Alibaba to help US e-tailer launch in China

ShopRunner, in which Alibaba bought a 39pc stake last year, will offer American retailers low-risk access to mainland e-commerce market

PUBLISHED : Thursday, 08 May, 2014, 11:48am
UPDATED : Friday, 09 May, 2014, 12:56am

Alibaba has struck one of its largest deals with a United States e-commerce company, agreeing to help Amazon.com rival ShopRunner expand into the mainland.

ShopRunner, whose partners include Neiman Marcus and Nine West, will use Alibaba's domestic logistics infrastructure to launch in China later this year, ShopRunner chief strategy officer Fiona Dias said.

The move would offer a new way for US retailers to tap the world's second-largest economy, where many have stumbled in the past. It also allows Alibaba to cater to booming Chinese demand for authentic American products, in a market flooded with counterfeits.

"The history of US retailers going to China is one that's fraught with peril," Dias said. "This is a very low-cost way to do it that doesn't require them to go to China to figure it out."

In October, Alibaba paid US$202 million for a 39 per cent stake in ShopRunner, which launched four years ago and sells products from thousands of brands, like American Eagle Outfitters and Calvin Klein.

The startup, with over a million members, is still a minnow compared with Amazon or eBay, but a move into mainland China could afford a major boost to its growth. Alibaba and ShopRunner now aim to create a "joint brand" in China, Dias said.

The venture will be in addition to Alibaba's other websites, including the three marketplaces that make up more than 80 per cent of the e-commerce giant's revenue, according to the company's IPO filing on Tuesday.

US retailers from Best Buy to Wal-mart Stores have long tried to crack a Chinese retail market dominated by strong local players, but patchwork regulations and competing local interests have forced some, like Home Depot and eBay, to shut their big-box stores or pull out of the country.

"Everyone would love to have a way to at least test the market," said Richard Last, a former JC Penney executive and now a professor of retail at the University of North Texas.

"If you partner with the Alibaba group, you might have a good shot at being successful."

Alibaba, which on Tuesday filed for what could eventually become the world's largest technology debut on the stock market, has been trying to court US retailers for years. Its Tmall marketplace hosts an increasing number of brands, like Gap.

The company has also been investing in US technology startups, from ridesharing service Lyft to mobile messaging service Tango.

Dias said not all retailers have been comfortable selling through Alibaba sites, because they are perceived to be cluttered with retailers who might be selling competing, counterfeit goods.

Chinese consumers will get their products 10 days after ordering on the US website, but they will have to pay shipping costs from the US which could wind up as high as 20 per cent of the product price.