Alibaba Group Holding Ltd., already the largest Chinese company by market capitalization, is nothing if not ambitious. Its chief financial officer, Maggie Wu, recently told investors she expects revenue to increase by up to 49 percent next year, a staggering prospect. But perhaps more staggering is how Alibaba hopes to get there: In part, by tapping the U.S. market.
By any measure, Alibaba dominates online retail in China. Through its subsidiary TMall, it commands more than twice the market share of its largest competitor, JD.com, with 56 percent of all Chinese e-commerce. In splashing out on more than $21 billion in strategic asset acquisitions, Chief Executive Officer Jack Ma has humbly declared Alibaba no longer a company but an “economy.” Having branched out into cloud computing, electronic payments, news media and films, he may have a point.
Yet expanding to the U.S. — much less creating 1 million jobs there, as Ma has pledged — will present some daunting challenges. In fact, the effort seems quite likely to fail.
One problem is the company’s business model. Alibaba is often referred to as the “Amazon of China,” but this ignores some important differences. Where Amazon.com Inc. has built world-class logistics operations to speed and standardize delivery, Alibaba has opted for an asset-light approach, in which customers ship directly to other customers through third-party logistics operators with warehouses throughout China. Alibaba just provides the platform.
If Ma wants to open the Chinese market to small U.S. businesses, he’ll need to expand this operation, while surmounting some serious legal and practical hurdles. Most large American companies already have operations in China, or established routes to ship goods there. Small ones won’t have the skills necessary to navigate Chinese paperwork, and shipping individual products…