Inside Alipay's post-pandemic U.S. e-commerce push
Three years ago, Alipay began its brick-and-mortar conquest of North America, promoting acceptance of the Alibaba affiliate Ant Group’s mobile wallet at shops targeting Chinese tourists, eventually reaching thousands of U.S. and Canadian stores.
Now Alipay wants to do the same thing with U.S. e-commerce providers, but after coronavirus decimated Chinese tourism, the new focus will be hundreds of millions of middle-class Chinese Alipay users shopping from their home market.
The timing is auspicious. Coronavirus travel restrictions dealt a blow to Alipay’s bottom line from several directions, because the mobile wallet typically handles Chinese visitors' payments for U.S. flights and ground transportation in addition to shopping.
Travel and luxury shopping merchants in North America catering to Chinese tourists have seen precipitous sales declines since the pandemic began, and Chinese-U.S. tourism isn’t likely to return to previous levels for years, said Gareth Lodge, a senior analyst with London-based research firm Celent.
Global political trends also likely play a role in Alipay’s newest ambitions, he suggests.
“The U.S. trade war with China dampened visitor numbers in 2019, but there were still around 3 million tourists who came and spent more than $10 billion,” Lodge said. “Alipay clearly wants to find a way to fill that gap between travel and tourism by building up e-commerce.”
Apart from tourism, Alipay is the primary purchasing vehicle for Chinese consumers for a huge array of services including grocery, food delivery, movie tickets, loans, insurance and wealth management — and as Chinese consumers' appetite for all kinds of U.S. goods grows, Alipay wants to play a key role in satisfying it.
Joanie Xie, the Alipay executive recently appointed to lead the company's U.S. e-commerce initiative, sees various ways to expand Alipay’s digital reach. One strategy will be capitalizing on the atmosphere of change and disruption gripping U.S. e-commerce merchants in the wake of the pandemic.
“We see a great opportunity, because with a lot of U.S. retailers’ sales down because of the pandemic, and Chinese consumers staying home, there’s huge potential for consumers there who want to buy U.S. products,” said Xie, head of U.S. business for Alipay.
Xie’s task will be persuading both small and large e-commerce companies to integrate with Alipay, and helping them bridge business and technical challenges to do so.
In her previous role at Alipay, Xie handled complex negotiations with major global technology companies including Apple and Google, working to add Alipay acceptance to local mobile wallets around the world. Xie's work enabled Chinese consumers to make purchases through iTunes and Google Play, and also established Alipay’s payment connections to Uber and Airbnb.
But building up U.S.-to-China e-commerce will require a different approach than Alipay used to conquer North American stores. To rapidly expand in the U.S. and Canada beginning in 2017, Alipay relied on a series of deals with acquirers including First Data, Verifone and Ingenico — all since swallowed up in payments mega-mergers — who brought maintegration for retailers from souvenir stores to luxury retailers and restaurants.
Alipay isn’t starting from zero with North American e-commerce operators. Alipay has 1 billion users in all with global partners, and merchants in more than 50 countries already offer Alipay as an option for Chinese consumers making online and in-store purchases.
“Alipay acceptance at the point of sale grew fast in the U.S. in recent years, and we’ve acquired a lot of merchants in the offline setting, including Walgreens and Sephora. Now we can help these same merchants by enabling Alipay access in online stores," Xie said.
Alipay already is working with digital payment integrators including Adyen and others, but the company wants to work directly with merchants to leverage marketing opportunities in addition to payment acceptance, Xie said.
Chinese consumers are also interested in buying online from smaller and specialty U.S. brands, and Alipay has resources to help them, she said. “It’s more than just connecting merchants to millions of Alipay shoppers in China for e-commerce. We know who these users are, their shopping behavior and we can help a merchant customize marketing to target who sees the offer.”
Xie expects to take a more hands-on role in developing Alipay’s relationships with U.S. e-commerce merchants.
One of her first moves will be planning roundtable discussions with various U.S. merchants to determine their goals and needs in expanding payment options and related e-commerce and marketing services, she said.
Building international shipping services between the U.S. and China won’t be an immediate concern for Alipay, Xie said, because many of Alipay’s online partners already have their own logistics capabilities to ship to China through companies like Shopbop.
“Chinese consumers have figured out their own shipping solutions using shipping forwarders,” Xie said.
While designer and luxury items like handbags and jewelry are top draws for Chinese shoppers, the Alipay audience in China also is increasingly interested in digital offerings from the U.S., including online education, Xie said.
Alipay is piloting some U.S. educational services to Chinese customers and is also in talks with software developers and entertainment companies to add these wares to Alipay’s e-commerce menu.
“We’re in talks with various software and digital providers … these negotiations can take more time,” Xie said.
Voice commerce will be a big area of development for Chinese consumers buying from U.S. e-commerce merchants, she predicts.
“Most Alipay e-commerce customers use their phones, and voice shopping [with phones, or with Alexa-like devices, or both] are getting a lot of traction in China.”
Credit options will be key to driving Chinese consumer e-commerce from the U.S., Xie said.
Alipay offers financing to Chinese consumers, including instant qualification for credit or installment payments. Huabei, a virtual credit card launched in December 2014, is a primary credit option and Alipay may add more.
Alipay’s credit options include repaying within 40 days of the purchase, and that includes the choice to convert the amount to installment payments of three, six or 12 months.
“Some merchants prefer to have installment options presented on the U.S. merchant’s website,” Xie said.
Scaling Alipay acceptance with U.S. e-commerce merchants likely will take more time and involve more individualized approaches with companies, according to Xie.
“Today my role is really focusing on helping U.S. businesses access a larger customer base in China,” she said.