Alibaba’s China-Japan Portal: Is This The Way To Cross Borders?

Written by Frank Hayes
June 3rd, 2010

Think about the effort you put into dealing with the problems of doing business between countries in North America—the U.S., Canada and Mexico. What if all those challenges could be addressed by something besides your own IT shop?

This week, China’s Alibaba Group opened up a two-way e-tail portal between mainland China and Japan. Alibaba’s goal is to make cross-border sales to consumers easy enough for tiny retailers who can’t afford all that cost and effort. But the China-Japan portal may also be a model for big retailers to do the same thing.

Face it: All cross-border operations are a pain. Differences in language and currency are just the start. Beyond that are import/export paperwork, tax laws, privacy regulations, other legal requirements, logistics, customer service, merchandise returns and a host of smaller problems. And IT has to support all those variations from standard operating procedure.

Many companies find it easier to set up a subsidiary across the border just to handle the paperwork and logistics. Lots of companies avoid cross-border commerce completely.

Alibaba may have found a way to avoid much of that pain. Its new venture consists of a pair of consumer shopping Web sites: Yahoo! Japan China Mall, which allows Japanese consumers to buy directly from Chinese online merchants, and TaoJapan, which lets Chinese consumers buy directly from Japanese online merchants. Alibaba provides the online marketplaces but also handles payments and currency conversion, export paperwork and logistics, and even local-language customer service for the merchants on each side.

The retailers—many of whom are far too small to handle the details of cross-border retailing by themselves—set pricing, do their online marketing and then send their fulfilled orders locally to Alibaba, which makes the deliveries on the other side of the water. From the retailers’ point of view, they might as well be selling and shipping to local customers. Meanwhile, customers order and receive merchandise as if they’re buying from a local company.

“Previously, small merchants had to sell through a trading company,” said John Spelich, Alibaba Group’s VP of international corporate affairs. “That meant they lost control of pricing and the customer relationship. But with this new paradigm, they can open a storefront and do business around the world.”

How much does that paradigm carve away from the cross-border problem? Not everything, but enough that it’s practical for very small e-tailers to get into a foreign market. Those small fry don’t have a choice; with no real IT departments of their own, they’re glad to hand that work over to Alibaba.


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