Chinese diaspora can help e-commerce giant take on Amazon
Updated: 2014-09-15 14:43
By Bloomberg(China Daily)
Using a combination of word-of-mouth and advertising, Alibaba Group Holding Ltd is tapping the millions of Chinese outside its homeland from Singapore to San Francisco to accelerate global expansion.
The e-commerce company, which started its meetings with potential investors for its initial public offering this week, is attracting people of Chinese heritage drawn by hard-to-find items on its Taobao Marketplace like pineapple cakes and motorbike brake pads, as well as bargain-basement prices.
"I buy everything on the platform because it's so cheap," said Sam Ng, a 33-year-old Web designer in San Francisco, who shops for car gadgets and Korean fashion clothes on the website and learned about Taobao from friends.
Alibaba's success - and the prospect of pulling off the largest IPO in US history - is built on its business in China, the country of 1.35 billion people where the company dominates the fast-growing e-commerce industry. Still, Chairman Jack Ma is looking beyond his base, betting that Chinese abroad will help him reach a wider array of customers in Asia, Europe and the home turf of Amazon.com Inc and eBay Inc.
"If Alibaba's strategy is to follow the Chinese diaspora, it's a smart strategy because you don't have to build a brand from scratch," said Niraj Dawar, a professor of marketing at the Ivey Business School in Canada. "To be a global player, they eventually have to serve markets that are non-Chinese."
To reach those new markets, Alibaba, which gets more than 85 percent of its sales from China, is making acquisitions and developing its own platforms.
AliExpress, the company's market for customers outside of China, was founded in April 2010 and is available in English, Russian and Portuguese.
In the US, Alibaba has acquired stakes in Fanatics Inc, a Web retailer of officially licensed sports merchandise, as well as ShopRunner Inc, a membership-based shopping platform for brands like Calvin Klein, Tommy Hilfiger and Neiman Marcus.
There are nearly 50 million people of Chinese descent living outside their home country, larger than the population of Argentina, and more than 1 billion people who speak Mandarin.
David Lee, executive director of the Chinese American Voters Education Committee in San Francisco, said: "Alibaba seems to have strong connections with the immigrant population. It makes sense to go after this market."
Targeting this group is a strategy others are already using. Xiaomi Corp, which toppled Samsung Electronics Co last quarter to lead smartphone sales in China, is targeting overseas Chinese to lead its global expansion as it starts sales in Singapore, Indonesia, Thailand and India.
Through its reach in China, where the company accounts for more than half the nation's package deliveries, Alibaba can meet demand for products that can't be bought elsewhere and provide direct access to manufacturers for lower costs.
As consumers become more comfortable buying from overseas websites, transactions are forecast to surge. Last year, eBay's PayPal unit published a study that predicted cross-border shopping will nearly triple to $307 billion by 2018.
(China Daily USA 09/15/2014 page14)