Strange bedfellows: Amazon sets up shop on Alibaba site

Amazon.com has opened an online presence on rival Alibaba’s Tmall superstore, according to Reuters and other outlets citing an Alibaba spokesman.

[company]Amazon[/company] and [company]Alibaba[/company] are both prodigious online retailers and rivals and both are eying the other’s turf. Earlier this week Aliyun, Alibaba’s online services arm, opened a cloud data center in Silicon Valley, its first presence in the U.S. Aliyun is seen as a competitor to cloud giant Amazon Web Services.

I’ve reached out to both Alibaba and Amazon for further comment and will update this story as needed.

Other western companies, including Costco, Burberry and Zara parent company Inditex, have also set up shop on Tmall, which runs the ecommerce sites and provides the associated payment-processing operations.

Amazon.com offers its own ecommerce site in China, but Alibaba is the 800-pound gorilla there and it makes sense for Amazon to set up shop on Alibaba’s Tmall if it wants to sell more stuff to Chinese citizens.  Long live co-opetition I guess.

If you thought cloud competition couldn’t get hotter, think again

Chinese e-commerce giant Alibaba has opened a data center hub in Silicon Valley, adding yet another gigantic player to a growing, but already hotly-contested cloud computing market.

Aliyun, Alibaba’s cloud computing arm, has been likened to Amazon.com’s Amazon Web Services unit and you can bet that [company]Amazon[/company], as well as [company]Google[/company] and [company]Microsoft[/company], are watching this development closely. Those American cloud giants are focused on boosting business and operations outside the U.S. — Microsoft and Amazon have presence in China, for example, and now Aliyun will return the favor with its first US-based data center.

The initial plan is for the Aliyun data center, the exact location of which was not disclosed, to target Chinese companies based in the U.S. and to expand from that base. In a statement Aliyun VP Ethan Sicheng Yu said:

… the ultimate objective of Aliyun is to bring cost-efficient and cutting-edge cloud computing services to benefit more clients outside China to boost their business development.

The U.S. expansion comes at an interesting time politically as well — relations are tense between the Chinese and U.S. governments and both sides have accused the other of spying on each other and using native tech companies to help in this effort.

Aliyun’s current data centers are in Hangzhou, Qingdao, Beijing, Shenzhen and Hong Kong.

Peel gets $50 million investment from Alibaba

Remember the funding round that Peel, maker of the remote control apps that you find on handsets from Samsung, HTC and others, raised in June from Alibaba? Thursday, the company announced a number, and it’s a big one: Alibaba invested $50 million in Peel, bringing the total amount raised by the startup to $95 million. I guess replacing a device that everyone hates, but still uses every day, does pay off.

Alibaba is just the beginning: How B2B marketplaces will thrive (for real, this time)

During the heyday of Web 1.0, B2B marketplaces were, we were assured, the next trillion-dollar gold rush. In 2000, Gartner Group was projecting B2B ecommerce transactions would reach $7.3 trillion by 2004. Goldman Sachs predicted $4.5 trillion by 2005. The assumption was that web-based technologies would completely automate virtually all supplier-customer transactions, including retailing, wholesaling and procurement.
Like so many other predictions of that era, B2B marketplaces proved to be more fizzle than sizzle.
With the dot.com crash, many B2B companies disappeared just as quickly as they rose to fame. The ones that survived were primarily solutions for large companies, from horizontal players like SAP’s Ariba  to consortia-based marketplaces that focused on a particular vertical:  supplyON.com (automotive), elemica.com (chemical), agentrics.com (retail), and hubwoo.com (MRO-Parts).
One major player of that era, Alibaba (which got its start in Jack Ma’s apartment in 1999), is on track to be the world’s first ecommerce platform to handle $1 trillion a year in transactions. This Chinese B2B trading platform connects buyers in North America and Europe with suppliers from China. Alibaba follows an aggregation of supply model (similar to other early B2B players), helping to solve the pain of global sourcing. Yet with Alibaba, buyers still need to work to identify the right supplier and complete the transaction.
While the overall market may not have skyrocketed as quickly as analysts predicted a decade ago, today we are seeing the emergence of a new wave of B2B startups that are focused on making procurement and supply chains more efficient for the long-tail SMB market. (Disclosure: The author’s firm holds investments in commerce-related companies Clarity, GroupTalent, Indiegogo, and tindie.)

New wave caters to small and mid-sized companies

More than aggregators, these new B2B marketplaces are buyer-driven workflow solutions for small and mid-sized businesses. While large companies can afford to implement EDI or other automated procurement systems, small businesses still fax and file paper purchase orders and quotes. There’s an enormous opportunity to streamline the procurement process, rather than having a purchasing manager call around to suppliers to fax over quotes.
There are a number of B2B ecommerce startups focusing on specific vertical opportunities. Examples include Joor, for fashion – the company is shooting for $350 million in sales this year – and Lookboard for furniture and home décor. Such marketplaces are particularly useful in those verticals where companies can source from a myriad of suppliers and need tools to help them identify, research and contact the right ones.

The future of B2B marketplaces

The B2B players we see today are just at the cusp of what’s to come, as there’s a massive opportunity to replace the paper-centric, error-prone supply chains for small businesses. Emerging B2B startups can improve on earlier generations by creating more value for their users either by lowering the costs of transactions or identifying unique suppliers/products. Here are three methods for doing so:
1. Increasing liquidity by providing more choice and enabling buyers to discover new suppliers. While these marketplaces are mostly buyer-driven (i.e. buyers post the products they need), marketplaces need to increase the supplier base in an efficient way beyond those that are already seeing the RFP.  Without strong suppliers, there’s no incentive for a buyer to use that marketplace.
2. Employing modern technologies such as matching algorithms, personalization and big data crunching to help buyers find the right products and suppliers. For example, a platform can recommend new suppliers based on a buyer’s past purchase history or defined preferences.
3. Supporting mobile in addition to desktop. Even today, a large number of sales transactions involve face-to-face meetings between buyer and supplier. The addition of mobile streamlines these interactions, as quotes and purchase orders can be processed right on spot via smartphone.

Challenges to overcome

Naturally there are obstacles that every startup must face, and creating a marketplace has its own specific ones. Here are two:
If none of these start-ups can execute on the three points above and deliver additional value to the participants of their marketplaces, their role will be reduced to merely being a provider of purchasing software. While that’s still a solid business for sure, it’s definitely less attractive than a marketplace business, where you take a middleman’s cut of every transaction.
And for all B2B marketplaces that are focusing on a vertical, there’s always the question of whether any given vertical market even has the potential to grow enough to support a large, stand-alone company.

Still, given the rise of cloud apps alongside the use of iPads and iPhones in the workplace, the market is more ready today than it was 10-20 years ago for B2B ecommerce. While we didn’t see the projected numbers come to fruition during Web 1.0, today and tomorrow’s B2B startups will undeniably disrupt supply chain processes for small businesses.
Boris Wertz is the founder of version one ventures, and has invested in over 40 early-stage consumer and enterprise companies.  He blogs at http://versiononeventures.com/blog/; follow him on Twitter @bwertz.
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