Alibaba Opens the Door to American Small Businesses

July 23, 2019

By Carlo Versano

Alibaba Group ($BABA) is making its biggest foray into the huge U.S. business to business (B2B) market, announcing Tuesday that it will allow American small businesses to sell their wares to other businesses around the world on the flagship Alibaba platform for the first time.

"Our mission is to make it easy for all businesses everywhere to do business anywhere," said John Caplan, head of Alibaba's North American B2B unit in an interview on Cheddar announcing the expansion.

Alibaba, which started as a "yellow pages of the best factories in China" and has since grown into a business to consumer (B2C) and B2B e-commerce behemoth, enters the U.S. B2B market at a time of cutthroat competition for small business dollars from the likes of Amazon ($AMZN) and others. Previously, U.S. businesses were only able to purchase goods and services via Alibaba.com.

The Alibaba platform gives small businesses "everything [they] need to operate or source goods globally," Caplan said. Selling on Alibaba gives businesses a storefront with CRM capability and demand, "all in one place."

Alibaba monetizes the platform through a roughly $2,000 membership fee, plus extra for advertising opportunities, Caplan said, rather than taking a cut of each sale. That model could be beneficial to small businesses worried about B2B costs cutting into their margins. (By contrast, Amazon takes a cut of each item a third-party merchant sells).

"We are not a retailer," he said. "The value chain in B2B is more complex, but it's also a far bigger business."

Bigger by an order of magnitude, in fact. The B2B industry is worth nearly $24 trillion, according to the U.S. International Trade Commission, compared to just under $4 billion for the B2C industry.

Though Alibaba dominates e-commerce in China, it is still relatively unknown to many American consumers and small businesses. Caplan acknowledged that there is "marketplace confusion" here with regard to Alibaba's businesses, but noted that the U.S. still makes up a full third of the company's global market of buyers. And with more than 70 percent of American small businesses still without a digital presence, the opportunity for Alibaba to become the one-stop shop for manufacturers, distributors, and wholesalers is massive, Caplan said, opening them up to a global marketplace of buyers who were previously unattainable.