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Alibaba Dips Toe in Developing Markets

aliexpress_logoFinally there are some interesting news bits on e-commerce leader Alibaba that don’t involve its highly anticipated IPO, including a push into developing markets and a new tie-up with global payments giant MasterCard. Of the two bits, the former is more intriguing because it represents a major move for the company outside the Chinese-speaking world for its highly successful consumer-oriented e-commerce services. The latter tie-up is interesting because it involves a big name like MasterCard, even though actual details are scarce and probably won’t get worked out until some point in the future.

Let’s start with the global move, which will see Alibaba’s overseas-oriented AliExpress service try to develop consumer-focused B2C services in developing markets, including Russia, the Middle East, Eastern Europe, and South America. AliExpress is an English-language platform whose main users are small businesses seeking to sell their products to consumers. This new push will see the platform initially target small Chinese businesses looking to sell their products to consumers in some of these developing markets.

Alibaba’s decision to focus on buyers in developing markets looks like a prudent one, since many of these places have similar characteristics to its home China market. The main problem I would see is the fact that AliExpress is an English-language platform, even though none of the markets being targeted use English as their native language. But presumably Alibaba could quickly add other languages to the platform if the service develops in any particular markets.

This push is part of Alibaba’s global aspirations, which have been relatively limited to date and have had mixed results. The company’s original B2B platform, Alibaba.com, already has a large international customer base. Alibaba didn’t fare as well in Japan, where last year it shuttered a local version of its Taobao B2C service that was operating on Yahoo Japan’s platform. The company is also exploring other Chinese-language markets, with Taobao operating e-commerce services for users in Hong Kong and Taiwan.

As I’ve said above, I like this particular move with AliExpress as it does target the kinds of markets that Alibaba knows and understands best rather than very different markets like the U.S. or Japan. The international success of B2B site Alibaba.com has proven there’s a global market for businesses buying from other businesses, which isn’t hard to understand since that’s what constitutes most of global trade. Whether or not there’s a similar major global market for consumer-oriented services is another question, and we’ll probably see in the next couple of years whether this move by AliExpress succeeds.

From AliExpress, let’s look quickly at the new MasterCard agreement. As I said at the start, the announcement is quite general, and says the two sides have signed a memorandum of understanding (MOU) to explore future collaboration in e-commerce. At least in theory, this tie-up looks very complementary. Alibaba’s AliPay is one of China’s leading electronic payments services, while MasterCard operates one of the world’s biggest electronic payment networks. Thus the two companies could benefit from each others’ strengths to offer customers an e-payments network with truly global reach.

While all of this sounds promising, we’ll really have to wait and see if anything substantial develops from this deal. China is notoriously protective of its domestic e-payments market, which is now mostly dominated by Chinese names like AliPay and homegrown giant UnionPay. Meanwhile, MasterCard itself and global rival Visa have a reputation for their own anti-competitive practices, which resulted in the pair paying $7.25 billion last year to settle an antitrust complaint brought by retailers.

Regardless of whether or not this latest tie-up goes anywhere, I do have to say that I like that fact that Alibaba is exploring more global initiatives, both in partnerships and also on its own. I would probably give either of these latest initiatives a 50-50 chance of success; but at least they show that Alibaba is looking for more growth opportunities outside of China, as it seeks to someday become a major player in the global e-commerce market.

Doug Young lives in Shanghai and writes opinion pieces about tech investment in China for Techonomy and at www.youngchinabiz.com. He is the author of a new book about the media in China, The Party Line: How the Media Dictates Public Opinion in Modern China.

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