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American Small Businesses Are Eager to Grow Online. Alibaba Wants to Help.

Alibaba, best known for its retail e-commerce business, wants to expand in another key market.

Alibaba, best known for its retail e-commerce business, wants to expand in another key market.

Alibaba is best known for its retail e-commerce business, including flagship platforms like Taobao and Tmall, serving the vast number of Chinese consumers. But the company wants to expand in another potentially huge market—the global business-to-business sector.

Alibaba Group Holding (ticker: BABA) founder Jack Ma started the company two decades ago with Alibaba.com, an international wholesale marketplace meant to help China’s small companies reach buyers abroad. Over the years, the U.S. has long accounted for the largest number of buyers on Alibaba.com, but American sellers have been largely left out.

Last year, Alibaba.com moved to expand its reach, opening a gate to allow American sellers—especially smaller ones with limited online capabilities—to access the millions of global buyers on its platform. Since last summer, the company has been touring cities across the U.S. to recruit members for Alibaba.com.

Although the company hasn’t disclosed how many businesses have signed up, the potential is huge. Global spending in B2B e-commerce reached $23.9 trillion in 2016, according to the U.S. International Trade Commission. That is six times the amount of online sales to consumers.

In December, Alibaba.com commissioned a research firm to survey 5,000 small-business owners in the B2B sector. While 90% of the respondents are already doing some B2B selling or purchasing online, less than one-third have been doing it for more than five years.

The survey also found that the bulk of B2B online activity is still done using tools such as email or website order forms. Only 21% of respondents used online marketplaces like Alibaba.com. This is a contrast to the consumer sector, where most shoppers and retailers are familiar with marketplaces like Amazon.com (AMZN) and Taobao.

“That means there is an enormous opportunity for U.S. small and medium businesses to digitize and grow their businesses globally with ease,” said John Caplan, head of North America B2B at Alibaba Group.

Small-business owners are upbeat. Nearly two-thirds of the respondents, 62%, said the economy is gaining momentum, with a bright future. And 46% expect volume to increase at their online businesses, while 60% expect to increase their procurement budgets. Fifty-six percent of the surveyed companies are already doing some cross-border trade, which makes up an average of 17% of their total business.

The results are not surprising. After a year-long rally in 2019, all three major stock indexes are near all-time highs. The Federal Reserve turned dovish last year, cutting interest rates three times. Trade tensions between the U.S. and China have diminished—Washington and Beijing are set to sign an initial deal on Wednesday—alleviating uncertainty that had made companies less willing to commit to capital spending. In another positive sign, corporate earnings are now expected to grow again this year after sliding for most of 2019.

One of Alibaba.com’s main rivals in the U.S. B2B market will be Amazon Business, whose large warehouse and delivery network across the country might give it an advantage over the Chinese giant. But Alibaba is more focused on its global reach, and will potentially offer lower costs. Alibaba.com doesn’t take a share of business transactions, but charges an upfront membership fee plus any marketing and advertising expenses.

To better help small businesses grow digitally and globally, Alibaba.com has launched a series of weekly events called “B2B Tuesday,” featuring success stories, in-person events, new platform offerings, educational content, and more.

“Small businesses are really the unsung heroes of the U.S. economy, particularly those in manufacturing, distribution, and wholesale,” said Caplan, “Our goal is to provide resources and tools to help small businesses to access and participate in the global B2B e-commerce economy.”

Alibaba stock rallied 55% last year, compared with the S&P 500’s 29% gain. As of Monday, the stock had risen 8.7% year to date to reach an all-time high of $230.48, although it slipped back on Tuesday.

Write to Evie Liu at evie.liu@barrons.com

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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