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James Martin/CNET
E-commerce giant Amazon has, at least for the time being, decided that joining them is sometimes better than trying to beat them.
This week the company opened its own digital storefront on rival Alibaba’s Tmall, an online marketplace for consumers in China, which hosts merchant’s storefronts and lets Alibaba take a cut of sales.
The marriage between Amazon and Alibaba is, to put it mildly, an odd one. Alibaba is China’s largest e-commerce company. And after going public in the US last year — in an historic IPO that saw it raise $25 billion — it has set its sights on e-commerce in the US, where companies like Amazon and eBay dominate. Meanwhile, Amazon has been trying for years to be a major presence in the Chinese market, where it’s been able to capture only a small share.
Tmall is a key ingredient in Alibaba’s China success. It provides digital storefronts to major retailers around the world and has been a commercial gateway to a growing Chinese middle class. Several prominent US companies, including Apple and Nike, have storefronts on Tmall. In the vast majority of cases, individual companies use Tmall to sell their own products directly to Chinese consumers; Amazon’s portal to access goods from a wide range of companies is uncommon.
By opening a storefront on Tmall, Amazon finds itself in the unfamiliar position of having to pay another e-commerce company to sell products. The decision reflects how tough it can be to break into the Chinese market and attract consumers. Government regulations have historically safeguarded China-based companies, making it difficult for foreign firms to gain a foothold without at least partnering with a Chinese company. For instance, in the video game market, the only way for console makers to sell their hardware to Chinese consumers is to team up with a China-based business.
Alibaba has made clear that it wants to expand its presence in the US — a market that’s been more welcoming of foreign companies than China has. In January, Alibaba announced a new service — which uses its digital-payment platform Alipay — that’s designed to make it much easier for US companies to sell directly to Chinese consumers.
The service, called Alipay ePass, enables a China-based customer to make a purchase on a US merchant’s own US-based site. The customer pays through AliPay, which handles the transaction and converts the Chinese currency to the dollar and pays the US retailer. The retailer then ships the product to an Alipay facility in the states, which handles the logistics of getting the product to the customer in China.
Though some have cautioned that the move is part of a broader effort on Alibaba’s part to eat Amazon’s lunch, the Chinese company has shied away from comparisons to Amazon, saying that unlike its US-based counterpart, it doesn’t actually sell its own products. Instead, Alibaba provides a portal for other companies to sell their wares.
Alibaba founder and CEO Jack Ma has been loath to draw too close a comparison to Amazon. Last year he said he wants to expand his business in the US but sees Amazon as a potential partner rather than a competitor.
“We are coming here not to compete,” Ma said. “We’re coming here to help a lot of small businesses, which I think a lot of things may need to be done. It’s not a competition [with Amazon].”
An Alibaba spokeswoman echoed that sentiment in a statement on Friday, telling CNET that Amazon’s decision to come to Tmall is welcome.
“Tmall has been a committed leader in providing quality products and services to consumers, and we continuously seek out partners who share the same passion,” the spokeswoman said. “We welcome Amazon to the Alibaba ecosystem, and their presence will further broaden the selection of products and elevate the shopping experience for Chinese consumers on Tmall.”
Amazon did not respond to a request for comment.
The company’s Tmall storefront features a relatively small number of departments, including food, shoes and kitchen items. Amazon’s own e-commerce site includes far more departments, ranging from video games to electronics to furniture to just about everything else.
