Alibaba's Office Depot Deal Won’t Help Trump’s Trade Balance
(Bloomberg Opinion) -- Soon after Donald Trump got elected, a host of Asian business leaders responded by flying to the U.S. to shake his hand and pledge to create more jobs for Americans.
Since then, the U.S. 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 U.S. jobs even before Trump took office. 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 U.S. 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 U.S. Businesses. Put simply, Office Depot customers will be able to access not only the U.S. company’s catalog but Alibaba’s, too.
American SMBs – who account for 99.7% 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 U.S. 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 U.S. 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 U.S. SMBs sell their products to buyers in the U.S. 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 U.S., 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 U.S. 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 U.S. that helps Alibaba realize Jack Ma’s goal of garnering half its revenue from outside China by 2025. It won’t do much for President Trump’s plan to rebalance trade with China.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Tim Culpan is a Bloomberg Opinion columnist covering technology. He previously covered technology for Bloomberg News.
©2019 Bloomberg L.P.