In the rush to meet the growing e-commerce demands of consumers, U.S.-based small to midsize businesses (SMBs), especially those in the business-to-business (B2B) realm, have been left behind. Digital marketplaces catering to small businesses in the B2B world have been mostly non-existent, despite global B2B e-commerce estimated to be a $24 trillion industry.
The days of SMBs being ushered to the back of the bus are gone, however. Any doubters need only witness the events of July 23 to understand the sea-change. Yesterday morning, Alibaba (NYSE:BABA) announced it would offer Alibaba.com. to the U.S. small business market, putting the 190-country platform in front of 30 million American sellers, including those who want to sell within the U.S. Yesterday afternoon, transport and logistics giant UPS Inc. (NYSE:UPS) rolled out a slew of products aimed at the shipping and logistics needs of the small- to mid-size segment. These include seven day a week pick-ups and deliveries, extended pick-up times for next-day ground deliveries, an increase in pick-up and drop-off nodes known as access points, inexpensive global shipping of low-priced items, proposed full-blown commercial drone operations, and an expanded visibility and package flow platform known as “My Choice.”
In the space of about 12 hours, the SMB category saw its stature elevated exponentially. But Alibaba and UPS aren’t the only ones clamoring for SMB action. FedEx Corp. (NYSE:FDX) has made SMB penetration a top priority, and has already announced seven-day-a-week service, extended pick-up times and expanded access points targeted at that market. Amazon.com, Inc. (NASDAQ:AMZN) considers SMBs the lifeblood of its business, with its “Fulfillment by Amazon” service, in which smaller merchants use the company as its marketing, fulfillment and delivery partner, representing more than half of its total sales.
While they began in different places – Alibaba and Amazon in retail and FedEx and UPS in shipping – the lines of demarcation appear to be fading as the four converge on the business-to-business SMB sector. For example, UPS has built platforms like UPS e-fulfillment, an integrated service for storage, pick, pack and shipping services called “Ware2Go,” and “My Choice for Business” that have taken the company well beyond its traditional mandate. Amazon has evolved from a book and CD seller into a shipping and logistics giant, with most of its investment today aimed at expanding its distribution and delivery network. About 14 years after its founding, Alibaba in 2013 created Cainiao Logistics along with eight other partners to serve as its logistics unit. A couple of years ago, however, Alibaba took majority ownership of the unit and has since been expanding it across Asia and North America.
Michael Zakkour, who runs the global digital commerce unit of Tompkins International, a logistics and supply chain management consultancy, said Alibaba, through Cainiao, has been forging partnerships with U.S.-based carriers and third-party logistics providers. Zakkour, who has followed Alibaba for years, said it is unlikely to pursue an Amazon-like strategy of building out its own shipping network, and will instead rely on partnerships. Another difference, according to Zakkour, is that Alibaba would never position itself as a partner and competitor, unlike Amazon which competes with its partners. “It is against their culture. It is not who they are,” said Zakkour, referring to Alibaba.
UPS is a preferred shipping provider, and, according to UPS spokesman Steve Gaut, it sees the opportunity to support many of Alibaba’s small business sellers with its new “worldwide economy” service, which offers five- to 12-day transit times for low-priced goods moving in cross-border e-commerce.
Then there is JD.com (NYSE:JD), the Chinese logistics and e-commerce giant whose shipping network is unrivaled in size and scope, but which is still predominantly China-centric (although it has expanded to other Asian points). In March, JD launched a store to sell its products on Google Express, the online shopping site owned by the unit of Alphabet Inc. (NASDAQ:GOOG). The store’s launch came less than a year after Google agreed to invest $550 million in JD. However, for JD to become a key player in the SMB market in the U.S., it will have to eventually build its own footprint, said Zakkour.
The erection of these giant ecosystems and the three backbones of the future – logistics, technology and an embrace of the new retail environment – has one overarching goal, according to Zakkour. He said it is to become a global version of Amazon Prime, the popular service where free one-day shipping is available to Prime members on more than 10 million items, a number that will inevitably grow. The mission over the next couple of years, Zakkour explained, is to offer guaranteed two- to three-day deliveries between any two points anywhere in the world, he said. The differentiator will not be the product selection or even their cost, he said. It will be in the reliability of getting it there. The vendor that does it best will win the wallets of SMBs and their customers.