Alibaba found Jack Ma. Image: www.alibabagroup.com.

US Businesses Benefit From Alibaba's Global Expansion

China

When Chinese e-commerce giant Alibaba first submitted its intention to list on the New York Stock Exchange last year, there was speculation that the company would seriously threaten domestic businesses if it entered the American market. Since then, Alibaba’s actions in the US suggest that it will have the opposite effect, providing new opportunities for American businesses both at home and abroad.

The Hangzhou-based company’s Initial Public Offering (IPO) on Friday was the largest in US history, with opening share prices reaching close to $100, far exceeding the initial price of $68, and is expected to raise significantly more than the projected $21.8 billion. This success is not surprising considering that the Alibaba Group accounts for around 80% of online commerce in China, with over $248 billion in gross merchandise volume in 2013 alone. The company will now have billions of dollars in cash just waiting to be invested, much of which will be spent in the US.

Before the IPO, Alibaba had already begun investing widely in American technology start-ups, including eBay listing tools Auctiva and Vendio, ridesharing service Lyft, and Tango, a mobile messenger. Most recently, the company paid $75 million for a 39% stake in ShopRunner, a San Mateo-based retail shipping company.

This move offers a new way for US retailers to access the enormous Chinese market, where there is huge demand for authentic American products. In line with this goal, Alibaba launched Tmall International earlier this year, a website dedicate to foreign businesses who want to sell their products in China. While still in its initial stages, this service will be helped enormously by the inclusion of companies such as ShopRunner.

Alibaba’s expansion will also grant American e-retailers greater access to the domestic market, currently dominated by the likes of eBay, Amazon, and Etsy. The company recently launched 11 Main, an online marketplace, and their first official foray into the US retail industry. Pitched as an American Main Street-style shopping experience, the website will offer both retailers and consumers an alternative to Amazon and eBay, with carefully selected vendors, high-quality merchandise, and an easy payment system. Furthermore, thanks to the purchase of Auctiva, sellers will be able to upload their existing eBay listings to 11 Main at a 3.5% sales commission, compared with almost 10% for eBay.

Though the exact benefits to American businesses will only become clear with time, the success of Alibaba’s IPO guarantees new investments that will increase American and Chinese market access for American goods. With high levels of goods imported from China to the US for many years, this may prove an opportunity for greater quantities to begin heading in the opposite direction.

Jonathan Gordon recently graduated from the University of Sydney and is a Research Intern at the East-West Center in Washington, D.C.