."

AliExpress connects suppliers in China with small online merchants and marketplace sellers, allowing them to place smaller-quantity orders and offering an escrow service for protection.

By allowing overseas buyers to use PayPal, Alibaba enabled its business customers to source goods through AliExpress in their preferred local currency. Other payment methods include Moneybookers, Visa, MasterCard and bank transfer, as well as select debit cards, according to the AliExpress website.

The early relationship between Alibaba and eBay had been antagonistic, but when eBay CEO John Donahoe replaced Meg Whitman in 2008, he mended ties, and spoke onstage with Alibaba founder Jack Ma at the annual AliFest conference in Hangzhou last year.

Alibaba and eBay have long competed in both the marketplace space and in online payments in China. Alibaba's Alipay payments unit recently received a "Payment Business License," becoming one of China's first non-financial institutions authorized to conduct payments business. PayPal is in the process of submitting a license, but no foreign-owned entity has been granted a license to operate a payments service domestically in China.

PayPal's primary business in China is to enable cross-border online payments, and it said its total payment volume in Greater China was more than $4.4 billion in 2010, up 44% over the previous year. It did not disclose how much of that increase came from its AliExpress partnership, launched in April 2010.

Reuters reported it had obtained a document that showed PayPal was unhappy with AliExpress' rising consumer business on the platform, which is meant for business transactions, and wanted to raise transaction fees for certain accounts. AliExpress commonly allows merchants to place low quantity items as samples, and recently launched the AliExpress Premier Channel showcasing over 30 premium Chinese brands.

An Alibaba spokesperson provided the following statement: "AliExpress is committed to serving our customers with choice in payment options. As always, our primary focus is our customer's needs, and we will continue to offer multiple, secure payment options on AliExpress for our customers around the world."

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About the author:

Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. She's a widely cited authority on marketplace selling and is author of "Turn eBay Data Into Dollars" (McGraw-Hill 2006). Her blog was featured in the book, "Blogging Heroes" (Wiley 2008). Follow her on Twitter at @ecommercebytes and send news tips to ina@ecommercebytes.com.
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