Why Alibaba Gave Up On U.S. Consumers

Summary

Alibaba, China’s largest e-commerce platform, has faced challenges in the U.S. market despite its massive success in China. After an unsuccessful attempt to compete with Amazon through the 11 Main platform, Alibaba shifted its focus to helping U.S. businesses export products to China’s growing consumer market. Although Jack Ma’s promise of creating one million jobs in the U.S. was retracted due to trade tensions, Alibaba continues to help American brands like Starbucks and Nike tap into China’s 300 million-strong middle class. While its U.S. retail expansion remains a long-term priority, Alibaba is focusing on Southeast Asia and global trade.

Takeaways

• 😀 Alibaba is China's largest e-commerce platform, with 636 million annual active consumers on its China retail marketplaces.
• 😀 Despite its massive following in China, Alibaba remains a relatively unknown brand in the U.S.
• 😀 Alibaba's primary market focus is China, and its market there is still growing, with 300 million people in the middle class to target.
• 😀 Alibaba entered the U.S. market in 2014 with a highly successful IPO, raising $25 billion, the largest U.S.-listed IPO at the time.
• 😀 After the IPO, Alibaba's attempt to enter the U.S. consumer market via the 11 Main website failed and was shut down after just one year.
• 😀 Alibaba's strategy is not to compete with Amazon or eBay in the U.S., but to help American businesses, such as farmers, export goods to China.
• 😀 Alibaba is facilitating U.S. companies like Ocean Spray and Washington State apples to sell their products on Alibaba's platform in China.
• 😀 In 2017, Jack Ma met with President Trump to discuss helping small American businesses sell to China, with the promise of creating one million indirect jobs.
• 😀 Trade tensions between the U.S. and China led Jack Ma to back out of the promise to create one million jobs, citing the lack of a favorable trade environment.
• 😀 Alibaba has been working with American brands like Starbucks, Guess, and Nike to sell directly to Chinese consumers via its platforms like Tmall.
• 😀 Despite challenges, Alibaba is focused on long-term expansion, with priority given to markets in Southeast Asia and plans for further expansion into Western Europe and the U.S. over the next 5-10 years.

Q & A

What is Alibaba's largest consumer base and how does it compare to the U.S. population?

Alibaba has 636 million annual active consumers on its China retail marketplaces, which is almost double the entire population of the United States.

Why is Alibaba not focused on the American consumer market?

Alibaba's market in China is much larger and continues to grow, particularly with a middle class of 300 million people. This makes the Chinese market more attractive and profitable than pursuing the U.S. consumer market.

What was Alibaba's first major attempt to enter the U.S. market?

Alibaba first attempted to enter the U.S. market in 2014 with an IPO on the New York Stock Exchange, which was the largest IPO ever at the time, raising $25 billion.

What happened to Alibaba's e-commerce website '11 Main' in the U.S.?

'11 Main' was an e-commerce website Alibaba launched to cater to American consumers, but it was shut down just a year after its launch due to its failure to compete with established platforms like Amazon and eBay.

How does Alibaba view its role in the U.S. market?

Alibaba sees its role in the U.S. as helping American businesses, particularly small farmers, to export products to China. The company is more focused on business-to-business relationships than competing for American consumer market share.

What is the significance of Alibaba's partnership with U.S. companies?

Alibaba has helped U.S. brands like Starbucks, Nike, and Urban Outfitters access the Chinese market through its Tmall platform. Smaller businesses, such as Emily’s Chocolates, have also benefited by selling directly to Chinese consumers.

Why did Jack Ma's promise to create one million jobs in the U.S. not come to fruition?

Jack Ma’s promise to create one million jobs in the U.S. was based on the premise of a strong U.S.-China partnership, which deteriorated due to trade tensions. As a result, the promise was never fulfilled.

How did political tensions between the U.S. and China impact Alibaba’s strategy?

The trade tensions between the U.S. and China, especially during the Trump administration, caused Alibaba to backtrack on its job creation promise and impacted its ability to fully execute its strategy in the U.S.

What are Alibaba's current expansion priorities?

Alibaba's current expansion priorities are focused on Southeast Asia and India, where it has made acquisitions like Lazada. Expansion into Western markets, including the U.S. and Europe, is considered a longer-term goal, with a 5-10 year timeline.

What other business ventures is Alibaba involved in beyond e-commerce?

In addition to e-commerce, Alibaba is involved in cloud computing, digital media, entertainment, logistics services, and is a part owner of the financial services company, Ant Financial.