Posts tagged Disrupt
Chinese e-commerce giant Alibaba has gotten lots of attention thanks to its pending multi-billion-dollar U.S. IPO. It seems to have no immediate plans to expand in the U.S.—but that’s likely just a matter of time. And when it does, Amazon had better watch out, because Alibaba has a host of ready allies: the legions of mom-and-pop retailers that Amazon has left stranded in its wake.
Let’s start with some background from Alibaba’s perspective. The company controls 80% of the Chinese e-commerce market, which means it needs new markets in order to grow. Its current model—acting as an e-commerce middleman that connects buyers and sellers—might translate well to some big emerging markets, but Alibaba will need to take a more subtle approach in America for three reasons:
- Culture clash: Alibaba is a Chinese consumer brand and Amazon is an American consumer brand managed by an incredibly smart and aggressive company. Guess which brand will win over American consumers? Jeff Bezos’s attitude to price wars has been “bring it on,” so Alibaba cannot expect to win on price alone.
- Trade friction: Things got ugly between Cisco and Huawei, and some people are already muttering about Alibaba in the U.S. as well (for instance, complaining that the Chinese company will get access to American consumers’ credit card information”). Alibaba will need to avoid getting drawn into the narrative of U.S.-China trade clashes; it would be a major PR fail. It badly needs a fan base among American consumers, not just among investment bankers.
- Tapping innovation: America is still the innovation capital of the world. New concepts get traction in America first and then make their way elsewhere. Innovation isn’t susceptible to brute force, frontal assaults; you have to woo it.
The smart thing for Alibaba would be to take an indirect approach. Think of the way Microsoft won over developers in order to take over the PC market—a strategy emulated by countless startups since then. In the case of Alibaba, this means winning over Main Street merchants in the U.S.
It’s probably no coincidence that Alibaba’s first online storefront for the U.S. is branded 11 Main.
Sussing Out The Alibaba Strategy
The 11 Main site today is a placeholder, and Alibaba isn’t saying much about 11 Main on the record. What little we know, however, appears targeted more at entrepreneurs than consumers. Here’s the PR soundbite: “Alibaba is run by entrepreneurs and firmly believes in supporting entrepreneurs with great vision and a strong sense of mission for their companies.”
11 Main is owned by two e-commerce ventures recently acquired by Alibaba—Auctiva and Vendio. This fits with the indirect model sensitive to wooing innovation: Let American e-commerce entrepreneurs take on Amazon, backed by Alibaba’s cash and clout.
Here’s what we know about Vendio from its Crunchbase profile:
Founded in 1999, Vendio Services, Inc. (www.vendio.com) helps small to medium-sized merchants (SMM’s) succeed by offering them an integrated solution to manage their sales seamlessly and cost-effectively across multiple online sales channels including their online store, Amazon.com, eBay, Google, Shopzilla, and more. Each year over 80,000 merchants use Vendio’s award winning multi-channel platform and applications to sell nearly $2 billion in merchandise. The company also operates Dealio (www.dealio.com), a shopping and coupons site for consumers.
That doesn’t seem to present not much threat to Amazon on the surface. Amazon already sells products from partners. Vendio offers merchants access to multiple channels—not just Amazon—and that was probably the appeal to Alibaba, but that alone does not look disruptive.
Auctiva, meanwhile, mostly seems to offer tools to help people sell their wares on eBay. Its “about us” page, however, adds this:
Auctiva was acquired in August 2010 by Alibaba.com, providing users integrated access to low-cost product sources through AliExpress—a global wholesale platform geared for smaller resellers seeking fast shipment of small quantities of goods.
AliExpress, by the way, is—in the words of Slate’s Lily Hay Newman—”Alibaba’s hilarious, deeply bizarre, factory-outlet marketplace.”
Finally, on the 11Main site itself, you can piece together the following description of the type of merchants the site is looking for:
The Best Address For Your Business
Build a following of customers inspired to buy from you again and again.
Connect With Customers
11 Main is a shopping destination where hand-picked shop owners connect with customers in a stylish and professionally merchandised marketplace.
On 11 Main, customers know who you are and can easily visit or follow your shop.
- Build one-to-one relationships with customers
- Attract new customers with special offers—some funded by 11 Main
- Receive promotional placement in 11 Main targeted marketing
Share Your Story
As an 11 Main shop owner, your brand identity is associated with every item you sell. Every connection with a customer is a personal one.
Customers love to hear shop owners describe their journey, passion and point of view. Your identity shines through in your shop at 11 Main, and in your story.
We keep it simple and affordable, so we’ll always be the right place for your business. You’ll be able to offer your great items at great prices, and keep your customers coming back. Request an invitation to sell at 11 Main and we’ll tell you more.
Is 11 Main Right For You?
We hand-pick shop owners who:
- Sell interesting, quality products in 11 Main’s key categories
- Sell successfully online
- Provide great customer service
- Display clean, detailed images and write clear, original descriptions
- Offer fast, reasonably-priced shipping, originating from within the U.S.
Where you won’t find any information about 11 Main, however, is in Alibaba’s IPO prospectus. In 325 pages, 11 Main is mentioned exactly zero times.
Putting The Pieces Together
So here’s how Alibaba can make all that work:
- Main Street merchants never quite got over being “Amazoned.” (Hey, it might be a funny story in the blogosphere, but when your family business goes bankrupt it ain’t funny). Groupon and other deal marketplaces claimed to ride to the rescue, but big discounts and promotions turned out to be a losing proposition for many retailers. American e-commerce entrepreneurs are not exactly winning Main Street’s popularity contest. An American store backed by a Chinese e-commerce entrepreneur might stand a better chance.
- Selling Chinese goods in the U.S. is clearly not the way to go. If Alibaba wants to position 11 Main as an American brand, it needs to sell a lot of made-in-America products.
- The open space is “artisanal”; it include exclusive fashion and other low volume, high price goods. It’s a wide-open territory that Amazon doesn’t dominate—and that it may have difficulty attacking effectively. This is the unclaimed market that Alibaba could win.
- Small merchants are more agile than behemoth retail chains; that’s why many of them moved into artisanal goods before e-commerce entrepreneurs spotted the trend. Big box stores have to get to WalMart scale to survive, but millions of mom-and-pop merchants are finding ways to thrive with differentiated merchandise, a friendly local vibe and an increasingly savvy digital presence.
- 11 Main retailers could also act as local hubs in the supply chain. Order from 11 Main online, and it delivers your shipment for pickup at an 11 Main retailer near you. As a consumer, you get cheaper delivery, and small stores get foot traffic. This is the truly disruptive play for Alibaba.
All this levels the playing field with Amazon, as Alibaba won’t have to build massive warehouses and a small air force of drones. And it could provide Alibaba with a ready-made and sympathetic PR line: It’s creating entrepreneurial jobs in America!
Of course, neither Amazon nor its rivals will be standing still. Amazon’s recent “#AmazonCart” deal with Twitter, for instance, is geared toward helping it capture sales of such artisanal goods. And there will be more more where that came from.
It should be an interesting fight. May the best store win.
Lead image by Flickr user F.D. Richards, CC 2.0
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