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The U.S. online retailer, Amazon.com has opened a flagship store in local competitor Alibaba Group Holding’s online marketplace. The US Company, however, is struggling to build its base in the dragon country.
Amazon’s store inside Alibaba’s Tmall, launched recently, so far offers a limited number of product categories including imported food, women’s shoes, toys and kitchen equipment. Alibaba, however, has welcomed Amazon, said a company official.
For instance, the food section includes Blue Diamond almonds and Californian wine, while the toy section carries international brands such as Lego and Crayola.
By becoming a Tmall seller, Amazon becomes Alibaba’s customer. Retailers and brands that operate their flagship stores on Tmall pay a commission to Alibaba for each transaction.
The situation is different in the US where Amazon is a household name for the shoppers, but the company has faced a daunting task battle in China, where Alibaba dominates the growing e-commerce market.
It is to be mentioned that Amazon had just a 1.3% share of the total business-to-consumer market in China in the third quarter of last year, a 13.8 percentage point loss of market share from the same quarter in 2008, claimed a Daiwa Capital Markets report on e-commerce in China, citing data from iResearch.
Daiwa further said, Amazon China recorded revenue of around 10 million yuan in 2013, making up only 3% of its global gross merchandise volume. The firm said it expected Amazon’s China operation to have continued to post a net loss in 2014.
The other headache for Alibaba is the presence of the local players in the fray such as JD.com, whose main business model of selling goods directly to consumers is more similar to Amazon.
Alibaba, which went public in the U.S. last year in a record $25 billion initial public offering, runs Taobao and Tmall marketplaces where many merchants sell their goods. While Taobao is a bazaar-like platform for small merchants where almost anyone can be a seller, Tmall mainly hosts larger retailers, including major U.S. brands such as Apple, Nike and Gap. Chinese e-commerce companies such as Dangdang and Yihaodian also run their flagship stores on Tmall.