Alibaba steps up competition with Amazon in global market

Alibaba, the Chinese ecommerce group, is overhauling the business model of a fast-growing subsidiary in a bid to offer a full international service able to challenge Amazon, the world’s largest online retailer.

Trudy Dai, president of Alibaba’s wholesale marketplaces division, told the Financial Times that AliExpress — an ecommerce business that sells goods from Chinese retailers to customers in more than 150 countries — is making changes to enable retailers from other countries to also sell products on its platform around the world.

“From the very first day that Alibaba was founded we had a ‘global dream’,” said Ms Dai, who along with Jack Ma, Alibaba’s founder, was part of the company’s first executive team in 1999.

To launch the new initiative, AliExpress has for the first time opened its platform to vendors overseas, allowing small and medium-sized businesses in Russia, Turkey, Italy and Spain to register and sell their products to other countries in the AliExpress network, Alibaba executives said.

AliExpress plans to roll out the service — which it calls “local to global” — in more countries after building up experience in the initial four, Ms Dai said. Although the new strategy started only this year, a “good foundation” of small and medium-sized businesses in the four countries had registered to sell products, an executive said, but declined to give exact numbers.

“This year is the first year for our ‘local to global’ strategy,” said Ms Dai. “This strategy is intimately connected to Alibaba’s broader globalisation strategy.”

Ms Dai identified AliExpress as the spearhead for a globalisation strategy that is also supported by Alibaba’s subsidiary Lazada, south-east Asia’s largest ecommerce platform, and other affiliated companies around the world. Alibaba has also taken equity stakes in Indonesia’s Tokopedia and India’s Snapdeal.

The urge to expand overseas, said Billy Leung, a director at brokerage Haitong, is being driven by wilting growth at home.

“We are seeing Alibaba trying to expand globally because they are trying to offset declining growth in China itself,” said Mr Leung. “They are at the point when they need a lot of growth to come from AliExpress and Lazada and other international businesses.”

AliExpress has been a star performer, contributing to revenue growth of 94 per cent in the 2018 financial year for the company’s international ecommerce retail businesses — one of the fastest growth rates in the group.

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Competition with Amazon has not yet evolved into a contest for international market share, Mr Leung said, because penetration rates in the global ecommerce industry remain low, especially in the developing world. The priority now is to lay the foundations for growth in expanding markets.

Nevertheless, in China itself, the US company has suffered setbacks. It is set to close its Amazon China store in July, some 15 years after it opened it, after competition from Alibaba and, another leading Chinese company, squeezed its business volumes. Chinese online shoppers, however, will still be able to order goods from Amazon’s global store.

As it expands its international footprint, Alibaba is employing a number of different localisation strategies aimed at building up customer bases, sometimes with politically well-connected partners.

In Russia, for instance, it announced last year that AliExpress will partner with Moscow’s sovereign wealth fund and Kremlin-friendly oligarch Alisher Usmanov to build out its presence., a local internet company controlled by Mr Usmanov, had some 97m active users last year — potentially boosting AliExpress’ Russian customer base.

In Turkey, online clothing company clothing Trendyol opened a store on AliExpress earlier this year, a move that followed an investment in Trendyol by Alibaba last year.

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