BEIJING—Alibaba.com Ltd. said it will accept payments from users of eBay Inc.'s PayPal service on Alibaba.com's new online wholesale platform, a deal that suggests the two companies are setting aside a longstanding rivalry to realize their global expansion goals.
Alibaba.com, the Hong Kong-listed unit of Chinese e-commerce company Alibaba Group, is a site for small-to-midsize exporters in China and other countries to list products for sale to buyers around the world. On Monday, Alibaba.com formally launched AliExpress, an online platform that lets those buyers directly purchase goods from those exporters, largely in smaller quantities. Alibaba.com Chief Executive David Wei said the company, based in Hangzhou, China, plans to invest $100 million to develop AliExpress "as quickly as possible."
The new deal with PayPal will let AliExpress clients sell goods to PayPal's 84 million active users around the world, including eight million merchants who could use the service to source from Alibaba sellers. It gives PayPal users a vast new selection of products. The companies said the deal could put AliExpress among PayPal's largest merchants in terms of product offerings, with three million products listed from at least 40 categories.
Alibaba Group has its own electronic-payment platform, called AliPay, but Mr. Wei said limiting users to one service "actually kills choices" for consumers and vendors. "Openness is very important," Mr. Wei said during an interview. "PayPal is one of the most important payment methodologies."
Alibaba.com had 74% of China's $237 million business-to-business market in the first quarter of 2010, according to research firm Analysys International.
The rivalry between eBay and Alibaba Group, of which Yahoo Inc. owns 39%, dates to the early part of last decade when Alibaba Group's Taobao unit, a consumer auction and retail site, gobbled up market share from eBay's Chinese unit, mainly by undercutting its commission fees. EBay largely withdrew from China in 2006. But eBay and Alibaba Group have shown signs of rapprochement, with Alibaba Group Chairman Jack Ma visiting eBay's headquarters in San Jose, Calif., in March of last year.
"The interesting thing about the Internet is that you have partnerships with different companies that you also compete with," Scott Thompson, president of PayPal, said in an interview. "You can partner together as two businesses, and as part of your business you can compete vigorously."
The new partnership is part of a broader international push by PayPal, including in China, home to the world's largest population of Internet users. PayPal, which has been supplying a growing share of eBay's revenue, announced plans last month to partner with China UnionPay Co., the country's largest electronic-payment-service provider, to let Chinese consumers shop from overseas merchants.
PayPal and Alibaba.com executives said the new partnership has been in the works since Mr. Ma's visit to eBay. They declined to say if further collaboration is planned.
AliExpress sellers, all of whom are currently in China, offer a wide range of goods, from $1 T-shirts and $5 novelty Web cameras to $60 foldable bicycles. AliExpress has been in testing since September, and Mr. Wei said it has attracted a higher percentage of U.S. buyers than Alibaba.com's main listing Web site.
For the new PayPal deal, instead of requiring its sellers to sign up for PayPal accounts, Alibaba.com will act as the PayPal merchant and will charge the sellers a fee to cover any commission paid to PayPal.
Alibaba.com, which reported revenue of about $567.4 million for 2009, earns the bulk of its money from fees to sellers for premium listings and services on its site. On AliExpress, product listings will be free for all Alibaba.com members, and a 3% fee will be charged per sale to members who pay for the premium service, while nonpaying members will pay 5% per transaction.
