By Juro Osawa
China's Alibaba Group Holding launched a U.S. shopping website,
in what could be its biggest foray into the home turf of e-commerce
giants Amazon.com Inc. and eBay Inc.
The 11 Main marketplace hosts more than 1,000 merchants in
categories such as clothing, fashion accessories and jewelry as
well as interior goods and arts and crafts and it plans to keep
adding more, the company said.
11 Main is being launched as Alibaba, China's largest e-commerce
company, is preparing to go public in New York in what could be one
of the largest initial public offerings in U.S. history. Other than
11 Main, Alibaba has been stepping up its deal activities in the
U.S. over the past year, investing in a range of U.S.
companies--not just in e-commerce, but also in other areas like
mobile messaging.
The shopping section of 11 Main is currently available only to
customers who first sign up and get an email invitation. 11 Main
declined to give a time frame as to when the site will be fully up
and running.
Building a popular site from scratch won't be easy: Consumers
already have a number of options to choose from--not just Amazon
and eBay but also niche players like Gilt Groupe and Etsy as well
as e-commerce sites run by traditional retailers like Wal-Mart
Stores Inc.
Still, 11 Main sees demand from small U.S. merchants who aren't
quite satisfied with selling their products on existing
marketplaces.
"There are many small shop owners that are looking for broader
platforms, but when they look at the broader platforms, those are
not necessarily structured to support their brands or their
identities," said Mike Effle, 11 Main's president, in an interview.
Mr. Effle declined to give any numbers for the company's targets
for growth. "Of course, we would love to be an everyday shopping
destination."
It is likely to be hard for Alibaba and 11 Main to pose a major
threat to established players in the U.S. unless they make major
acquisitions, said Forrester Research analyst Zia Daniell Wigder.
With 11 Main, Alibaba "is attempting to break into a developed
e-commerce market with well-established players and mature growth
rates," Ms. Wigder said. "It's far easier to be disruptive in an
early-stage market where the landscape of leading players is still
in flux and growth rates are high."
11 Main--developed by Alibaba's two wholly owned U.S. units,
Vendio and Auctiva--is trying to attract sellers by making the
platform less expensive for merchants. The site charges a
commission rate of just 3.5%--about half or one-third of what most
other major U.S. shopping sites charge.
At the same time, 11 Main says it is carefully screening the
merchants to make sure the ones who join the site meet certain
criteria in terms of product quality, customer service and even the
quality of the photos they post online.
"We set a very high bar," Mr. Effle said. "Sellers want a place
that can elevate their brands." He said 11 Main has received
thousands of applications so far, and it has rejected a fair number
of applicants.
Susan Berry, who runs an online retail business called Oshun
Spirit that sells natural skin-care and beauty products, has joined
11 Main. She has been an eBay seller, off and on, since 2001, but
is worried about the risk of relying too heavily on one site. "I'm
always looking for alternatives to eBay," she said.
Ms. Berry, who is based in New Hampshire, said she has been told
by people from 11 Main that the company has set aside an aggressive
marketing budget to make the new site more recognized among U.S.
consumers. "I've seen many new sites open over the years but none
of them have really gained traction," said Ms. Berry.
An 11 Main spokeswoman said the company has a "robust marketing
plan" to support the growth of the shops featured on the new site,
but declined to share specific plans or how much it plans to spend
on advertising.
It is still unclear whether 11 Main will actually generate any
buzz, but Ms. Berry says she is more hopeful this time, in part
because Alibaba's deep pockets are behind 11 Main. "I've been down
this road before and I'm usually skeptical, but this time I'm
cautiously optimistic."
Alibaba, which dominates e-commerce in the world's largest
Internet market, dwarfs U.S. counterparts in terms of the value of
transactions it handles. In 2013, the combined transaction volume
of its consumer shopping sites in China reached $248 billion,
according to its IPO filing last month. That is triple the size of
eBay and more than double the size of Amazon.
Alibaba owes its massive scale to the sheer size of the Chinese
market, home to more than 600 million Internet users. Most of the
consumers using its shopping sites are in mainland China, though
the company is trying to expand in Hong Kong, Taiwan and Southeast
Asia.
"The world is not just China," Joe Tsai, Alibaba's executive
vice chairman, said in an interview in February. "We do think of
ourselves as eventually becoming a more global company."
Alibaba's view on the U.S. market is "very long-term focused,"
said David Rosenblatt, Chief Executive of 1stdibs, a New York-based
luxury e-commerce company in which Alibaba has invested $15 million
earlier this year. Given its experience of building a dominant
marketplace in China, "Alibaba is not just another company," Mr.
Rosenblatt said. "It will be an important player in the U.S."
Last year, Alibaba set up a dedicated U.S. investment team in
the San Francisco Bay Area. The team, headed by former Liberty
Media executive Michael Zeisser, has since struck a string of
deals. In October, Alibaba led a $206 million investment in
ShopRunner Inc., an Amazon.com Inc. rival that offers unlimited
two-day shipping from U.S. retailers. Earlier this year, the
company said it had bought a minority stake in TangoMe Inc., a
Silicon Valley startup behind the Tango mobile-messaging
application, for $215 million.
Write to Juro Osawa at juro.osawa@wsj.com
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