Alibaba’s investment in ShopRunner sets up an ecommerce showdown with Amazon
Chinese ecommerce juggernaut Alibaba has paid $ 75 million for a minority stake in two-day shipping service ShopRunner, according to separate reports from The Wall Street Journal and Financial Times on Friday.
When contacted by The Next Web, an Alibaba spokesperson declined to comment on the reports, so the deal is hardly confirmed, but with the Journal and FT both on the trail, there certainly seems to be something there.
And when I step back and look at ShopRunner’s business model, it makes absolute sense. The startup, which is now helmed by former Yahoo CEO Scott Thompson, offers free two-day shipping for ecommerce purchases from its partners for $ 79 a year. So, basically Amazon Prime for everybody else. Current ShopRunner merchants include Toys-R-Us, Drugstore.com and MacMall.
Alibaba already made a recent investment in the US market by backing sports apparel vendor Fanatics earlier this year. Both Fanatics and ShopRunner are part of parent company Kynetic, so this latest deal, if true, deepens a pre-existing relationship. Kynetic itself was born out of the three companies spun off from Ebay’s acquisition of GSI Commerce, so Alibaba might want to invest in members-only ecommerce site Rue La La just for the hat trick.
Newly-minted Alibaba CEO Jonathan Lu said publicly last month that he was committed to making major investments to establish the company’s position, and that’s on top of two massive deals from earlier: $ 586 million for a piece of Chinese social networking darling Sina Weibo and $ 294 million for a 28 percent stake of local map leader AutoNavi.
As it moves into the US market, Alibaba already boasts that its Alibaba.com and Taobao stores are bigger than Amazon and eBay combined in terms of gross merchandise volume. However, even with its bigger scale, Alibaba will be at a disadvantage against its rivals, which are comfortably entrenched in the market.
Building up brand recognition and consumer trust will take time for Alibaba, but investing in ShopRunner can help it get a jump on infrastructure and market research. Amazon Prime offers customers an exceptional shopping experience while also locking them into shopping on the site in order to get the most out of Prime’s annual membership fee. By partnering with a Prime competitor that already has traction and strong partnerships with some of Amazon’s top rivals, Alibaba takes several steps closer to the inevitable head-to-head battle.
With Alibaba gearing up for an IPO, it’s not hard to imagine the company taking a portion of the cash it will raise from going public and betting it on a big push into the US. At this point, one thing seems certain – when the Alibaba/Amazon showdown does take place, it’s bound to include free* two-day shipping.
(*free as in $ 79)
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