Alibaba.com, Smarting From Scandal, Taps U.S. Entrepreneurs

Alibaba.com Ltd., the Chinese e-commerce company shaken by revelations of fraud, is heading West as it rebuilds trust, courting entrepreneurs in the U.S. and investing in online companies.

About 200 people attended a three-hour conference at Stanford University this week to hear how the company is helping businesses find Chinese manufacturers for their wares. Small businesses in the U.S., including peddlers of everything from bikes to light bulbs to ballet flats, are starting to tap Alibaba to find partners.

“In the States, nobody really knows about them,” said Jonathan Shriftman, who began using Alibaba.com last year to find a manufacturer for inexpensive fixed-gear bikes. Shriftman resells the bikes on his own website, SoleBicycles.com. “If you have an idea, it’s really easy to make stuff now.”

Alibaba, based in Hangzhou, east China, is aiming to lure people like Shriftman as part of its broader ambition to grow beyond its home country. The company, which has about 60 engineers in its Santa Clara, California, office, has identified the U.S. as its top investment priority. It bought Vendio Services Inc. and Auctivia, both California-based companies, last year and is looking for more acquisitions, former CEO David Wei said in an interview in August.

The Stanford seminar kicked off a tour of 15 California schools to help people jump-start international businesses. Many attendees were entrepreneurs, who asked venture-capitalist panelists for advice on business ideas and mingled after the event over dim sum Alibaba provided. Many said they came away with interest in using Alibaba’s marketplace, which lets them search for manufacturers around the world, helping them save money as they nurture their small businesses.

Turning to Colleges

Alibaba.com said it’s turning to colleges after noticing that during the economic recession, many new users were students buying from suppliers to start their own companies.

As Alibaba courts U.S. business owners, it will have to mend its image and rebuild customer confidence. Alibaba.com’s shares have tumbled 8.2 percent since the company said on Feb. 21 that more than 2,300 vendors used its website to defraud global buyers. Wei and Chief Operating Officer Elvis Lee, who weren’t accused of wrongdoing, resigned.

Alibaba.com shares rose 3.7 percent to HK$15.32 at the 4 p.m. close of trading in Hong Kong. The stock has gained 9.9 percent this year, underperforming Chinese Internet rivals including Baidu Inc. (BIDU) and Tencent Holdings Ltd. (700)

The company is still trying to smooth over the scandal. At the Stanford conference, an Alibaba spokeswoman addressed the incident, saying the company wanted to send a message to customers that it values transparency and that it will fix any shortcomings.

Global Customers

The Stanford event was part of a weeklong entrepreneurship program at the university with lectures and workshops. The goal, executives said at the conference, is getting entrepreneurs to think about their suppliers and customers as global, rather than simply within their country.

“If you want to start a business, Alibaba.com is a great launch pad for you,” said Tami Zhu, who oversees business development and marketing at the company.

There aren’t many companies offering services similar to Alibaba.com’s to U.S. entrepreneurs, said Ryan Miller, an e-commerce strategist at Burlington, Massachusetts-based DemandWare Inc., which helps companies such as Barneys New York and Anne Klein run their websites.

“If you want to customize an iPhone case, Alibaba can put you in contact with multiple companies in China that can provide that,” said Miller, who founded his own Internet-commerce company in China in 2004. “They are definitely pioneers in that area.”

Responding to Fraud

Some students said they were reassured by Alibaba’s response to the fraud and the resulting executive departures.

“It was a pretty noble thing, seeing how most executives of American companies react to those types of things,” Shriftman said.

Still, Alibaba was unable to persuade at least one entrepreneur, Greg Wientjes, to give up his online video-conferencing ambitions to pursue a business selling physical wares.

“I feel more enthusiastic about building digital products than physical goods because it seems more capital-intensive,” said Wientjes, a student at Stanford who is developing an application that runs on Facebook Inc.’s social-networking website. “This is the way the world is going.”

Slowing Growth at Home

Alibaba.com, whose parent also runs Taobao, an Internet-auction company that’s similar to EBay (EBAY) Inc., is stepping up its expansion in overseas markets including the U.S., India and Japan to counter slowing customer growth in China. Subscribers for the export-oriented China Gold Supplier program rose by about 12,000 in the first nine months of 2010, compared with more than 41,000 a year earlier, according to data disclosed by Alibaba in November.

Yahoo! Inc. (YHOO), owner of the most-visited U.S. Web portal, is the biggest shareholder of Alibaba Group Holding Ltd., which owns a 73 percent stake in Hong Kong-listed Alibaba.com.

As Alibaba.com promotes its site to entrepreneurs, it may also be laying the foundation for a coming showdown with EBay, owner of the largest e-commerce marketplace, said Scot Wingo, chief executive officer of ChannelAdvisor Corp., which helps more than 3,000 businesses with their online strategies.

U.S. Expansion?

“It seems they’re up to something pretty serious,” Wingo said. “A lot of people in the industry think that behind the scenes they’re going to start a Taobao equivalent in the U.S. and more directly compete with EBay.”

Alibaba.com says it has no plans to target consumers and go head-to-head with EBay in the U.S.

Key to Alibaba’s ambitions outside China will be increasing awareness among entrepreneurs like Shriftman, who said he had never heard of Alibaba until a year ago when he searched the term “bicycle manufacturer” on Google.com.

The company plans similar international-business seminars this year at University of California, Berkeley, and California State University in Fresno, among other schools.

To contact the reporter on this story: Joseph Galante in San Francisco at jgalante3@bloomberg.net

To contact the editor responsible for this story: Thomas Giles at tgiles5@bloomberg.net

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