Alibaba Group Holding Ltd has struck one of its largest deals with a US e-commerce company, agreeing to help Amazon.com rival ShopRunner expand into China.
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 told Reuters on Wednesday. The move would offer a new way for US retailers to tap the world's second largest economy.
In October, Alibaba paid US$202 million (S$252.2 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 Inc, but a move into 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 Web sites, 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 have long tried to crack a Chinese retail market dominated by strong local players.
"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, has been trying to court US retailers for years. Its Tmall marketplace hosts an increasing number of brands like Gap.
The company also has 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.
She argued that a partnership with Alibaba could make more goods available to Chinese buyers: while the appetite for American brands in China is large, the selection is narrow at present."They do want to access Chinese customers and they want to do it on their own terms," Dias said.
ShopRunner offers free two-day shipping within the United States from a variety of stores for US$79 a year, similar to Amazon's "Prime" service.
Chinese consumers will get their products 10 days after ordering on the US website, Dias said. But they will have to pay shipping costs from the US market, which Dias said could wind up as high as 20 per cent of the product price, or as much as US$10 for a US$50 item.
American Express, also an investor in Shoprunner, will offer some Alibaba customers complimentary memberships on ShopRunner. ShopRunner has a similar arrangement with American Express in the United States.
Factbox of Aliababa M&As
Youku Tudou, an online video platform, for US$1.22 billion in April 2014
Tango, a California-based chat application, for US$215 million in March 2014
ChinaVision Media Group, a Hong Kong-listed media group, for about US$800 million in March 2014
ByeCity, a provider of online visa application services for people who want to travel abroad, for US$20 million in March 2014.
TutorGroup, a leading online education platform and largest English-language learning institution, for about US$100 million in February 2014.
AutoNavi Holdings Ltd, a Chinese digital mapping and navigation firm, for US$1.58 billion in February 2014.
1stdibs.com, an e-commerce site targets buyers of high-end art and design, for US$15 million, January 2014.
gyer.com, an online tourism service provider, for US$10 million, in July 2013.
Weibo.com, a provider of microblogging service, for US$586 million, in April 2013.
Intime Retail (Group) Co Ltd, a Hong Kong-listed department store operator, for US$692.2 million, in March 2013.