Last Updated Aug 25, 2010 9:23 PM EDT
Alibaba's first business was connecting international firms, including blue chips like Walmart (WMT) and Proctor and Gamble (PG), with a wide base of Chinese suppliers. This helped it launch a massive IPO and attracted investment from Yahoo (YHOO), Goldman Sachs (GS) and George Soros.
But, as my colleague Erik Sherman wrote, the margins on Chinese exporters are rapidly shrinking. To continue to grow its business, Alibaba is spending $100 million to expand into the United States this year, and it plans to increase both the size and scope of its ventures.
The acquisition of Auctiva and Vendio links Alibaba to 250,000 U.S. merchants. The idea is to create an "end-to-end network connecting manufacturers and wholesalers with e-tailers and consumers". Businesses would source through Alibaba or purchase wholesale through the newly launched Aliexpress. They then could turn around and sell through eBay and Amazon, all on the same software platform.
"Hopefully what this does for eBay is increase their sales," Alibaba spokeswoman Linda Kozlowski told PC Mag. "We want to help power their sellers. We want to help them source more so they can sell more."
That's a chummy line, and for the time being it may be true. But as CEO David Wei said in an recent interview, Alibaba would also like to help American firms sell directly to consumers.
Alibaba owns Taobao, the largest shopping site in China. "We are in the early days to look at how we enable U.S. merchants to sell to China," Wei told auctionbytes.com. "Maybe some good California wine." If U.S. merchants start selling through Alibaba, it won't be long before the company starts pursuing U.S. customers as well.
Image from Flickr user Don Hankin