Alibaba offers American retailers new ways to sell to China's buyers

Chinese Internet retailer Alibaba has attracted American retailers to use its Alipay as one of their online payment tools.

Among biggest names in U.S. retail sector, Macy's, Neiman Marcus, Saks Fifth Avenue and Bloomingdale have confirmed their agreement with Alibaba.

Media review said, Alibaba is offering American retailers new ways to sell to China's vast and growing middle class.

"Fast lane"

Alibaba is often described as the Chinese version of eBay, and like the U.S. Company, has its own payments system -- Alipay. It has no product stocks itself. Instead, it connects buyers and sellers.

Alibaba's and Alipay's program for U.S. companies is called ePass, which includes a customs pre-approval process, a sort of "fast lane" that shaves days off delivery.

When a China-based customer makes a purchase on a U.S. retailer's website, he or she will pay through Alipay, which handles the transaction, converts the Chinese currency to dollar and pays the retailer. The retailer then ships the product to an Alipay facility in the United States, thence to handle the logistics of getting the purchase to the customer.

In this way, it allows U.S. retailers and Chinese consumers to avoid difficulties associated with foreign exchange. Chinese consumers pay in yuan; U.S. companies get paid in dollars.

Alibaba's international steps

Alibaba's outbound development has gotten in a fast lane.

Last June, Alibaba began to take bold steps in its expansion in the U.S. market. The company cooperated with its first U.S. online shop 11 Main, in a bid to directly face American consumers.

11 Main did not accept Alipay as one of the payment means of the website.

On Sept. 19, Alibaba was listed on the New York Stock Exchange and closed at 93.89 U.S. dollars on the first day of IPO, an increase of 36.32 percent.

In October, Alibaba announced its initiative to help foreign retailers to open online shops at the international version of Alibaba'sTmall, an initiative which did not get positive responses. The company's statistics show among more than 5,000 brands and 650 shops on the platform, only 30 surpassed 10 million RMB in sales volume.

But good luck struck soon and Tmall International improved much. Since U.S. hypermarket giant Costco Wholesale Corp launched a store on the platform, it has attracted 90 million independent visitors, 90 percent shop owners have sold products, with sales volume surpassing 40 million RMB in the first month.

Eye on Chinese consumers

Owning a mature logistics system and the dominant Chinese electronic payments system, the world's largest Internet retailer, is considered by these American retailers as a good way to get to fast growing Chinese online shopper market.

"They're on the ground and they know the Chinese consumer so well," Michael DeSimone, Chief Executive Officer of Borderfree, a U.S. retailer, told Reuters.

Alibaba has reportedly started testing Alipay payment and logistic service with its cooperating U.S. companies, including luxury retailers Neiman Marcus and Saks Fifth Avenue, as well as Macy's, Ann Taylor and e-commerce site Gilt.

Alibaba will also work with U.S. startup Shoprunner, an online mall for U.S. Retailers, and retail services provider Borderfree Inc. to court Chinese consumers.

"Haitao", which means buying goods online from overseas, is becoming popular among Chinese consumers.

A report in September from market research company Nielsen said 18 million Chinese spent 216 billion yuan by haitao in 2013. It estimated the value would reach 1 trillion yuan in 2018 and the number of buyers 35.6 million.

According to Internet industry consultancy iResearch, China's total online shopping sales hit 691.41 billion yuan in the third quarter of 2014, up 49.8 percent from the same period last year. The year's total cross-border e-commerce -- inbound and outbound -- is forecast to grow 30.6 percent from 2013 to reach 4 trillion yuan, accounting for 14.8 percent of total foreign trade.

China's Ministry of Commerce forecasts cross-border trade by e-commerce companies in China will be worth 6.5 trillion yuan in 2016.

The impetus comes from the Chinese government. In August 2013, China's State Council issued a policy to support cross-border e-commerce, with six concrete measures to facilitate processes, including the Customs clearance, quarantine inspection, duties and foreign exchange.