In 2005, Meg Whitman said, "Whoever wins China, will win the world" as eBay invested $100 million in China. Five years later, it looks like Meg could not have been more right. eBay lost to Alibaba in China, and now it is Alibaba's turn to invest $100 million in the U.S., acquiring two major eBay vendors in the last three months.
Alibaba.com CEO David Wei spoke to AuctionBytes on Tuesday after the company announced it had acquired eBay service provider Auctiva and talked about what this news would mean for online merchants. The Chinese ecommerce firm had also acquired Vendio in June and is using the platform to encourage sellers to source product from its AliExpress.com marketplace.
A term Wei used throughout the interview was "enabler." He said Auctiva and Vendio are enablers that save merchants time and help them be more efficient. By helping their sellers source products on AliExpress.com, both companies could enable merchants to improve margins between 30 - 40 percent.
Auctiva is twice as big as Vendio in many respects. Auctiva drives over $5 billion in GMV annually compared to Vendio's $2 billion. Auctiva has 170,000 active users compared to Vendio's 80,000 users. And because Auctiva is more sticky (merchants spend more time on the site), Wei believes sourcing integration will happen faster there as are merchants are exposed to more sourcing opportunities.
Consolidation
Speaking about Vendio and Auctiva, Wei said Alibaba would keep both brands, and said they would each operate independently. Both companies provide some of the same tools and services to online sellers. When asked about consolidation, Wei said each company would decide which tools they should continue in the future. "That will be Mike (Effle) and Jeff (Schlicht)'s call."
Becoming a Marketplace Not a Priority
Both Vendio and Auctiva offer services that allow merchants to create their own ecommerce websites. Asked whether Alibaba would aggregate those listings together under one URL, Wei said that was not a priority. "It depends on whether we can create value for consumers."
Wei said every merchant benefits from multi-channel selling, and that is something Alibaba.com supports. Alibaba.com, Auctiva and Vendio are experienced at enabling merchants, not consumers.
"The last thing we will do is become a channel for the merchants. We'd rather be an enabler for multichannel distribution, an enabler to improve margin, and an enabler to improve efficiency for the merchant."
Dropshipping: Build, Buy or Partner
AuctionBytes asked Mr. Wei about Alibaba.com's interest in drop-shipping services. Reducing inventory risk is absolutely something Alibaba.com is looking for and has observed merchants doing virtually. "We're very open to build, buy or partnering. Dropshipping is something we believe in in the bigger picture. The B to B to C model should have it."
eBay and Amazon
Wei said eBay and Amazon should be happy that Alibaba is helping their merchants improve their margins and eventually helping their consumers. "We have not received any negative feedback from the marketplace operators," he said.
John Donahoe will have an opportunity to let Alibaba know exactly how he feels about the acquisition of two of its major third-party vendors. He's scheduled to present a keynote address at Alibaba's annual conference in Hangzhou, China in September on the future of global ecommerce and the opportunities and challenges facing small businesses entrepreneurs.
Fighting Walmart
Wei said small merchants are often jealous of the sourcing power of companies like Wal-Mart, which have taken advantage of globalization and hurt local merchants. Now small merchants can use globalization themselves to fight against the big companies like Wal-Mart, he said.
Merchants love the inventory Alibaba.com can help provide, he said, but need some courage to take the first step towards importing goods. With Auctiva and Vendio working together, the service is assured, instead of "googling" a supplier in Asia, they can expect a different experience.
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