20 February 2019
Alibaba aims to create an international e-commerce logistics network to expand its business. Photo: Reuters
Alibaba aims to create an international e-commerce logistics network to expand its business. Photo: Reuters

Alibaba seals another partnership as it chases a global dream

After dominating China’s e-commerce industry over the past decade, Alibaba Group is now signaling its ambitions to extend its competitive edge beyond its home base, aiming to take on global players such as Amazon and eBay in some markets, particularly in Asia.

The Hangzhou-based company, which is gearing up for a US initial public offering, announced Wednesday a strategic alliance with Singapore’s national postal service provider SingPost, in a deal aimed at creating an international logistics platform.

Under the deal, the two groups will set up a joint venture for international e-commerce logistics, which will enable Alibaba to handle overseas deliveries better and will also help customers to source goods from outside China.

As part of the partnership, Alibaba will invest about US$248 million for a 10 percent stake in SingPost.

The SingPost deal came days after Alibaba secured a partnership with Australia Post to help more international merchants sell to millions of Chinese through the e-commerce marketplace. Australia Post will open a flagship online store on TMall Global to sell a wide range of Australian products to Chinese online shoppers.

It is no secret that Alibaba aims to go global to maintain its growth momentum, while keeping its market-leading position in China. The e-commerce giant has been operating an international platform for a long time, initially starting with business-to-business (B2B) platforms such as AliExpress to help foreign buyers reach China suppliers, and then gradually extending to business-to-consumer (B2C) with the launch of TMall Global for foreign online shoppers.

However, the international business is still a small unit within the group. In the nine months ended December, the business contributed less than 10 percent of Alibaba’s total revenue.

As Chinese entities, Alibaba’s TMall and Taobao, as well as the group’s founder Jack Ma, all have strong credentials in the e-commerce market and also enjoy wide recognition among the overseas Chinese community.

However, not all sellers are willing to ship their products to overseas markets. That has given rise to a new business, the so-called Taobao transport service, with regard to overseas buyers. Overseas buyers can place their orders through agents; the agents will charge a premium over the transport and administrative costs for each order.

With the alliance with SingPost, Alibaba can offer its sellers and buyers new international shipment services to serve overseas buyers better at lower costs. That should create a win-win situation for Alibaba as well as sellers and buyers, and stimulate sales across all of the group’s e-commerce platforms.

The deal comes as Taobao and TMall are facing various competitors from different countries which are all serving markets beyond their homeland. For example, Japan’s Rakuten is taking overseas orders, and it has just established a regional headquarters facility in Singapore. Elsewhere, Taiwanese e-commerce site PCHome also operates a dedicated e-commerce site for overseas buyers.

With the new partnership with SingPost, Alibaba will strengthen its logistics network overseas and shorten the delivery time to end-users, helping the Chinese group outpace regional rivals

While it may be too early to conclude that Alibaba will pose a significant challenge to foreign e-commerce players like eBay and Amazon, there is no doubt now that Ma and his team will leave no stone unturned to prove that they can in fact do so.

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EJ Insight writer

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