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Amazon and Alibaba Become “Frenemies”

In a move that has surprised many, Amazon recently (and quietly) set up shop on rival Alibaba Group’s Tmall shopping platform. Amazon’s virtual store launched with little fanfare last Friday, perhaps because they are not particularly proud of having to piggyback on Alibaba to increase access to China’s massive community of online shoppers.

Amazon hopes to “develop new sales channels, offering Tmall consumers a variety of premium imported brands and a quality life backed by Amazon,” said Niu Yinghua, vice president of Amazon China, in an interview with Alibaba’s Alizila news site.

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Jing Wei / China Daily

The Tmall marketplace, a business-to-consumer (B2C) site, is known primarily as a platform for top brand name stores (Burberry, Nike, etc.) to offer their goods for sale. Along with Taobao—Alibaba’s largest consumer-to-consumer (C2C) ecommerce site—the group has roughly 334 million active buyers. Amazon China’s angle is to offer such imported goods as food, household supplies, footwear, and toys, with the hope of tapping into consumers’ continued demand for quality imports. This is something that the main Amazon China website has struggled to do on its own given the competition in China.

According to iResearch, Amazon China only has approximately 1.3% of the market share of online shopping websites, compared to Tmall’s 57.6% share. So perhaps Alibaba feels fully secure in welcoming this partnership, as they are the undisputed king of ecommerce for millions. At the same time, Amazon would be getting more exposure to this market while in return paying Alibaba a cut for purchases made from their Tmall store.

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“Ultimately it’s about being customer obsessed,” says an Amazon China spokeswoman. “The set-up of Amazon International Brands Flagship Store strengthens our position as the go-to agent for vendors who want to bring high quality and authentic international brands to China. And we want to make those available to any Chinese customer. Therefore it makes sense to offer them on multiple distribution channels.”

While Amazon has had difficulties reaching a larger consumer base in China, one advantage the company does have going for it is its distribution network. Tmall serves more as a virtual storefront for many brands as well as other ecommerce sites based in China, but it does not have its own storage and shipping network like Amazon. Amazon, in fact, has a large number of warehouses already built in China plus thousands of self-pickup locations for packages.

Only time will tell how this unexpected partnership pays off.

H/T: Geekwire