Alipay opens Chinese consumers to global retail

A new service from China's largest online payment service provider Alipay looks set to unleash a huge wave of Chinese consumer spending on the Internet.

Alipay, a subsidiary of China's largest e-commerce company Alibaba Group, announced Tuesday a new international service which allows consumers in mainland China to buy directly online from global retailers.

According to a company statement, the new service enables foreign currency transactions between Chinese consumers and overseas retailers.

The service, said to be the first online payment of its kind in China, enables transactions between renminbi and 12 major foreign currencies.

Welcoming the news, Shaun Rein, managing director of China Market Research Group, told ZDNet Asia that the announcement "will revolutionize the way China's middle class shop".

"We have conducted interviews in Beijing, Shanghai and Guangzhou, and consumers always complain about the weak product selection in China's retail stores. Alipay will now let China's emerging 250 million-strong middle class buy whatever items they want that are available in the world," Rein said.

"They no longer have to travel abroad to buy items, which is very important for the middle class who cannot always afford to travel overseas. But they can now buy what they see on the Internet and in magazines."

According to the market researcher, Chinese consumers buy US$6 billion worth of luxury items every year, of which only one-third are purchased in China.

Rein said the Chinese prefer to travel overseas to shop because of the wider product selection, and goods are cheaper abroad due to China's high import duties.

Alipay's first international retail partners include Asian cosmetics retail giant Sa Sa International Holdings, and J Shoppers, a subsidiary of Japan's largest listed mail order company Nissen On-line.

The company plans to expand its overseas partner list to over 100 online merchants by the end of 2007, which will include sellers of cosmetics, fashion, bags, jewelry, household and digital products.

Retailers benefit
This announcement is also good news for global retailers, as they now have a way to Chinese consumers' pockets.

"For retailers, this is very exciting because they can tap into China's consumer frenzy by leveraging Alibaba's know-how, marketplace, and licenses," Rein said.

He explained: "Right now it is hard for foreign retailers to set up e-commerce platforms to tap the China market, because of the restrictions on foreign companies setting up interactive Web sites, and the high costs of setting up brick-and-mortar stores.

"They also do not have to worry about repatriating money back to their home countries, which is always a problem for MNCs because of China's tight currency conversion restrictions," he added.

With credit cards not widely used in China, Alipay's service will be a boon for e-commerce worldwide, Rein said. China has only 56 million credit card users compared to 1.2 billion debit card users.

Alipay claims to have more than 47 million users in China, with more than 80,000 new registered users each day. It handles 780,000 transactions per day, with average daily transaction volume exceeding RMB 150 million (US$19.9 million).

The company is projecting the new service to reach monthly transaction volumes of RMB 800 million (US$105.9 million) by the end of the year.