Alibaba and Amazon, two of the world's largest e-commerce companies, appear to be working together in China, giving rise to speculations on whether the rivals are turning into "frenemies".
Seattle-based Amazon opened a store on Chinese e-commerce giant Alibaba's Tmall retail platform on Thursday. Amazon did not respond to a request for comment yet.
"We knew it was coming. We didn't know where, when, how, or why, but we knew Alibaba, the largest and most profitable e-commerce company in the world, and Amazon, the second largest, would inevitably come into direct contact with each other," said Michel Zakkour, vice president of Tompkins International Consulting, in a note.
Amazon, a company waging a losing battle to compete head to head with Alibaba in China, has seemingly declared "if you can't beat them, join them," Zakkour added.
The move helps Amazon expand in the lucrative e-commerce market in China, since Alibaba's Tmall accounted for 61.4 percent of business-to-consumer online commerce in the second quarter of 2014, while Amazon China only had 1.3 percent of that market, according the Shanghai-based iResearch Consulting Group.
Since Amazon also operates its own site in China, Zakkour said "this is the bricks and mortar retailing equivalent of Target announcing they will be opening stores within stores inside Wal- Mart."
It would appear that Amazon has realized that you can't do e-commerce in China without partnering in some way, shape or form with Alibaba, Zakkour added.
Analysts said such move allowed them to open a major channel in China and also allowed Amazon to better understand the characteristics of e-commerce in China.
Nonetheless, Zakkour said, it remains to be seen if Amazon and Alibaba end up in a major partnership, if they develop into " frenemies" or if things fall apart and they battle for global e-commerce domination.
Alibaba, Amazon in online battle by Du Xiaoying, China Daily
Just two weeks after Nov 11 helped Alibaba Group Ltd hit a one-day sales record of 57.1 billion yuan ($9.3 billion), rival Amazon.cn unveiled its Chinese version of Black Friday on Nov 28.
The two-day campaign featured more than 35,000 products at discounts of up to 70 percent and allowed local shoppers to buy foreign products with discounts similar to those in the United States.
It seems that the battle between the two notable players is on. Who is going to win? What are the advantages of each player? And what will local shoppers gain?
Both of them have their strengths. Logistics, foreign products and after-sale services are Amazon's advantage.
Thanks to the mature logistics system in the US and the long-term partnership with large airlines, Amazon can complete international orders in nine to 15 days on average, even two to four working days in some cases.
After 19 years in business, Amazon has a deeper relationship with many US and international retailers.
Many of the brands promoted by Amazon in China during its Black Friday campaign are from the US.
Moreover, Amazon's after-sale services surpass Chinese standards and have impressed all the shoppers I have interviewed, even flattered some. They said the services exceeded their expectations, and they feel safe shopping on Amazon.
Alibaba also has strengths such as fame in China, a huge number of customers, language, and "Double 11", a sensational shopping day it created, and many other e-commerce dealers in China to promote sales with discounts.
Alibaba is the biggest player in China's e-commerce market. People are used to shopping on its platforms Taobao.com and Tmall.com. The habit is hard to break unless Amazon can offer something better.
English is a barrier for many Chinese shoppers looking for foreign products. Some of my interviewees complained that the detailed introduction of products in Amazon are in English, so they have to search for a Chinese introduction somewhere else.
Nov 11 also dimmed shoppers' enthusiasm somewhat on Amazon's Black Friday, as many people already got what they needed on Nov 11. Amazon's chance to win is small, unless it offers better prices or products not found on Alibaba.
Nevertheless, competition among the two will certainly benefit local shoppers, as they can buy quality foreign products at home, with more options available, and get better service and prices.
This year's competition can be seen as a test run for Amazon, the merchants it teamed up with, and Chinese shoppers, who were able to buy across borders online for the first time.
Alibaba selects LendingClub to lend to US buyers of Chinese goods, by Agencies
Alibaba Group Holding Ltd is teaming with LendingClub Corp to offer financing to US businesses to buy from Chinese suppliers, hoping to make it easier for American firms to tap the world's largest economy.
LendingClub, an eight-year-old San Francisco startup, said it will provide its core service of matching small business borrowers with lenders on Alibaba.com, the Chinese company's global wholesale platform.
In the exclusive arrangement, LendingClub becomes the main source of US buyer financing on Alibaba.com. It will offer loans of up to $300,000, typically for a few months, at rates of 0.5 percent to 2.4 percent - a fraction of the double-digits that credit cards incur.
"They were looking for a technology-aware platform and also a partner that can operate at a low cost, so that the cost of credit for US buyers would be lower," LendingClub founder and CEO Renaud Laplanche told Reuters.
Alibaba derives the lion's share of its revenue from retail platforms Taobao and Tmall. But it got its start supporting small businesses with Alibaba.com, which Jack Ma co-founded out of his Hangzhou apartment in 1999.
The service is used by businesses on the lookout for cheap products. Alibaba posted revenue of $631 million in international wholesale commerce in the year to March 2014, a sliver of the $8.5 billion in revenue over the same period.
Alibaba intends to grow its US footprint by connecting American sellers with increasingly affluent Chinese buyers. It is also trying to aid smaller businesses and merchants, an effort analysts say earns it goodwill while laying the foundation for a longer-term expansion.
The Chinese company settled on LendingClub because it found its platform faster and easier to use than a traditional bank. The startup, which has provided some $6 billion in loans since its 2007 inception, is capable of keeping up with demand, said Michael Lee, Alibaba.com's global marketing director.
"They're capable of providing an instant approval decision..., that a traditional bank may not be able to. This is really critical to the borrowers," Lee said.
The lending risk will be borne by its pool of institutional investors including foundations, endowments and pension funds.
Laplanche said the short-term nature of the envisioned loans, typically six months, tended to reduce overall risk.
Alibaba will now look for similar providers to extend financing beyond the United States, to major markets such as Britain, Australia, Germany and Canada, Lee said.