Amazon has been struggling to make inroads in China. Now it’s turned to the same venue as every other retailer hoping to reach Chinese shoppers online: its archrival Alibaba.
Amazon’s store, which quietly launched this week, resides on Alibaba’s Tmall platform—which is, as the name suggests, an online mall where brands from Apple to Adidas have virtual storefronts. The store has limited offerings so far. Product categories include women’s shoes, American-style snacks, and children’s toys from brands like Crayola, Lego, and Blue Diamond.
At the moment, Amazon still needs a lot of help to grab a piece of the enormous Chinese market.
The move might seem puzzling to Amazon’s US customers. After all, as a Tmall retailer, Amazon must pay Alibaba a commission whenever a customer buys anything from its store. But at the moment, Amazon still needs a lot of help to grab a piece of the enormous Chinese market. According to a November report from Beijing-based market consultancy outfit iResearch, Amazon’s four-year-old Chinese site accounted for just 1.3 percent of China’s business-to consumer sales transactions in the third quarter of 2014, ranking it a dismal eighth. Tmall claimed the top spot with 57.6 percent of sales transactions.
Alibaba, meanwhile, stands to benefit from the deal by gaining a credible retailer on its platform. Alibaba has faced aggressive scrutiny from Chinese authorities over counterfeit goods on its platform. Having Amazon on board gives Alibaba another credible, mainstream brand to burnish its reputation.
Notably, the opening of Amazon’s Alibaba store comes just as Alibaba announced its own significant move across the ocean with the opening of a data center in Silicon Valley to compete with Amazon in the cloud. So far, Alibaba hasn’t signaled any major plans to challenge Amazon’s online retail might in the US. But in this Pacific Rim rivalry, it’s hard to imagine that these two giants won’t end up clashing on every front.
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