E-COMMERCE: Alibaba Looks for Global Story with European Hires

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Bottom line: Alibaba’s new announcement of expansion in France and Germany looks largely incremental rather than a major move, and is aimed at creating positive buzz around its international growth story. 

Alibaba names France country head

E-commerce giant Alibaba (NYSE: BABA) is closing out 2015 with a couple of big new hires in Europe, as it tries to give investors new reason to cheer about its future growth prospects. But a closer read of the announcement detailing the hires of country chiefs in France and Germany reveals a distinctly Chinese story, rather than the global expansion tale that many investors are eagerly awaiting.

In this case, Alibaba is choosing to focus on how the new office openings in France and Germany will help merchants in those markets sell into China. That’s part of a broader trend that has seen Alibaba, archrival JD.com (Nasdaq: JD) and global names like Amazon (Nasdaq: AMZN) and Wal-Mart (NYSE: WMT) try to offer more global brands to increasingly affluent Chinese consumers who are willing to pay more for these trusted names.

That drive certainly seems like a good one because it plays to a number of factors, including growing Chinese consumer demand for imported goods and Beijing’s new desire to boost imports to bolster the slowing economy. But in my view this kind of move is really quite incremental for a huge company like Alibaba, and is far less exciting than the kind of global expansion that many would like to see.

Alibaba trumpeted its latest global move in an announcement whose headline simply said it has hired local industry veterans to head its France and Germany country operations. (company announcement) Alibaba first indicated it was moving into Europe in October, when it said it would open offices in France, Germany and Italy over the next few months. (previous post) The company’s latest announcement calls the move a major milestone in its global expansion. But then it quickly adds this particular move is part of its strategy of becoming a gateway to China for European retailers and merchants.

I don’t know about other people, but I was expecting to read a story about Alibaba’s plans to launch e-commerce services in Germany and France after reading that particular headline. That’s not to say I think this particular strategy is bad, though it does seem a tad more conservative than the more aggressive moves we’re used to seeing from Alibaba.

In Search of Global Success

The fact of the matter is that despite its movements into a wide range of global markets including Korea, Russia, the US and now France and Germany, Alibaba has yet to score any major successes on the global stage. To the contrary, the company’s early investment in a Japanese e-commerce venture was a high-profile failure, and more recently it sold its US-based e-commerce site called 11 Main after failing to gain much traction. (previous post)

Those kinds of setbacks have taught Alibaba, JD and China’s other global Internet companies that the global marketplace is far more competitive than their relatively protected home market. Accordingly, it’s not surprising that none of these companies have scored notable success in any of their global ventures to date, and that Alibaba is now proceeding with caution into Europe.

This latest European announcement comes at a sensitive time for Alibaba, whose shares have only recently recovered after a massive sell-off that saw them lose nearly half of their value in the first 9 months of the year. Since hitting an all-time low in late September, the stock has risen 45 percent and now trades comfortably above the offering price from its record-breaking $25 billion IPO in September 2014.

Company watchers know the spark that set off Alibaba’s downward spiral was a high-profile spat with Beijing involving piracy on Taobao, one of its main online marketplaces. The company is now waiting nervously for Washington to release its own annual report on copyright infringement, which could create new embarrassment if it criticizes Alibaba’s anti-piracy efforts. Against that backdrop, the company certainly could use some positive buzz, which seems like one of the main purposes of this upbeat but largely incremental announcement of its latest expansion in France and Germany.

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