Alibaba is world’s most profitable e-commerce company and T-Mall is its flagship b2c platform on which at least 60,000 domestic as well as overseas retailers and brands have stores. The platform offers electronic payments too via its own Ali-Pay, something similar to the world renowned PayPal. Alibaba does not own any of the products sold on T-Mall and it also don’t have any touch on those.
Amazon has lately realized doing a profitable e-Commerce business in China without the support of Alibaba in some way, shape or form is not possible even though they are the second largest online retail giant in the world. Today, it announced opening up a consumer product presence on T-Mall.
This is the bricks and mortar retailing equivalent of Target TGT -1.27% announcing they will be opening stores within stores inside Wal-Mart. While it’s true that Amazon started selling Kindle e-books on T-Mall last year, this marks Amazon’s entry into selling consumer products like apparel, footwear, food and electronics in China through Alibaba. Amazon has also had a Chinese website up since 2011, but the company has not been able to make a dent in Alibaba’s China business, not only on B-2-C through T-Mall , but also Alibaba’s C-2-C platform Tao Bao and its B-2-B platform Alibaba.com.
Alibaba dominates almost every aspect of e-commerce in China and is emerging as a major force in cloud computing, streaming services, supply chain and banking. So dominant is Alibaba that approximately 75% of all e-commerce transactions in China touch an Alibaba business unit.
Frenemies? Or More?
The first question we have to ask is why is Amazon doing this and why is Alibaba allowing it?
It would appear that Amazon has realized that you can’t do e-Commerce in China without partnering in some way, shape or form with Alibaba. This move allows them to open a major channel in China and a back door to building awareness of and engagement with the Amazon brand. It also allows Amazon to better understand the characteristics of e-commerce in China.
At the same time, Alibaba stands to profit from a potentially huge new stream of transactions without any new capital investment. They make their money on store set up fees, advertising and commissions. Reuters reports Alibaba spokesperson Candice Huang as saying, “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,”.
The bigger question is, what does this mean for the future of Amazon’s business in China and Alibaba’s business in America and the future of “borderless e-commerce”. It remains to be seen if Amazon and Alibaba end up in a major partnership, if their develop into “frenemies” or if things fall apart and they battle for global e-commerce domination.