You are here

Alibaba's Office Depot deal won’t help Trump’s trade balance

[TAIPEI] Soon after Donald Trump got elected, a host of Asian business leaders responded by flying to the US to shake his hand and pledge to create more jobs for Americans.

Since then, the US president has continued to flay China for the massive trade imbalance between the two nations. It's been the spur for raising tariffs and dragging Beijing to the bargaining table to flesh out a fresh deal.

One of those quick to show his face was Jack Ma, the founder of Alibaba Group Holding Ltd., who vowed to create one million new US jobs even before Mr Trump took office. Mr Ma later walked back that commitment, blaming the growing trade war as a reason that couldn't happen, even though the figure was the result of some creative accounting and unlikely to go through, anyway. Nevertheless, the sentiment seemed real: Alibaba would help US small and medium businesses (SMBs) and farmers sell their wares to China.

At first glance, a deal announced on Monday with Office Depot Inc appears to put some meat on the bones of that initial undertaking. The headline alone sounds promising: Office Depot and Alibaba.com Form Strategic Collaboration to Serve US. Businesses. Put simply, Office Depot customers will be able to access not only the US company's catalogue but Alibaba's, too.

sentifi.com

Market voices on:

American SMBs – who account for 99.7 per cent of all companies in the United States – need more ways to grow and compete in today's economy and take advantage of the enormous opportunity in B2B e-commerce.

Dig deeper, though, and this tie-up isn't about helping US businesses sell their goods, but making it easier and more convenient to buy products beyond Office Depot. From that angle, the deal helps Alibaba's mostly Chinese clients sell directly to "more than 10 million US business customers" by tapping into Office Depot's logistics network.

In the last bullet point of their press release, the two companies said they intend to "help US SMBs sell their products to buyers in the US and around the world through Alibaba.com". This looks more like an afterthought than an actual plan.

Over more than a decade, Alibaba has built up an impressive logistics system that allows sellers on its platform to ship anywhere in China, often overnight. Yet the Hangzhou-based company lacks boots on the ground in foreign territories like the US, which is among the reasons why it gets less than 9 percent of its revenue from international commerce.

A deal like the one with Office Depot helps solve that problem. It also smooths out points of friction for a US buyer seeking cheaper Chinese goods, one who may have otherwise bought locally or turned to an American distributor to source those products. From there, it's not a stretch to say that Alibaba has a good shot at becoming for business buyers what Amazon.com Inc became for retail shoppers.

This agreement could be an important beachhead in the US that helps Alibaba realise Mr Ma's goal of garnering half its revenue from outside China by 2025. It won't do much for Mr Trump's plan to rebalance trade with China.

BLOOMBERG