Tmall to offer customers $47m in rebates

Alibaba Group Holding Ltd is taking a new approach to boosting sales online: paying its customers to cut their prices.

China's biggest e-commerce company plans to spend 300 million yuan ($47 million) on summer promotions for goods ranging from iPhones to televisions to air-conditioners sold through its Tmall. The website, which operates a marketplace similar to eBay Inc's, is subsidizing its vendors' deals for their customers.

The program steps up Alibaba's battle with online rivals 360Buy.com and Tencent Holdings Ltd for China's Internet shoppers, estimated at 193 million by Boston Consulting Group.

"They are taking money out of their own pockets and helping clients slash their prices to steal users from 360Buy," said Michael Clendenin, managing director of the research company RedTech Advisors. "It's a very aggressive move."

Under the program, which is focused on electronics, vendors on Tmall can apply to the Alibaba unit for subsidies to make up for discounts. Alibaba may also pay rebates straight to consumers.

Luring shoppers to Tmall is a key part of Chief Executive Officer Jack Ma's plan to tap into booming online sales in China. Alibaba is seeking debt and equity financing to help fund its planned $7.1 billion share buyback from investor Yahoo! Inc.

"Today, people think of Alibaba as an e-commerce company, an Internet empire," Ma said on Thursday. "It's not an empire, it's an ecosystem."

Ma said the company could sell shares in an initial public offering within five years, adding that he is confident Alibaba can withstand new challenges. His Chinese e-commerce rivals, he said, have mostly copied US Internet business models.

"Copycats never survive," he said.

'Best position'

Tmall accounted for 37 percent of Chinese business-to-consumer e-commerce in the first quarter, more than double the 17 percent held by 360Buy.com, the No 2 player, according to the research company Analysys International. Suning Appliance Co, Tencent, and Amazon.com Inc each have about 2 percent, the researcher said.

"Alibaba is probably in the best position right now of anybody - they have the platform in place, and the critical mass of eyeballs," said Ben Cavender, an analyst at China Market Research Group in Shanghai, which advises retailers.

China has more consumers buying online than the United States, and the value of the country's e-commerce market may triple, to $364 billion, by 2015, Boston Consulting Group predicts.

With more Chinese consumers shopping online, RedTech expects e-commerce to account for 5.3 percent of the nation's retail sales this year versus 4.9 percent in the US.