Amazon seeks Alibaba’s help to make it in China

Discussion
Mar 06, 2015

Amazon has opened a store on Alibaba’s Tmall online marketplace to help gain traction in China, where it has struggled since launching Amazon.cn in 2011.

"We welcome Amazon to the Alibaba ecosystem, and their presence will further broaden the selection of international products and elevate the shopping experience for Chinese consumers on Tmall," Candice Huang, a spokesperson for Alibaba, told Bloomberg News.

According to reports, Amazon is selling a variety of imported products, including food, kitchenware, shoes and toys, in its Tmall store. Amazon’s Chinese division did not publicize the store opening and its representatives in the Asian nation failed to respond to media requests for comment.

An article on the Fortune website, citing Aram Rubinson of Wolfe Research as its source, reported Amazon is losing about $600 million a year in China. Mr. Rubinson called for Amazon to pull out of China.

"Everyone knows that Chinese e-commerce is dominated by Alibaba and at some point you go fish where the fish are," Sucharita Mulpuru, a Forrester Ressearch analyst told Bloomberg.

Separately, Alibaba has announced plans to compete with Amazon, IBM, Microsoft and others in the cloud computing space in the U.S. Yesterday, Alibaba announced its Aliyun division has opened a data center in Silicon Valley. Aliyun is the largest cloud services provider in China with 1.4 million customers.

"For the time being, we are just testing the water," Sicheng Yu, vice president and head of international business for Aliyun, wrote in a blog post. "We know well what Chinese clients need, and now it’s time for us to learn what U.S. clients need."

What do you think of Amazon using Alibaba’s Tmall to help it succeed in China? Will Alibaba be successful as it moves into the U.S. cloud computing market?

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6 Comments on "Amazon seeks Alibaba’s help to make it in China"


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Chris Petersen, PhD
Guest
7 years 2 months ago

When you go to Shanghai, you realize that you are definitely “not in Kansas anymore”—or New York for that matter.

China is the fastest growing omni-channel market in the world. It is also one of the most complex. In major cities like Shanghai, you can order online and get delivery in four hours. Yet to reach the vast rural areas of China, delivery can take days. So from a purely supply chain standpoint, it makes sense to partner in such a large and diverse market to learn and test what works.

The greater complexity of China is understanding what the consumer wants. Sicheng Yu said it best: “We know well what Chinese clients need.” When entering a market as large and diverse as China, it makes strategic and financial sense to use Tmall as a testing ground for products and pricing.

Max Goldberg
Guest
7 years 2 months ago

China is a difficult market to crack. Alibaba found the formula for success. Amazon did not. So if you can piggy back on a successful competitor, why not?

Alibaba, on the other hand, is having a difficult time cracking the U.S. market. Perhaps cloud computing will be more successful. That said, it will be hard to compete against IBM, Apple and Amazon on their home turf.

Jason Goldberg
Guest
7 years 2 months ago

China is the largest e-commerce market in the world, and 38 percent of Amazon’s revenue is abroad. Chinese consumers don’t start their shopping/search behaviors on a brand site, they start on a marketplace. You simply can’t build an audience in China w/o having a presence on Tmall or JD.Com.

Amazon doesn’t have to “beat” Alibaba to meaningfully grow their business in China. Amazon’s willingness to put ego aside to grow their China business is an impressive move.

Amazon’s appearance on Tmall has a potentially much bigger financial impact than Alibaba’s cloud offering in the U.S. (Aliyun), which is really just about offering a U.S. data center to its Chinese clients.

Gene Detroyer
Guest
7 years 2 months ago

Amazon needs China and the best way to succeed in China is to understand the Chinese market. The biggest problem U.S. companies have taking their business international is they try to copy and paste the U.S. business model in a foreign country. (read Target in Canada). The global middle class, led by China, will grow by 2 billion people in the next 15 years. The U.S. middle class will drop to 200 million. Where would you grow your business?

The comment made by Sicheng Yu, vice president and head of international business for Aliyun, with regard to cloud computing, applies to every company, “We know well what Chinese clients need, and now it’s time for us to learn what U.S. clients need.” For Amazon, let’s just turn it around, “We know well what U.S. customers need, and now it’s time for us to learn what Chinese customers need.”

Kenneth Leung
Guest
7 years 2 months ago

One nice thing about e-commerce is the low barrier to entry in web properties. Alibaba has proven successful in China, so why not partner with them for now and learn? Many brick and mortar retailers in the US started off partnering with Amazon until they figured out how to compete on their own.

Jerry Gelsomino
Guest
7 years 2 months ago

Smart! The best way to understand the Chinese market is to really watch and listen to what happens there. There have been too many attempts with arrogance about “what works in the U.S. will work in China.”

Take your time, determine what segment of the market you want (nobody can capture all 1.35b), build trust, and you will be rewarded.

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