Deals

Chinese e-commerce giant Alibaba.com gathers army of American sellers to take on eBay

Chinese powerhouse auction site Alibaba.com is gathering an army of small-time online sellers as it prepares to march into the United States.

Alibaba.com acquired its second small-scale e-commerce tool in six weeks on Wednesday — Auctiva, a popular service for smaller eBay sellers that helps manage sales and marketing on an individual scale. Alibaba.com acquired a similar service, Vendio, in June.

Alibaba.com offers a wholesale platform on the global site that is geared toward small sellers seeking fast shipment of small quantities of goods. Across all its marketplaces, the company has a community of more than 53 million registered users in more than 240 countries and regions, according to the website.

Now armed with a force of about 250,000 loyal and well-maintained smaller sellers after the acquisitions, Alibaba.com stands to challenge eBay for dominance of the auction marketplace. This comes at a time when eBay begins a shift in its strategy that focuses on its money-transfer service, PayPal.

eBay earlier had problems gaining a strong foothold in the Chinese market when it attempted to enter under the leadership of Meg Whitman in 2005 — and was competing directly with Alibaba.com.

After the spat with eBay, Alibaba.com had few options to enter the U.S. market, leading it to focus on smaller sellers and multiple sales outlets like online retailer Amazon.com and even eBay’s service.

With the turnaround in eBay’s strategy began when John Donahoe took the reigns in 2008, a lot of pressure has fallen on smaller sellers, as the company has focused more on a fixed pricing model with its Buy It Now option and its PayPal platform, said Ina Steiner, founder and editor of auction news site Auctionbytes.com.

The acquisitions also come at a time when eBay has seen decreased traffic, falling soundly behind Amazon.com in the second half of 2009.

Coupled with Alibaba.com’s recent decision to set aside $100 million for e-commerce acquisitions as part of its expansion of AliExpress.com and eBay’s waning support for small sellers, the acquisitions of Vendio and Auctiva shouldn’t come as much of a surprise.

“Auctiva and Vendio’s clients have been having problems selling on eBay, so they were more open to being acquired than in previous years when things were going better,” Steiner said.

Technology Investment Banking Group of Morgan Joseph organized the acquisition, though no payment details were disclosed.

[Image credit: Jan Ramroth]

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