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Open Sesame: Alibaba Enters US Market

Like its namesake — the protagonist from the folk tale Ali Baba and the 40 Thieves — Chinese e-commerce giant Alibaba is hoping to gain access to a treasure trove in the US with the pending launch of its business-to-consumer e-commerce site 11Main.com.

Not much is known about the 11Main.com business model except that it will be run independently by Alibaba's US subsidiaries Vendio and Auctiva, and the marketplace will feature technology items, jewelry, and fashion goods.

Though this is a consumer site, I have to believe that this new entrant in the e-tailing space could have a dramatic impact on the supply chain in the US — much like Amazon.com has. With little more to go on than the recent Reuters report, I am curious about what this will mean in the larger scheme of things. Here are some of the questions I have, and my best guesses about their answers.

Q: If I'm a US-based company that buys goods through Alibaba.com and then sells through 11Main.com, will there be a logistics infrastructure I can leverage?

A: Alibaba is expected to leverage its existing infrastructure and will be investing heavily ($16 billion) in logistics and support in the next six years. Most of this is to support domestic customers in China, but I can't help but think that some of that might make its way into other markets where Alibaba is investing — say the US.

Q: Will Haier appliances be available on the 11 Main website?

A: That seems like a very good possibility given Alibaba's recent purchase of a 2% stake in Haier, which has manufacturing facilities in South Carolina.

Q: Will Alibaba have the financial strength to take on the US market?

A: I would think so. The company is reportedly readying for an IPO, and analysts value them at $120 billion. This would give them plenty of cash to invest in world-class logistics centers that use state-of-the-art warehouse and transportation management systems.

Q: Is Alibaba the only China-based e-commerce company that I should think about?

A: No. JD.com is No. 2 in China with sales of approximately $16.5 billion. They have filed a placeholder for up to $1.5 billion for a public offering in the US.

Q: If I'm a US-based logistics provider, what are my chances of capturing some of this business as these companies work to get a foothold in the US?

A: It's a complicated proposition. You need to consider the competition, such as Amazon. US customers expect Amazon-like service levels, and, thus far, Amazon stands far apart from the crowd. There is also a question of whether Alibaba will outsource any of its logistics needs. However, according to the 11 Main site, potential vendors must be able to offer “fast, reasonably-priced shipping, originating from within the U.S.” So while the long term prospects for US 3PLs doesn't look great, there is a glimmer of hope.

Q: How will a new big e-commerce offering impact transportation capacity in the US?

A: The question here is how much more growth will 11 Main stimulate in the overall market? Will they drive incremental new business or simply take market share from US competitors?

Q: Can 11 Main or other Alibaba models compete in the US?

A: That's the million-dollar question. There are many factors to consider, including the brands they sign on to the site, the cost and efficiency of the supply chain, and the financial strengths they are bringing to bear. But, given Alibaba's vast resources and history of aggressive entrepreneurship, I wouldn't bet against them.

Now, we want to know what you think these new developments may mean. Let us know in the comments where you think this will lead.

7 comments on “Open Sesame: Alibaba Enters US Market

  1. Daniel
    February 17, 2014

    Wade, oho Ali Baba is behind this 11 main.com, that's new information. I thought 11 main is an independent C&F (Carry and Forward) agency, which is going to venture into online retail sales too.

  2. FLYINGSCOT
    February 18, 2014

    I hope that is not a photo of JD.COM's Chinese HQ.  If so I would wonder about the quality of their products (only joking here)

  3. FLYINGSCOT
    February 18, 2014

    I hope that is not a photo of JD.COM's Chinese HQ.  If so I would wonder about the quality of their products (only joking here)

  4. SP
    February 18, 2014

    I would wonder the reason behind the name 11main…Alibaba seems better..With the people prefering online shopping these days it will be helpful …

  5. Ariella
    February 18, 2014

    @SP yes, to Shakespeare's “What's in a name?” we can answer a lot — that can make the difference between marketing success and failure.

  6. Ashu001
    March 10, 2014

    Ariella,

    In all Fairness,I know plenty of Consumers who swear by a particular set of Services which are'nt exactly Brand-Name.

    The Problem(this can be both a Strength& weakness) with Brand Name Products & Services is that they tend to be the same wherever you go.

    Then there is also the issue that most of these Services are operated by Franchisees today(whose standard may/may not be upto the market).

    You need to keep experimenting until you find something you are Happy with(IMHO).

    Regards

    Ashish.

     

  7. Ashu001
    March 10, 2014

    Guys,

    And I know I speak for most Consumers here;Amazon has set a very high standard in this space today.

    Its an area where Any upstart entering this market will have to compete super-hard to achieve any form of Success.

    Also,Don't forget that Amazon is actually Losing Money today.Is this a viable Business Model in the Long-term?

    I have serious doubts.

    Sure its nice to scale and Scale Big;but if you don't have any Profits to speak of ;How are you Going to Pay Employees and spend cash on Infrastructure Upgrades?

    I don't think Shareholders will always be so kind to Jeff Bezos as they are currently.

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