Alibaba Group Holding Ltd. founder Jack Ma promised Donald Trump in January that he would help create 1 million U.S. jobs. In June, he will make his pitch to U.S. companies, encouraging them to sell on Alibaba’s marketplaces that dominate online shopping in China.
Ma will be a keynote speaker at Gateway ’17, the first large-scale event Alibaba has organized in the United States to recruit companies to sell on its online marketplaces, notably Taobao and Tmall. Alibaba expects more than 1,000 businesses to attend the event June 20-21 at Cobo Center in Detroit.
In a letter released today, Ma highlights some of the small U.S. businesses that have sold successfully through Alibaba’s shopping portals. They include Peter Verbrugge, a cherry farmer in the Pacific Northwest who has sold through an Alibaba program that transports tons of newly ripened cherries to China for sale on Tmall; Stadium Goods, a retailer of collectible sneakers based in New York City; and LuckyVitamin, a drugstore near Philadelphia that sells more than 10,000 products to Chinese consumers.
“We are already a gateway for thousands of global brands, retailers and companies to sell to Chinese consumers,” Ma writes in the letter. “We want to expand that gateway—level the playing field—to make it easy for American entrepreneurs, small businesses and farmers alike to take advantage of the China opportunity.”
The Detroit event represents the beginning of a five-year effort to increase the number of U.S. businesses selling on Alibaba’s marketplaces in China to 1 million from 7,000 today, says Jennifer Kuperman, head of international corporate affairs for Alibaba. She says that directly correlates to Ma’s promise to create 1 million U.S. jobs. “If we get a million businesses selling on our platforms into China and Asia and each of those businesses hires even one person you’ve reached that million,” she says.
However, many small businesses won’t be able to afford selling on Tmall, the Alibaba marketplace geared to foreign companies, because of the expenses, says Jimmy Tobyne, a former Alibaba executive now associated with cross-border e-commerce technology provider Qordoba. “There are a lot of costs,” Tobyne says. “It doesn’t strike me as something you would target to small businesses.” He says a U.S. company likely would have to be doing at least $50 million in sales to be able to afford the expense of selling on Tmall.
Tmall requires a security deposit of up to $25,000, an annual fee of $5-10,000, takes a commission of 2-5% on each sale and adds a 1% fee for processing payments through Alipay, a payment processor with ties to Alibaba. In addition, many foreign retailers and brands pay a so-called Taobao Partner to handle customs, warehousing, delivery and customer service, and those companies’ fees can eat up 15-20% of revenue, according to Western executives doing business in China. There are also marketing expenses to ensure a foreign brand gets noticed among the stiff online competition in China.
An Alibaba spokeswoman says Tmall is mainly for larger brands, such as Nike and Levi’s that have a physical presence and business license in China, but that Alibaba also offers alternatives geared to smaller companies. One is Tmall Global, which allows overseas brands without a China presence, to sell to online shoppers in China under relaxed cross-border import rules China has introduced in recent years.
A second newer option is called Taobao Global, and that will be introduced at the Detroit conference, the spokeswoman says. This program allows a Chinese seller on Taobao to sell products on the big online marketplace on behalf of an overseas brand or retailer.
The Detroit event will focus on selling into China, Kuperman says, but will also explain how U.S. companies can sell on Lazada, an operator of online marketplaces throughout Southeast Asia that Alibaba bought last year for $1 billion. On hand at the event in Detroit, in addition to Alibaba representatives, will be companies like UPS Inc. and Shopify Inc. that work with Alibaba to help their clients sell on Alibaba marketplaces, along with other companies that specialize in assisting overseas brands and retailers in bringing goods into China and market on Chinese marketplaces.
While Ma makes a point to note how Alibaba’s marketplaces have helped small businesses prosper—and indeed some 8 million Chinese companies and individuals sell on its massive Taobao online bazaar—the Chinese e-commerce giant also has facilitated sales for major foreign retailers and brands. Among the U.S. companies selling through Alibaba sites in China are athletic footwear brand Nike Inc., No. 37 in the newly released Internet Retailer 2017 Top 1000; shoe manufacturer Skechers USA Inc. (No. 504); retail chain Costco Wholesale Corp. (No. 8) and consumer goods manufacturer Kimberly-Clark Corp., which sells Huggies diapers and other products online in China.
Some will no doubt see the Detroit event as part of a charm offensive by Alibaba to improve its image in the U.S., where it’s come under attack for allegedly facilitating sales of counterfeit goods on its marketplaces or allowing unauthorized sellers to promote their wares on those sites. In December, the U.S. government’s Office of the Trade Representative, which promotes the interests of U.S. firms in trade negotiations, restored Alibaba to its Notorious Markets blacklist of companies linked to promotion of fake goods, four years after the company was removed from that list.
Alibaba protested, saying that it works hard to keep counterfeit goods off its sites. In a letter to the U.S. Trade Representative, Alibaba pointed out it had removed 380 million suspect product listings and closed 180,000 stores on Taobao in the 12 months leading up to August 2016.
Alibaba, which went public on the New York Stock Exchange in a record-breaking IPO in 2014 that raised $25 billion, also disclosed last year that the U.S. Securities and Exchange Commission was investigating the Chinese company’s claims of sales on its big annual online promotion Singles’ Day, which takes place every Nov. 11 in China. Alibaba, which reported Singles’ Day 2016 sales of $17.4 billion, has said it is cooperating with the SEC.
Alibaba’s image issues were spotlighted in press reports when Jack Ma in January met with then President-elect Donald Trump, who has attacked China for allegedly unfair trade policies. Ma promised at the time that Alibaba would help create 1 million U.S. jobs by helping small and midsized U.S. businesses sell online in China. That led to an upbeat photo op with Trump and Ma at which the president-elect told reporters, “Jack and I are going to do some great things together.”
The event is not focused on improving ties with the Trump administration, Kuperman says. Rather, it reflects Alibaba’s longstanding aim to help U.S. businesses sell into China. After the late-2014 IPO, she notes, Ma spoke in New York City and wrote a Wall Street Journal op-ed piece that explained the opportunity for U.S. companies to sell to China’s growing middle class.
Ma has responded to frequent questions about whether Alibaba plans to launch a consumer-facing online marketplace in the U.S. to compete with the likes of Amazon.com Inc. with the observation that there is very strong retail competition in the U.S., and that Alibaba still has big opportunities for growth in China.
That’s still Alibaba’s view, Kuperman says. “The retail environment here is very different than in China,” she says. “We still have so much opportunity to grow in China and that’s where we know we can be successful.”
At the time of Ma’s meeting with Trump in January, Alibaba officials said the company planned to organize an event in the Midwest in the spring to explain to U.S. businesses how they can sell to China’s online shoppers via Alibaba’s marketplaces, but they didn’t provide details. Alibaba says nearly 500 million Chinese consumers shop via its online marketplaces.
Alibaba accounts for roughly 80% of online retail sales in China, which leads the world in online shopping. As of the end of its fiscal third quarter Dec. 31, Alibaba reported revenue of $17.2 billion in the first nine months of its fiscal year and net income of $5.5 billion. The company’s stock, which trades under the symbol BABA, has trended upward in the past year, and the company’s market capitalization is now $289 billion. That’s above the market value of $227 billion Wal-Mart Stores Inc. (No. 3 in the Top 1000), but well below the $439 billion current value of the world’s leading online retailer, Amazon.com Inc. (No. 1).
Amazon is No. 1 in the Internet Retailer Top 500 Guide, which ranks retailers by North American online sales, and Amazon China is No. 4 in Internet Retailer’s similar rankings for China. Wal-Mart’s China ally, JD.com, is No. 1 in the China 500 ranking. Though Alibaba accounts for most online retail sales in China, it’s not ranked in the China 500 because, like eBay Inc., it’s a pure marketplace that hosts listings by other retailers, and is not the merchant of record for sales on its sites.