Want access to Chinese shoppers? Alipay clears the way
Alipay is offering Western retailers access affluent Chinese e-commerce shoppers.
The UpTake: Alipay, the payment platform that powers Alibaba, is offering growth-hungry Western retailers something they may find hard to refuse: access to the growing number of middle class and affluent Chinese e-commerce shoppers in cities like Shanghai and Beijing.
First, China’s e-commerce giant Alibabacame to U.S. shores for an initial public offering that demonstrated the rising influence of the Chinese economy in global retail. Now comes Alipay, its online payment platform, which launches a program today called Alipay ePass, offering American and other Western retailers access to China’s coveted middle-class and luxury consumers.
The ePass program addresses often troublesome issues such as currency exchange, customs, and shipping logistics for Western retailers seeking to cater to Chinese consumers who want to shop their sites online, said Alipay U.S. president Jingming Li, who spoke to reporters in New York on Tuesday afternoon. On top of logistical issues, Alipay will provide marketing assistance to U.S. retailers that are trying to reach Chinese consumers without having to physically open stores in China.
“We’ve been there for 14 years: we know the customers, know their marketing channels,” he said. “We know how to turn a visitor into an actual shopper.”
Uber, the San Francisco-based car-service startup, already uses Alipay's technology, which has been in beta testing for some Western retailers. Gilt Groupe, the fashion and lifestyle e-commerce site based in New York City, will begin using the ePass platform at the end of this month. Chinese consumers spent $33 billion on overseas websites last year, according to Alipay, which says that figure has been growing exponentially. To put that in perspective U.S. consumers spent $40 billion on e-commerce domestically.
Li said that Alipay is courting any retailers that want to do business globally, including e-commerce marketplaces. He would not comment on whether he has had talks with Amazon. Nor would he speak of any potential details with eBay, which is spinning off its PayPal payment unit and could conceivably partner with Alipay, its Chinese counterpart and rival.
“We’re happy to work with anyone in the United States who wants to sell directly to the Chinese consumers,” he said.
What happens when a retailer signs up to offer Alipay? First the retailers install it as an API on their websites. The retailers also choose the currency that they want sales to be converted into. Chinese shoppers visiting these U.S. e-commerce sites, whether via a desktop PC or mobile device, will be recognized as having a Chinese IP address, and will be greeted by a message that offers the chance to pay with Alipay.
It’s unclear how much Alipay, which has most of its workers in China but offices in Santa Clara, California, where Alibaba is also located,will charge retailers for these services. It will take a percentage of sales, but Li said the percentage will vary and he declined to provide a range.
Alipay has 800 million accountholders in China, who use the platform to pay bills and shop. Among the 500 million e-commerce shoppers in China who go shopping online “it’s hard to find people who do not have an Alipay account,” said Li, who is charged with growing Alipay’s presence globally. (Worth noting: the Wall Street Journal recently cited iResearch data that says Tenpay has about 20 percent of the online payments market in China, compared with almost 50 percent for Alipay. Tenpay is an affiliate of Tencent, which is Alibaba's e-commerce rival in China.)
“The e-commerce market will be a $650 billion market in 2020,” Li says. “Cross-border and global part of it is going to be a significant part of it. “
The potential to bring those Alipay accountholders to new markets is big, if the brick and mortar habits of Chinese tourists are any indication. The company estimates that in 2012, Chinese consumers took about 100 million trips outside China to cities such as Paris and New York, where they discovered retail brands in physical stores that they liked but found difficult to access online after they returned home.
One of the issues is that making purchases online at such sites requires Chinese consumers to have an international credit card, which can be difficult to get approval for. Similarly, shipping to China can be a tough proposition because of difficulties of getting through customs as the Chinese government is rigorous about items coming inside its borders from overseas. These are issues that Alipay, as a company with experience with the rules and regulations in China, can readily address, he says.
Alipay is working with a number of partners to get past these barriers, involving shipping and such, but Li wouldn’t say which ones.
Will this appeal to U.S. retailers? If they’re looking for developing markets like China for growth, it well may. Total U.S. retail sales in the United States topped $4.53 trillion in 2013, an increase of 4.2 percent, but it was e-commerce that accounted for a significant portion of that growth, up 16.9 percent in 2013—or nearly $40 billion— according eMarketer. That percentage could grow significantly with access to China, where according to the Alipay team, shoppers are eager for U.S. goods, and not just the best-known brands.
Alibaba Group, which legally became a separate company from Alipay in 2011, did a big crackdown on counterfeits on its e-commerce site before its initial public offering, but knockoffs have long been a problem in China. For the young Chinese professionals who typically speak English and were educated in the West, the ability to access Western brands and ensure that they are getting authentic goods is paramount, Li said. While these consumers tend to live in bigger cities like Beijing and Shanghai, more may live in smaller Chinese cities too.
In a survey of Chinese consumers across the country, 80 percent said they had gone shopping overseas or gone online to do research into non-Chinese retailers. Some 25 percent of those who have never done so would like to.
“A lot of very good names are not known by Chinese consumers,” Li said.
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