Amid mounting geopolitical headwinds and a slowing economy in China, Alibaba (BABA) is looking outside of its home market to spur growth.
For Alibaba.com — the e-commerce giant’s international business-to-business arm — that means attracting more global small and medium-size business buyers to the platform and expanding its supplier base outside of China.
On Thursday, Alibaba announced a new generative AI-driven sourcing agent intended to simplify global trade at its second annual Co-Create event in Las Vegas. The company also launched a co-branded credit card for businesses with Mastercard (MA) intended to encourage transactions on Alibaba by providing easier access to capital and additional protections for buyers.
“We are building out networks not only for the demand-supply part but also with partners to establish the payment network, the logistic network … to enable small and medium-size businesses to meet, trade, and work [on the platform],” Kuo Zhang, president of Alibaba.com, told Yahoo Finance.
Alibaba’s international trade business has emerged as a rare bright spot for the company as consumers have become increasingly cautious in its domestic market.
In its most recent quarter, Alibaba’s International Digital Commerce Group (AIDC) saw revenue grow 32% year on year, while overall growth for the company, including divisions for Chinese commerce, cloud services, and logistics, was limited to just 4%.
Alibaba.com, a division of AIDC, connects global business buyers to suppliers largely based in China. The US remains one of its biggest markets, accounting for 30% to 40% of all gross merchandise volume, according to Zhang, though the platform is expanding its international footprint rapidly.
“Global trade is a $20 trillion business, but digital penetration [right now] is in single digits,” Zhang said. “We believe there’s a lot more potential to grow if we lower the barrier.”
The AI sourcing agent aims to do that by allowing buyers to connect with one of its 200,000 global suppliers using conversational language. The search tool provides real-time translation in addition to the details of each supplier and their prices backed by more than a billion product listings already on the platform.
Diversifying the supply chain
The latest announcements are part of the platform’s broader effort to diversify beyond China as lawmakers in the US and Europe consider additional trade barriers on Chinese goods, citing concerns about overcapacity and unfair subsidies.
Former President Donald Trump has proposed a minimum 60% tariff on all Chinese imports, while President Joe Biden has imposed tariffs ranging from 100% to 25% on Chinese electric vehicles, solar cells, and steel products.
Any additional taxes are likely to weigh on Alibaba, as the company is still heavily exposed to China, with 80% of suppliers on the platform based in the country. Zhang said Alibaba.com is focused on diversifying its supplier base, citing the company’s acquisition of a German business-to-business digital trade platform last year.
At the same time, small and medium-size businesses within China are also increasingly seeking opportunities to participate in global trade and export goods abroad as the domestic economy continues to sputter, according to Zhang. Chinese small and medium-size businesses are a significant driver in the world’s second-largest economy, accounting for 60% of the country’s GDP.
Zhang singled out the southern port city of Guangzhou as an example of that growth, highlighting a 30% to 40% increase in Alibaba suppliers compared to last year. He said products sold ranged from consumer goods to industrial machines.
“Previously it was very hard for them to understand what the real demand is and how to ship [goods] in time, how to collect money,” Zhang said. “With digital, it’s lowering the barrier to participate in global trade.”
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