Can US SMEs afford to log on to Alibaba?

Updated: 2015-07-01 08:04

By Amy He/Paul Welitzkin/Yang Ziman(China Daily)

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Can US SMEs afford to log on to Alibaba?

A board shows how much was spent on Tmall on Single's Day, Nov 11, a major online shopping day in China. [provided to china daily]

"In terms of value, cost-benefit for a company, that's fantastic. But again, if your total sales are $2 million and say it's $100,000 just to get in the game, that's 5 percent of your total sales," he said.

Alibaba already works with US retailers such as Costco, GNC, Forever 21, Patagonia and Under Armour. However, observers say smaller companies may be hindered by the difference in online shopping culture.

Carl Miller, managing director of San Francisco-based Global Retail Insights Network, a nonprofit organization that helps retailers go global, said Chinese consumers' expectations differ from their American counterparts. Customer service is a big part of the online shopping experience, something US retailers may have difficulty adapting to.

"Most Chinese consumers are going to be utilizing chat-text chat or talking to a customer representative-to talk about the product, to verify the authenticity," he said. "They'll sometimes want to barter, and one of my main concerns when I heard (about Ma's speech) is: How are all of these smaller companies going to actually have the time and energy to provide, or even outsource, customer service that's going to adequately represent their product?"

A case in point is Xue Chanchan, a public relations worker in Beijing, who said Taobao is her No 1 choice for shopping online because of the after-sales services. "I can see the store and talk to the owner. On other platforms, I can only call customer service instead of the store itself. This way, I feel more assured."

Zia Daniell Wigder, vice-president and research director at Forrester Research, is optimistic about small US retailers on Alibaba, especially those who would be dealing with international customers, shipping, customs, and local currencies for the first time. She said the Chinese company can help streamline these processes because of its market dominance and vast infrastructure network.

"There certainly are differences (between US and China e-commerce), but a lot of them are surmountable issues," she said. "Cross-border online shopping is growing incredibly quickly. It's not just between the US and China, but between a large number of different countries. Alibaba's opportunities in Brazil and Russia, and other places like that, have grown substantially, so they're looking to penetrate what is the other extremely large e-commerce market in the world, which is the US."

Michael Tudor, CEO of Ripen eCommerce, a consulting company, told Forbes last year that Alibaba's Tmall and Taobao, along with Alipay, its third-party online payment platform similar to PayPal, can help small businesses in the US "who don't have the resources to meet the challenges of the Chinese market".

For a small US retailer to be successful in China's e-commerce marketplace, Kosha Gada, principal at AT Kearney's media, consumer and retail practice, said they will need understand the market demand, build a brand, and have a firm grasp on logistics and operations.

"It's a different market from the US, and companies will need to accurately assess the competitive landscape," she said, warning that electronic payment is not as developed in China as in the US, raising the risk of fraud, while shipping can be a hassle due to undeveloped infrastructure outside of major cities.

Teng at the Cheung Kong Graduate School of Business offered one more piece of advice for US companies: Watch what Chinese tourists buy in bulk abroad. "Chinese are seeing the world," he added. "They know what the good products are, they aren't easily swayed by novelties."

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