Alibaba US jobs pledge show­cases global strat­egy

China Daily (Canada) - - BUSINESS -

E-com­merce gi­ant has so­lu­tions for bridg­ing US-based sell­ers with its vast China mar­ket

Alibaba Group Hold­ing Ltd added $7.5 bil­lion to its­mar­ket value af­ter re­port­ing quar­terly re­sults that beat es­ti­mates and rais­ing its full-year sales fore­cast. China’s big­gest e-com­merce com­pany in­creased its pro­jec­tion for fis­cal 2017 rev­enue growth to 53 per­cent, from 48 per­cent pre­vi­ously.

Jack Ma talked the talk when he met Don­ald Trump ear­lier this month, promis­ing to cre­ate 1 mil­lion jobs in the United States by link­ing small busi­nesses with Chi­nese on­line buy­ers. Now Michael Evans has to walk the walk.

The pres­i­dent of Alibaba is re­spon­si­ble for re­al­iz­ing Ma’s vi­sion, which some an­a­lysts crit­i­cize as be­ing un­re­al­is­tic in scope and prob­lem­atic in im­ple­men­ta­tion. Yet Evans said the on­line em­po­rium’s deal­ings with 10 mil­lion small busi­nesses in China can be the tem­plate for its US ef­forts.

“We un­der­stand the power of con­nect­ing small busi­nesses to con­sumers— in this case, new­con­sumers for their prod­ucts — and the lever­age that gives the small busi­ness to hire more peo­ple,” Evans said. “For the next five years, it’s go­ing to be a busi­ness pri­or­ity and fo­cus in the US.”

Alibaba is try­ing to broaden its rev­enue sources as China’s econ­omy grows at the slow­est pace since 1990. Ma’s at­ten­tion­pro­nounce­ment was por­trayed as a new ini­tia­tive, though the com­pany has been talk­ing up a US ex­pan­sion since Ma said he wanted more than half of sales to come from out­side China by 2025.

Last quar­ter, that por­tion was roughly 26 per­cent, ac­cord­ing to data com­piled by Bloomberg.

That would mark a sec­ond­straight de­cline in growth for the e-com­merce com­pany, where ex­plo­sive ex­pan­sion was the norm be­fore its ini­tial pub­lic of­fer­ing. Still, the com­pany’s shares are out­per­form­ing the New York Stock Ex­change this year.

Now Alibaba faces a cool­ing econ­omy at home. China’s gross do­mes­tic prod­uct ex­panded by 6.7 per­cent last year, and that’s ex­pected to drop to 6.4 per­cent this year, Bloomberg econ­o­mist sur­veys show.

To di­ver­sify, Alibaba con­vinced mega-re­tail­ers such as Macy’s Inc and Costco Whole­sale Corp to open on­line shops. This led a $2.6 bil­lion deal to pri­va­tize de­part­ment store chain In­time Re­tail Group Co and ramped up its out­reach to small and medium-sized en­ter­prises.

Alibaba al­ready has 650,000 US-based com­pa­nies reg­is­tered on its busi­ness-to-busi­ness plat­form, pri­mar­ily used for sourc­ing, and more than 7,000 brands across its plat­forms in­clud­ing Tmall Global, where busi­nesses sell di­rectly to con­sumers.

Re­cruiters will fan out across the US to lure more busi­nesses, Evans said. Their pitch: China’s ap­petite for cross-bor­der re­tail e-com­merce is ex­pected to reach 3.6 tril­lion yuan by 2020, ac­cord­ing to Ali Re­search In­sti­tute, a unit of Alibaba.

Evans said: “Today, these peo­ple are sell­ing prod­ucts in their lo­cal com­mu­ni­ties. The key is to con­nect them to new sources of de­mand— con­sumer de­mand in China and Asia.”

Ma said af­ter his Jan 9 meet­ing with Trump that Alibaba’sUS ex­pan­sion will es­pe­cially tar­get the Mid­west re­gion in items such as wine and fruit. China is head­ing to­ward a con­sump­tion-driven econ­omy, and a bur­geon­ing mid­dle class wants high­erqual­ity baby for­mula, or­ganic beauty prod­ucts and Alaskan salmon.

Skep­tics said it will be dif­fi­cult to sway mom-and-pop shops to trans­form into global traders, and the an­tic­i­pated flood of new­busi­nesses on Alibaba’s web­sites will make it harder for them to stand out.

Ju­lia Pan, a Shang­hai-based an­a­lyst atUOBKayHian, said: “This goal is too ide­al­is­tic. In re­al­ity, it will be very hard to get 1 mil­lion SMEs to all thrive on its plat­form.”

How­ever, Alibaba is un­daunted. The com­pany makes money from list­ing fees that can to­tal 150,000 yuan with sales com­mis­sions of up to 5 per­cent and tech fees of as much as 60,000 yuan— and mar­ket­ing costs.

That full-ser­vice clout ap­peals to Ed­uardo De Arkos, a San Francisco-based entrepreneur sourc­ing agri­cul­tural tools and plas­tics from Alibaba. De Arkos wants to start a cloth­ing busi­ness, and he said he has found a part­ner in Shen­zhen to man­u­fac­ture the gar­ments and ship them do­mes­ti­cally.

“China is al­ways the log­i­cal next step just be­cause of the sheer size of the mar­ket,” De Arkos said. “Stick­ing with Alibaba to sell to the Chi­nese makes sense be­cause of their dom­i­nance.”

But there are sig­nif­i­cant ob­sta­cles to e-com­merce trans­ac­tions be­tween Wis­con­sin and Wuhan. Re­la­tions be­tween the US and China may worsen un­der Pres­i­dent Trump, who has called for high tar­iffs on Chi­nese goods and ac­cused the coun­try of steal­ing Amer­i­can jobs.

TheUS gov­ern­ment has also just put Alibaba back on its black­list for sell­ing coun­ter­feit

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