Alibaba Steps Back From Competing Directly With Amazon and eBay

NEW YORK ( TheStreet) -- Alibaba (BABA) has long claimed that it has no interest competing with Amazon (AMZN) and eBay (EBAY) in the U.S. That seems to be the strategy behind the company's decision to merge its U.S. site 11 Main into social shopping site OpenSky.

11 Main hosts American specialty shops and boutiques on an invite-only marketplace for U.S. consumers. The site was created just a year ago in advance of Alibaba's U.S. IPO. Since then, not much has been shared about the site's performance in terms of revenue and active customers, and it has received little media attention.

Alibaba will still maintain a 37% stake in OpenSky, but it will essentially relinquish control of the site. It is unclear whether 11 Main will continue to exist as a separate entity under OpenSky or whether it will be completely folded into it. OpenSky will also gain control of Auctiva, Vendio, and SingleFeed, three other U.S. companies that Alibaba acquired to provide logistics for 11 Main.

"11 main is a very small part of our overall business," Bob Christie, an Alibaba spokesman, said. "We just think that more hands-on day-to-day management for a smaller company like that will position them for a stronger future."

In his recent trip to the U.S., Jack Ma, Alibaba's founder and executive chairman, emphasized that Alibaba was looking to bring U.S. sellers to Chinese consumers and had no interest in getting into e-commerce on American soil.

"People keep on asking, 'Now, you're big. What's your play in America? When are you going to come invade America?' " Ma said at an Economic Club of New York luncheon. "We show great respect for Amazon and eBay, but the strategy for us is helping small businesses in America sell their products in China."

Not everyone is convinced, however, that Alibaba is completely shutting down the possibility of bringing its e-commerce platform to U.S. consumers.

"Alibaba is probably a few years from competing directly with Amazon or eBay for domestic U.S. e-commerce, but all these moves are steps towards positioning Alibaba to compete more vigorously in three to five years," Wedbush analyst Gil Luria said.

The merging of 11 Main with OpenSky fits within Alibaba's overall strategy of linking to a bunch of different companies through small investments. Alibaba has also invested in Zulily (ZU), Snapchat, and Lyft. The small stakes are seen as ways that Alibaba can learn from different companies, and could eventually help Alibaba enter the U.S.

Alibaba denies any such strategy, but analysts aren't convinced.

"I do think the U.S. remains a longer-term priority for the company, but I think the company is still developing the appropriate strategy, whether it be through a larger acquisition -- which I wouldn't expect until after the Ant IPO at this point -- specialty e-commerce sites, or expansion of their ancillary services like Lyft," Morningstar analyst R.J. Hottovy said.

Getting involved in companies such as Zulily and teaming up with OpenSky offer Alibaba the ability to "learn about the U.S. market side-by-side with American entrepreneurs who are native to the U.S. market," said Erik Gordon, a professor at the University of Michigan's Ross School of Business.

"The U.S. is not as easy a market for Alibaba to crack as was the wide-open China market that had no entrenched powerhouses like Amazon," Gordon said.

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