Amazon opens store in Alibaba virtual mall for Chinese shoppers

I consider this a very interesting development that highlights the differences between two companies that are often compared – America’s Amazon.com and China’s Alibaba. Amazon is a retailer, much like any traditional retailer, except that it operates online, and has expanded into various web services, streaming video, and even TV production. In contrast, Alibaba is essentially a middleman – the company creates virtual malls where small retailers can talk advantage of Alibaba’s systems to engage in e-commerce, with Alibaba taking a percentage. Given this, it’s very interesting that Amazon has decided to open a store on an Alibaba property (at least, a virtual property). Given Amazon’s razor-thin margins, I bet paying a cut to Alibaba is going to hurt… – FD

(Bloomberg) — Amazon.com Inc. has opened a store on Alibaba Group Holding Ltd.’s Tmall.com, seeking to reach Chinese shoppers as the Web retailer tries to expand in the world’s second-biggest economy.

“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,” said Candice Huang, a spokeswoman for Hangzhou, China-based Alibaba. Imported food, shoes, toys and kitchenware are listed on Amazon’s store, one of many on Tmall that sell brand-name goods to Chinese shoppers via the Web.

Amazon has struggled to replicate its success with American consumers overseas. International sales made up 38 percent of the Web retailer’s revenue in 2014, compared with 48 percent in 2009. While Alibaba mainly caters to businesses seeking to buy wholesale goods, Tmall is a portal for sellers seeking to market goods directly to Web shoppers in China. E-commerce in China is projected to reach $1.01 trillion in 2018, more than doubling from $426.3 billion in 2014, according to EMarketer Inc.

Craig Berman, a spokesman for Seattle-based Amazon, referred inquiries to company representatives in China who weren’t immediately available for comment.

“Everyone knows that Chinese e-commerce is dominated by Alibaba and at some point you go fish where the fish are,” said Sucharita Mulpuru, an analyst at Forrester Research Inc.

Amazon’s international business is concentrated in the U.K., Germany and Japan, and the company has struggled to increase sales in China, where it has invested in building warehouses to ship merchandise.

Alibaba Group’s Tmall and Taobao, another online marketplace, had 334 million active buyers in 2014, Huang said.