E-Commerce can be tough business at times, as a well known U.S. clothing company can attest. The U.S. clothing company was expecting a 20 percent jump in online sales on Alibaba’s Tmall, thanks to the e-commerce giant’s massive reach.
But executives soon learned that what Alibaba gives, it can also take away.
The company refused to sign an exclusive contract with Alibaba, and instead participated in a big sale promotion with its archrival, JD.com Inc. Tmall punished them by taking steps to cut traffic to their storefront. With advertising banners vanishing from prominent spots in Tmall sales showrooms.
The well-known American brand saw its Tmall sales plummet 10 to 20 percent for the year. “Based on our sales record, we should have been in a prominent position, but we were at the bottom of the page,” said the brand’s e-commerce director.
Executives from five major consumer brands told the AP that after they refused to enter exclusive partnerships with Tmall. Traffic to their Tmall storefronts fell, hurting sales. Three are American companies with billions in annual sales that rely on China for growth.
“Alibaba and Tmall conduct business in full compliance with Chinese laws,” Alibaba said. “Like many e-commerce platforms, we have exclusive partnerships with some of the merchants on Tmall.
In its months-long investigation, the Associated Press found that the platforms that control access to Chinese consumers online wield such enormous power that even multi-billion dollar foreign companies can have trouble fighting back.
The competition between Alibaba and JD.com is so infamous in China — and so dirty — it’s been dubbed the “great cat-and-dog war,” after Tmall’s black-cat mascot and JD.com’s white dog.
The Power of Alibaba
Imagine a company twice as profitable as Amazon that each year serves more people than live in all of North America. That’s Alibaba. It claims to be the marketplace for nearly $550 billion a year in sales — more than is sold online in the entire U.S. economy.
Alibaba will rank as the fifth largest economy in the world. “Just say USA, China, Europe, maybe Japan and us,” chairman Jack Ma said.
The company has been aggressively recruiting foreign brands to sell on its platforms, and they have come, in droves. Alibaba said it signed up 60,000 international brands for its massive Single’s Day sale in November, up from 5,000 in 2015.
Alibaba’s retail sales outside of China also are growing fast — they more than doubled last fiscal year to 7.3 billion yuan ($1.1 billion), or 5 percent of total revenue.
America remains at the heart of Ma’s ambition. He told president-elect Donald Trump in Jan. 2017 that he would create a million U.S. jobs by facilitating trade between businesses in the U.S and consumers in China — a pledge he now says is imperiled by the brewing trade war between the two countries.
Main Source – Erika Kinetz – The Associated Press via Bloomberg