By Juro Osawa in Hong Kong and Eva Dou in Beijing
Alibaba Group Holding Ltd.'s decision to sell its U.S. online
shopping site to a U.S. rival highlights the challenges facing the
Chinese electronic-commerce company in mature Western markets
dominated by competitors such as Amazon.com Inc. and eBay Inc.
On Tuesday, Alibaba said it is selling 11 Main, an online
marketplace that started only a year ago, to OpenSky, an
online-marketplace operator based in New York. In exchange, Alibaba
is taking a 37.6% stake in OpenSky. In another deal announced
Tuesday, Alibaba and its financial-services affiliate, Ant
Financial Services Group, are together investing nearly $1 billion
into an Alibaba food-delivery booking service in China called
Koubei, hoping to turn it into a local services platform to
challenge similar apps backed by rival Tencent Holdings Ltd.
The two deals highlight Alibaba's priorities at a time when
earnings are slowing down and competition intensifies at home.
Alibaba, which went public in the U.S. in September in a $25
billion initial public offering of stock, might pursue
electronic-commerce opportunities in the U.S. in the long run, but
for the time being, analysts and investors are paying more
attention to Alibaba's efforts to solidify its strong position in
the Chinese market. Alibaba holds roughly 80% of China's online
shopping market.
When California-based 11 Main first made its marketplace
available on an invitation-only basis in June 2014, the company
said it had a "robust marketing plan" to support growth for shops
featured on the site. Some U.S. merchants who opened their stores
on 11 Main said they were counting on Alibaba's deep pockets to
make the marketplace successful.
But 11 Main struggled to gain attention and support from Alibaba
headquarters in China, according to a person familiar with the
matter.
While 11 Main's management will be integrated into OpenSky, 11
Main's website will remain separate from OpenSky for now, Alibaba
said Tuesday, without disclosing financial details.
Alibaba senior executives have said in the past that the
company's international strategy would focus primarily on helping
overseas merchants and brands sell their goods to Chinese
consumers, rather than expanding electronic-commerce services that
compete head-on with the likes of Amazon in Western markets.
"The key issue is whether we are going to have something in the
U.S. market that will really target U.S. consumers. We think in the
long run that's an interesting market to us. But today, our focus
is very much on cross-border activities" that connect U.S. sellers
with Chinese consumers, Alibaba Executive Vice Chairman Joseph Tsai
said in a November interview.
Apart from 11 Main, Alibaba has increased its presence in the
U.S. market as an investor. In March, Alibaba invested $200 million
in U.S. smartphone messaging application Snapchat Inc. Alibaba's
other U.S. investments have included TangoMe Inc., a maker of
video-call apps, mobile search provider Quixey Inc. and
ride-hailing service Lyft Inc.
Alibaba is also seeking investment opportunities in emerging
markets. In India, Alibaba and iPhone assembler Foxconn Technology
Group--formally known as Hon Hai Precision Industry Co.--are in
talks to jointly invest about $500 million in Indian
electronic-commerce startup Snapdeal.com, people familiar with the
matter said this month.
While Alibaba's investments in overseas startups might continue,
the Chinese company's immediate opportunities for growth are in the
domestic market.
In China, Alibaba and Tencent, a social-networks and games
company, are beefing up their mobile offerings to attract
smartphone users.
A significant battlefield is China's rapidly growing
online-to-offline or O2O market, in which consumers use smartphone
apps to book things including meals, taxi rides and movie
tickets.
In the latest deal, Alibaba and Ant Financial will each invest
three billion yuan ($483 million) in Koubei--which means
"word-of-mouth reputation" in Chinese--for 50% equity stakes in a
new joint venture, the companies said Tuesday. Koubei has been a
"dormant brand" under Alibaba, but will now be the central hub for
the company's O2O services, a spokeswoman for Alibaba said.
The company's Taodiandian food-ordering service will be moved
under the Koubei brand. Online services offered by Ant Financial
such as hospital bookings will be added gradually to help expand
Koubei's services beyond food.
Still, it is unclear whether the investment is enough to turn
Koubei into a formidable competitor. Tencent is the current leader
in China's food-delivery market, with stakes in restaurant-review
site Dianping and food-ordering app Ele.me, said Forrester analyst
Xiaofeng Wang.
Tencent invested in Ele.me, which means "Are you hungry?" in
Chinese, in January by participating in its $350 million
fundraising round.
Write to Juro Osawa at juro.osawa@wsj.com and Eva Dou at
eva.dou@wsj.com
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