Can US SMEs afford to log on to Alibaba?

Alibabafounder Jack Ma (center) rings the bell to open trading at the New York Stock Exchange on Sept 19. [provided to china daily]

Analysts see potential, pitfalls in China's online shopping market, report Amy He and Paul Welitzkin in New York, and Yang Ziman in Beijing. 

China's e-commerce market－specifically Alibaba's online shopping site, Taobao－isn't on Rob Wray's radar right now, but he says it might be in two years.

"China … is a low priority due to our experiences with Chinese banking and business complexity," said the Baltimore businessman, who owns Mp3Car, a small company selling electronics on Amazon and eBay in the United States. "Our focus is on building in the US, where we're based, and in other rapidly expanding markets that are less complex to enter."

It's not ideal, but Jack Ma may be happy with that.

Ma, the chairman of Alibaba, traveled to New York and Chicago this month, giving speeches and writing newspaper opinion pieces to urge small and medium-sized enterprises in the United States to consider using his e-commerce platforms, Taobao and Tmall, to reach Chinese shoppers.

"Today, China's middle class is almost the same size as the US population. We think that in 10 years more than half a billion Chinese people will be middle class," Ma told an audience at New York's Economic Club on June 9. "The demand for good products, good service, is so powerful. …We need more American products."

His target is to get 10 million SMEs from around the world using Taobao and Tmall, and China's other major e-commerce players, such as JD.com, Dangdang and Jumei, will have equally ambitious plans.

Although analysts and industry insiders agree there are terrific opportunities here for US businesses, opinions are divided on whether the potential profits outweigh the potential pitfalls.

According to Eguan, a business consultancy in Beijing, online cross-border sales were worth more than 80 billion yuan ($13 billion) in 2013, up 75 percent year-on-year. The company predicts, by 2018, Chinese consumers will spend 1 trillion yuan on purchasing products from overseas.

"The Chinese market is becoming the center of the business world in terms of how consumers are using e-commerce platforms to buy products," said Oliver Rust, managing director of Nielsen China. "E-commerce has become bigger and broader. It's a significant market."

China now has about 360 million online shoppers and a sales value of 2.8 trillion yuan, he said.

When it comes to separating the major players, e-commerce expert Wang Xiaoxing said Alibaba stands out because it is more of an intermediary. Individuals and companies have used Taobao to sell everything under the sun since it launched in 2003. Tmall, which opened five years later, is more used by companies offering relatively higher quality products.

"Alibaba doesn't own or deliver any product. It's a collection of independent stores," said Wang, an analyst for Beijing consultancy Analysys International. "Reaching out to SMEs in the US is natural for Alibaba because serving small businesses is built into its genes.