Why Would Amazon Open a Store on Alibaba’s Tmall?

In this corner we have Alibaba, weighing in at a $167.6 billion valuation, fighting out of Hangzhou China.  And, in the opposing corner we have Amazon, valued at $150.2 billion, two-time undefeated champion in the e-commerce arena.  In the battle of online retail giants, who will come out on top?

When Alibaba went public last year, it set the record for the largest US-listed initial public offering and shook things up, where the e-commerce center of the world revolved around Amazon.

Amazon recently announced it was opening a second marketplace on Alibaba’s business-to-consumer e-commerce platform, Tmall.  It has left people wondering if the company has admitted defeat, or is Amazon on to something?

The company currently operates its own site in China, amazon.cn, and opening up a store on Tmall may be a strategic move to expand the its footprint in China.  E-commerce transactions in China are estimated to reach $540 billion in 2015, and by 2020 China’s e-commerce market is predicted to be larger than that of the US, UK, Japan, Germany and France combined, according to a KPMG report. Is Amazon throwing in the towel by siding with the enemy?  It’s quite the opposite, Amazon is diversifying it’s approach and sees this is an opportunity for the company to tap into the lucrative e-commerce market in China.  Opening up a store Tmall will increase Amazon’s exposure among Chinese consumers and help the company gain a better understanding of how to improve its e-commerce operations in China.  Of course Amazon would like a share of this pie, that seems like a no brainer.  We will have to wait and see how this strategy pans out.



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