With the U.S. Economy Hurting, Alibaba Courts Small Businesses

But, if anything, Amazon has more to fear from Walmart and eBay

alibaba sign
Alibaba is appealing to small businesses in the U.S. with a new freight service, financing option and livestreamed trade shows. Alibaba
Headshot of Lisa Lacy

Key Insight:

Chinese ecommerce platform Alibaba has some new products and services it hopes will help U.S. small businesses attempting to go digital and reach new audiences abroad in the wake of the Covid-19 pandemic.

The offering includes a freight service to book and track bulk shipments by air and sea; a financing option for cross-border trade, which allows qualified buyers to order goods and pay for them up to 60 days after they are shipped instead of upfront; and, in the absence of live trade shows this year, a series of livestreamed events to connect U.S. manufacturers and wholesalers with buyers.

“Doing business online is the bridge for American small businesses through this crisis and into the next decade,” said John Caplan, president of North America and Europe at Alibaba.com, in a statement. “We are accelerating our transformation to get both sellers and buyers quickly set up for success and provide the critical tools and services that are required for growth—access to supply and demand, shipping and logistics, and working capital.”

Alibaba first began pitching itself as the connection between manufacturers, wholesalers and distributors in the U.S. to sell to buyers in countries including India, Canada, Brazil and Australia about a year ago.

That’s when Alibaba partnered with retailer Office Depot and produce company Robinson Fresh as “anchor sellers.” In addition, a beta test of Alibaba’s U.S. SMB program included three brands that also sold on Amazon: hair-care company Honey Baby Naturals; coffee supplier Vassilaros & Sons; and cleaning company Gett Clean Products and Solutions.

It was not clear whether these brands are still working with Alibaba, which did not respond to a question about these relationships.

A direct threat to Amazon?

Amazon has long positioned itself as the champion of U.S. small businesses. They are, after all, the ones kicking Amazon’s first-party butt in terms of sales, as CEO Jeff Bezos wrote in 2018.

According to Amazon’s latest Small Business Impact Report, it was working with more than 1.9 million small businesses, content creators and developers in the U.S. as of 2019. (Ecommerce intelligence firm Marketplace Pulse said it’s more like 1 million U.S.-based sellers specifically, which is about half of all sellers on Amazon.)

But in part because of increased competition—nearly 85,000 new sellers have joined the U.S. platform to date in 2020 alone, per Marketplace Pulse—it’s not as easy for sellers to make a buck on Amazon as it used to be. And then came a global pandemic, which brought restrictions on what products these sellers could send to Amazon warehouses as it prioritized household staples, medical supplies and other high-demand products. Some sellers were stuck fulfilling their own orders as a temporary fix without knowing when they could ship inventory again.

At the time, Elizabeth Marsten, senior director of strategic marketplace services at digital marketing agency Tinuiti, called it a wakeup call for small businesses that were “heavily dependent on Amazon” and said it would be interesting to see if they remain dependent or if they attempt to diversify their sales channels with additional partners.

Does this mean we’re likely to see an exodus of Amazon sellers to Alibaba? Probably not. That’s in part because Amazon provides a B2C opportunity while Alibaba is B2B. And, said Forrester analyst Sucharita Kodali, there’s certainly no harm in U.S. SMBs working with Alibaba, but the volume is light.

Amazon sellers partnering with, say, Walmart or eBay, however, is not such a crazy idea.

Todd Bowman, senior director of Amazon and ecommerce at performance marketing agency Merkle, said all of the above complaints plus delayed delivery times for Prime products caused some Amazon sellers to see drops in conversion rates.

“While Amazon is back to normal for the most part, this situation did show brands that they may not want to fully rely on Amazon to fulfill their orders and should consider alternatives,” he added.

However, Bowman also said the only sellers with a real opportunity to expand are the brand owners. “For [third-party] sellers who are just resellers, I think eBay would be their only other real opportunity for volume in the U.S.,” he added.

Zach Weinberg, director at research firm Gartner, agreed that it makes sense for Amazon sellers to explore other options now.

“In our very recent digital commerce consumer survey, we found that 85% of consumers have changed at least one shopping behavior in at least one category since the outbreak,” he said, including 36% of consumers who shopped via a website or app they’d never used before. “82% of these consumers are satisfied with their new shopping experience, and 85% of these consumers expect to use the websites or apps about the same or more in the next 12 months.”

So adjusting fulfillment strategies can help brands and sellers future-proof themselves, Bowman said.

“Amazon has shown that nonessential products can easily be deprioritized, which can make a brand/seller who relies on Amazon suffer overnight,” he added. “Brands need to build a relationship with a non-Amazon fulfillment company to either replace Amazon outright or operate as a backup in case we ever have another shutdown that causes Amazon to deprioritize products and extend their ship times.”

@lisalacy lisa.lacy@adweek.com Lisa Lacy is a senior writer at Adweek, where she focuses on retail and the growing reach of Amazon.