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Can China’s Alibaba and succeed in America?

With cheaper goods and a large bankroll to get things started, leading Chinese e-commerce sites Alibaba and could make a splash in America and give giants like Amazon stiff competition.

5 min read

Brands & Campaigns



Alibaba and are China’s two largest retail e-commerce companies, holding a combined market share of 75%. Their battle for e-commerce supremacy is spreading to new markets like Southeast Asia, and entering mature markets such as the US may be in the works.

While Alibaba has made lighthearted attempts to enter the US market in the past, earlier this year’s founder Richard Liu boldly stated his plans to enter the US market by the end of the year, having inked strategic global partnerships with the likes of Google and Walmart. Despite the fact that Alibaba is more well-known in the US,’s direct-retailing business model makes it much more likely to pose a serious threat to Amazon, the dominant player in the US e-commerce market.


Alibaba and hold a combined 75% share of China’s retail e-commerce market


Alibaba’s asset-light model is a disadvantage

Alibaba has historically acted as a marketplace that connects third-party sellers and buyers, leveraging technology to match products with buyers and taking a cut of every transaction. Alibaba’s platforms Taobao and Tmall, for the most part, do not buy and hold inventory. Although Tmall has started to branch out into direct retailing, its weakness lies in logistics. Its logistics network Cainiao leverages technology to allocate deliveries among third-party couriers, but Alibaba does not have its own logistics workforce to deliver packages. As a result, it cannot provide a faster delivery experience, with packages taking an average of 2-5 days to reach customers. In comparison, competitor delivers packages in 1-2 days and Amazon delivers to Prime customers within two days.

This asset-light model places Alibaba at a disadvantage against Amazon, which has its own proprietary logistics network of warehouses located close to consumers and benefits from strong economies of scale. While Amazon does use third-party couriers, such as USPS, FedEx, and UPS, it is rapidly building out its own courier force in large cities with Amazon Flex. In a hypothetical scenario where Alibaba were to enter the US market, it would be very difficult for Alibaba to undercut Amazon on price and also provide affordable, quick delivery services that match Amazon’s.

After a failed attempt to enter the US market in 2014 through an investment in e-commerce marketplace 11 Main, Alibaba has focused on soliciting US merchants to sell to Chinese consumers on its Tmall Global website. Although there have been rumors of Alibaba partnering with US supermarket giant Kroger, details have been sparse. Alibaba has limited its involvement in the US market to minority investments, holding a 37% stake in marketplace OpenSky and a 9.2% stake in children’s apparel site Zulilly.’s direct retailing approach could threaten Amazon’s business model is more similar to Amazon’s direct selling business, with nearly 92% of its revenues coming from direct online sales. stocks its inventory across a vast network of nearly 500 warehouses throughout China, and has its own logistics force of over 65,000 warehouse workers and delivery couriers. Its strong in-house logistics capabilities enable it to dispatch goods much more efficiently than Alibaba, as holds inventory in warehouses close to its consumers. During this year’s 618 shopping festival in June,’s annual sales event, 90% of its goods were delivered within two days, a feat that bests Amazon’s two-day delivery program.

Yet replicating this business model in the US will prove to be extraordinarily expensive. Founder Richard Liu wants to provide same-day delivery in the US, but this involves operating warehouses and holding inventory across a vast market where blue-collar wages for logistics workers are significantly higher than those of China’s.’s partnership with Walmart could give it access to a large scale logistics and distribution network on par with Amazon’s, but execution would have to be flawless. Even Amazon, which is known to be brutally efficient, hasn’t come close to providing same-day delivery outside major US cities. That said, is setting up an office in Los Angeles. To fund its expansion, in February it sold a 15% stake in its logistics arm for $2.5 billion.’s Mr. Liu is bold and confident, having clawed his way to a 16% share of a market where Alibaba was once thought to have been unbeatable. He wants half of’s revenues to come from overseas within 10 years, and plans to start by helping quality Chinese brands such as Xiaomi sell their products overseas at prices competitors can’t beat. Its strong network within China and strategic partnership with Walmart could enable it to source bulk goods at a lower price than Amazon can.’s partnership with Google also gives it data that enable the company to better understand US consumers as well. As we enter the second half of 2018, American consumers shouldn’t be surprised to see knocking on their doors soon.


Franklin Chu, managing director of Azoya USA, is an expert in China cross-border e-commerce.  Franklin also serves as President of Sage Capital Group Inc. a private equity and investment management firm and is a graduate of Yale University and Harvard Business School.

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