China retail: e-payment platforms now a gateway for US merchants?

By April 27, 2015

With its payment platform Alipay, e-commerce giant Alibaba is now helping US merchants to gain a foothold in a Chinese retail market that has long been off-limits to international businesses.

Mobile payments, which, according to a recent report from Forrester Research, will account for 54% of all online sales by 2018, are an area that is full of promise for the tech giants who are striving to outdo each other with ingenious ideas designed to provide innovative solutions for this market. Among the digital payment platforms already up and running are ApplePay, which is expected to account for 14% of the Brand’s total revenue in 2017; and PayPal, which today boasts 162 million active users in 203 countries. Alongside these, though, it is impossible to ignore the glittering rise of China-based payment solution Alipay, whose figures speak for themselves and may be giving the US players cold shivers. In fact the various constituent parts of the Alibaba ecosystem – first and foremost Alipay – and those of its competitors, may potentially serve as a commercial bridge between China and the United States, providing US companies with a foothold in this colossal market.

The vast potential of Alipay linkup

Jingming Li, Alipay’s President & Chief Architect in the United States, outlined the enormous success of Alipay at this year’sTransact'15, the flagship event hosted by the association of electronic transactions players, held in San Francisco in late March/April. The Alipay application, which is not only compatible with Alibaba services such as Tmall and Taobao but also those of third-party retailers, is now used by some 300 million Chinese to carry out transactions worth a total of €80 million every day.

Alibaba CEO Jack Ma hinted at a Wall Street Journal live event last year that he was interested in cooperating with US players, specifically Apple, without revealing any precise details of how the linkup might be done. A partnership of this kind would represent a tremendous advance for the payments industry.  Meanwhile, the Chinese e-commerce giant launched last October its Alipay ePass suite of products, which combines payments, logistics and marketing services designed to enable US merchants to sell products directly to Chinese consumers from their existing online retail site.  Explaining the move, Jingming Li underlined that “having a digital presence is a first step but it’s crucial to also have a payment method configured to suit Chinese consumers.”  

If any illustration were needed of the vast purchasing power of Chinese shoppers and the income they could generate for international retail businesses, Gilt provides an excellent example. Founded in 2007 and having raised €286 million in capital, this online high fashion apparel flash sales specialist lost no time in integrating the new Alipay ePass option into its online checkout system in October, thus making it easier for Chinese customers to purchase top designer brands. This move has led to a 693% hike in sales in six months. Other players have also seized the opportunity offered by Alipay to gain entry to the Chinese market. US store chain Macy's conducted a pilot test in partnership with Alipay ePass around Black Friday 2014. In a more recent move announced by Jingming Li at the Transact'15 event, Delta Airlines became the first US airline to offer Alipay to their Chinese passengers.

Bridges to China for US business

Growth in cross-border retailing is actually one of the main trends for mobile payments in 2015 and in this context Alipay and its suite of services looks like being an indispensable tool for US e-tailers going forward. It is of course no less true that now that digital platforms have created a sort of global shopping mall, Alibaba’s competitors also represent potential gateways to the Chinese market. First and foremost there is Tencent with its WeChat messaging platform, a savvy mix of social network, payment service and e-commerce website that numbers over 400 million active users. This player has taken the concept of ‘social network’ to a new level, offering its users a real multi-function platform.

Baidu, Alibaba’s number 2 competitor, which is one of the major investors in alternative taxi service startup Uber, is Google’s main rival as a search engine provider in China.

Any company looking to win over Chinese customers will therefore need to carefully study the full range of potential access points to the country and work out a precise strategy to reach consumers in a market that has now been unlocked.

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