Alibaba’s first U.S.-based e-commerce venture, 11 Main, is changing course.
Just one year after it launched, the marketplace has suspended operations as a stand-alone company. Experts said the site failed to gain traction with U.S. consumers and businesses and faced competition from the growing number online marketplaces.
11 Main’s operations will merge with social shopping marketplace OpenSky, which Alibaba now has a 37 percent stake in, as well as other Alibaba acquisitions Auctiva, Vendio and SingleFeed.
Positioned as an anti-big box e-tailer that worked with smaller boutiques — or the type of shops you would find on any Main Street — the American business was very much in line with Alibaba chairman Jack Ma’s mission. He said recently that he wanted to help small businesses in the U.S. sell their products online, in particular to consumers in China’s bustling digital shopping sphere.
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“OpenSky and 11 Main will be joining forces, and we believe together the combined business will be a strong and healthy independent company in which Alibaba will continue to have a significant equity stake. No additional comment will be made at this time,” a spokesperson for 11 Main told WWD Monday.
Instead of taking the approach of Amazon or eBay, which have been aggressive about linking up with designer brands, 11 Main prided itself on selling wares from Solestruck, a shoe store in Portland, Ore., that sells new and vintage footwear, and Alys Grace, which has three boutiques in California’s Bay Area.
At a luncheon hosted by Economic Club of New York two weeks ago, Ma spoke about his plans to harness Alibaba’s e-commerce prowess in China to grow small mom-and-pop shops in the U.S. Not only does he plan to import these much-desired American goods into China, but he also wants to help these small businesses expand their businesses.
“We need more American products to [sell in] China,” Ma said. “We have 100 million people coming to buy every day.”
Although 11 Main’s original mission had it focused on the U.S., its general format seemed to dovetail with that sentiment nicely.
Ma said he was not looking to compete with the big players in the digital space.
“People ask me when we’re going to invade America,” Ma said. “We have great respect for eBay and Amazon but…for us, it’s helping small businesses in America and selling their products to China.”
He called the Internet a “treasure for small businesses,” and noted that if America excels at helping big companies then China should help the smaller ones make more money.
Al Sambar, a managing partner at Kurt Salmon Associates, said although unique visits were up over the last year, the site saw very little traction.
“These marketplaces — there are so many of them out there. It’s hard to break into that,” Sambar said, adding that data from Compete.com showed traffic of less than one million unique site visits per month to 11main.com.
“Whether it’s eBay or Amazon or a department store, [these more established competitors have] been after this consumer for a decade now, and it’s going to be pretty tough to come in from the outside and take market share. Not that you would expect them to compete with Amazon in first year, [but] they are pretty far off from Etsy,” Sambar said.
Sambar also credited aggressive commission and low transaction fees — while attractive to merchants – as hurting the bottom line for 11 Main since the beginning.
Alibaba is a tech company at heart, so it’s not surprising to see it change tack quickly on a concept that wasn’t resonating or living up to expectations.
While the transition at 11 Main is something of a set back, Alibaba has plenty of irons in the fire.
The tech giant’s empire includes Chinese marketplaces Tmall and Taobao, microblogging network Weibo and mobile payment arm Alipay. Alibaba sponsors its own national holiday, Single’s Day, which drove $9.7 billion in sales last year. The firm recently since took a nearly $600 million stake in Meizu, a Chinese smartphone company, and is looking to take on live streaming in two months as well, when Tmall launches Box Office, its version of Netflix.
Alibaba began trading on the New York Stock Exchange in September, the biggest initial public offering to date.
Shares of Alibaba slipped 0.1 percent to $85.68 on Monday, leaving the company with a market capitalization of $213.8 billion.