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Alibaba (BABA) is known for connecting foreign brands with Chinese consumers. Now as part of its globalization strategy, the Chinese e-commerce giant wants to be the go-to online marketplace where American businesses trade with each other.
Alibaba revealed its ambitious plans for the U.S. market on Tuesday by launching new capabilities for U.S. businesses on Alibaba.com, including domestic payments, marketing tools, and a U.S.-based support team. It is also kicking off, in Brooklyn, New York, a national tour to recruit U.S. small businesses to sell on its platform. A few anchor retailers like Office Depot (ODP) and RobinsonFresh have already opened their stores on Alibaba.com, but the company is not disclosing the exact number of U.S. sellers that have signed up for the new initiative so far or its goal.
The move puts the Chinese e-commerce player in direct competition with Amazon (AMZN) in the business-to-business (B2B) online marketplace. Online business sales have grown fast and have overtaken retail e-commerce sales. By 2019, the U.S. B2B e-commerce market will be worth $1.1 trillion, compared to the business-to-consumer (B2C) market at $480 billion, according to Forrester.
Amazon has been a major player in the B2B space in the U.S., as analysts at Bank of America estimate. Amazon Business could hold as much as 10% of the market. Similar to its consumer offers, Amazon provides Business Prime subscription service, which includes fast shipping options, purchasing insight and control tools, and payment terms.
To compete on Amazon's home turf, Alibaba’s pitch to small businesses is that they own the data and the customers’ relationship, a main concern brands have whey they work with Amazon. Alibaba also has a different business model, in which sellers pay an upfront membership fee, without commissions in each transaction.
“Our relationship with our sellers is we're an ally to them. And it's really important to understand that if you're a seller, it’s all about how you own the relationship with your customers — We don't,” said John Caplan, the head of Alibaba’s B2B business in North America.
Full speed into the U.S. despite trade tensions
The move highlights Alibaba’s latest focus in the U.S. as trade tensions grow between the U.S. and China.
“Despite all of the geopolitical tensions that exist in the world, between China and the U.S., we continue to build our U.S. business carefully,” said Michael Evans, president of Alibaba, who was tasked with building out Alibaba’s international footprint about four years ago. Evans said he has spent time in Washington talking about the tech giant’s business plan in the U.S. so “we don’t surprise them.”