On Thursday of last week the Alibaba group, a collection of Chinese-owned online marketplaces, opened its initial public offering on the New York Stock Exchange and quickly set records as the largest IPO in the exchange’s history. While there has been much discussion over the last 12 months or so regarding what Alibaba’s IPO would mean for ecommerce companies in the U.S., a number of other outlets have also taken a look at one of Alibaba’s subsidiaries – Alipay – that has integrated escrow into the backbone of its payment services. But before we get into what that integration of online escrow could mean for other ecommerce payment methods, let’s take a look at the four main companies that comprise the Alibaba group.
AliPay – AliPay is the number one method of payment for online goods in China. Essentially a copycat of PayPal, Alipay’s major differentiation is that it offers an escrow service – unlike PayPay – as a means to boost confidence in its platform for buyers and seller looking to enter into a new market.
Alibaba.com – This is the Alibaba group’s B2B powerhouse. The site connects manufacturers direct to purchases for any myriad of products, and is the largest business-to-business platform in the world with over 7 million retailers.
TMall – Essentially a way for retailers to sell direct to consumers, TMall has been the site used to introduce major like Nike and Apple to the Chinese market. The most similar business operated here in the U.S. would be Amazon with its brand-specific storefronts.
Taobao – An online auction site similar to eBay, Taobao is the C2C arm of the Alibaba group. With auctions that allow for reserve prices and regular bidding, this consumer-to-consumer juggernaut uses Alipay as its payment platform of choice.
So What Does Alibaba’s IPO Mean?
Last year alone, Alibaba’s group of companies transacted nearly $300 billion in goods – more than the entire U.S. ecommerce segment processed for 2013. Aside from the fact that Alibaba group’s IPO was also the largest in NYSE history, the company’s entrance into a U.S. exchange could signify an interest in expanding their business footprint beyond China’s borders.
Should AliPay also begin to establish itself in western markets it could also mean the buoying of escrow to a more prominent place among other payment methods – a process now sometimes seen as an afterthought despite the fact that escrow offers exceptional financial protections for online transactions as compared to current payment methods. To truly compete on an even playing field, it would be great to see another online payment processor, like PayPal, integrate escrow to the same level that AliPay has. As they say, a rising tide raises all ships, and lifting U.S.-based escrow companies to a more prominent level would help both payment processors and consumers alike.
The easiest way for ecommerce companies to protect themselves against a potential onslaught of competition from Alibaba’s four major sites would be to mimic the offerings of those sites just as Alibaba has mimicked other successful .coms. Look no further than 11 Main, the first site the Alibaba group has launched geared for a western market, for an example of how their teams are beginning to shape storefronts. To take a page from Alibaba’s playbook, U.S. ecommerce retailers could simply:
- Focus on a way to connect manufacturers and purchasers
- Offer secure and reliable payment methods
- Consider adding escrow as an accepted and/or preferred method of payment
- Make international transactions easier to complete
- Keep a strong consumer focus
With the five tactics mentioned above, any advantage offered through one or all of the Alibaba-owned sites is negated. While the Alibaba group is no tame kitten, the elements of business in which they excel are all easily attainable for other web-based businesses with talented dev teams, or access to agile and capable partnerships.