Alibaba Launches 11 Main To Grow U.S. Presence Before Its Record American IPO

Ahead of one of the largest initial public offerings in American history, Alibaba Group is getting a little more familiar with U.S. consumers.
On Wednesday, the company officially launched 11 Main, an online retail site for unique goods and crafts that looks to highlight local American businesses and give the Chinese retailing giant a window into a market it has long coveted.  Complete with offerings like fixed-gear bicycles and women’s jewelry, the marketplace features select vendors and boutiques that are meant to provide as close to an online representation of Main Street, U.S.A as possible.
For a company that accounted for 80% of online commerce in China and exceeded $248 billion in gross merchandise volume last year, Alibaba has long hoped to expand its empire into the United States. But with the likes of Amazon.com AMZN +0.69% and eBay EBAY +1.14% firmly established here, the Hangzhou company has treaded carefully, investing in American technology startups like ride-sharing service Lyft and and e-commerce firm ShopRunner that it believed could be complementary to its Asian operations.
11 main, which for now will only be open to beta testers who have requested invites, is a shift in a new direction. Spun out of Alibaba’s 2010 acquisition of online retailing management companies Auctiva and Vendio, the new marketplace is a cheaper, niche-based approach for local businesses to list speciality items that can sometimes get lost among the millions of offerings on Amazon and eBay.
“We knew that these businesses needed somewhere else to sell,” says Mike Effle the 11 Main’s president and the former chief operating officer at Vendio. “The ’11′ portion of the name was based on the one-to-one connection that we saw consumers wanting to have with merchants and merchants wanting to have with consumers.”
With half-a-million products on its site, 11 Main seems to share a similar approach to current online retailer Square Market, whose focus has been getting neighborhood businesses online and selling. However, Forrester analyst Kelland Willis believes the potential for Alibaba’s new toy is larger, especially if 11 Main can leverage the same marketing techniques as a “localization engine” that have made the company’s subsidiaries including Taobao and Tmall into dominant forces in China. To that end, 11 Main, had already started to advertise on search engines like Google GOOGL -0.39% and Bing before its launch.
“The opportunity is definitely there there for a niche site that sells more interesting products or DIY goods,” she says. “Compare that to Amazon, which is selling Samsonite and Tory Burch.”
On first use, the company’s experience varies from the two largest American online-only retailers. 11 Main offers products across a variety of categories including fashion, jewelry, sporting goods and baby products, grouping similar wares into collections that can be displayed in rows of bulletin board-like square images. Vendors also have personalized pages, where they can display their goods, explain their business and feature informational videos.
Much like eBay, 11 Main handles none of the goods on its site, leaving the onus on vendors to handle logistics and shipping. Yet unlike its American counterparts, the site lacks a buyer-seller feedback and communications, though Effle says that the company is working on a better way for users to rate their experiences beyond using the typical five-star system. They’re also hoping to eventually launch a mobile application with the anticipation that sales from tablets and smartphones will increase over the next few years. Last year, almost 20% of Alibaba’s sales came from mobile devices.
As of launch, the site features more than 1,000 vendors, only a fraction of the thousands of businesses that have applied to sell, says Effle. Those that are selected to list their items will find that it’s cheaper than eBay, with 3.5% of commission from sales going to 11 Main compared to as much as 10% with the American auction site. Some products like books, music and movies carry no sales fees at all, says Effle.
Herb Oberman, who sells specialty paper products like antique menus online, says that eBay generates the most of his sales, but that he was willing to try anything to increase his chances of finding potential buyers. He and his wife Matha have been selling online for more than 15 years, and currently use Amazon, eBay, Bonanza and bidStart to market their goods.
“We’ve tried many other sites over the years and there were some good ones out there, but they didn’t know how to generate traffic,” says Oberman. “Some of them never got big enough to stay in business.”
With the blessings of Alibaba Chairman Jack Ma and Vice Chairman Joseph Tsai, who oversees the group’s investment strategy, capital should not be an issue for 11 Main. Aside from the comparably lower commission fees, the company is running several promotions to attract buyers to the site and encourage purchasing. Early consumers will reportedly have chances to find discounts, which 11 Main will refund back to sellers. Vendors can also suggest customers to the site, and will not be charged commission over the next two years for any goods purchased by a consumer came through their recommendations, says Effle.
Those efforts seem to convey that Alibaba, which recently purchased stakes in a Chinese soccer team and Singapore’s national mail service, is in it for the long haul. With an IPO on the horizon and Wall St. watching carefully, the online play for Main St. at the very least displays the company’s continued hunger for growth.
“Chinese companies are very much like American companies in that by serving their own market, they can become very profitable,” says Willis. “Not many have crossed over. We’re all curious to see how they do as they get into other markets aside from China.”