Alipay’s ePass – A Simple Premise With Big Promise

There is more meaning than there used to be in the phrase “just one more thing.” Steve Jobs can be thanked for this. After all, he used those words to introduce the very special “i” line of products over the years, and it is a recognizable part of the theatrical package of product introductions that Apple created and perfected and that many others have imitated.

Alibaba chairman Jack Ma is often compared to Jobs. Forbes officially crowned Ma the “Steve Jobs Of China,” in 2010. That comparison is drawn for many reasons, one of which is Jack Ma’s reported “quirkiness.” The third richest man in China reportedly encourages employees to create kung fu related nicknames for themselves and has built an HR infrastructure around how well workers exhibit their integrity and passion.

And while it’s quite clear that Jack Ma’s quirks are his own, the latter half of 2014 also might indicate that he’d studied the JOMT Steve Jobs playbook as he began Alibaba’s and Alipay’s aggressive assault of international markets.

Alibaba Group’s record breaking IPO was undeniably the headline. At $25 billion, it was the largest global IPO in history on the NYSE, surpassing both exchange record holder Visa and international record holder the Agricultural Bank of China.

While there was no missing Alibaba’s entrance onto the world stage with the IPO, the“ just one more thing” that everyone but payments watchers might have missed was the quiet announcement by Alipay – the formerly proprietary, now independently run payments arm of Alibaba – of the ePass system for U.S. retailers. The Alipay ePass is designed to make it easy for U.S merchants to add an Alipay button to their site and gain access to the 800 million or so Chinese consumers who have an Alipay account.

“We want to demystify the Chinese consumer for U.S. retailers,” said Jingming Li, president and chief architect of Alipay U.S., according to the LA Times. Alipay U.S. has a U.S. base in Santa Clara, California, alongside its affiliate Alibaba.

EPass is not, on face, quite as flashy as a $25 billion IPO or a market cap north of $200 billion, and therefore, may not make for quite as exciting a headline. Then again, according to some reports, Chinese consumers spent almost $300 billion online in 2013, and that’s a number that’s only expected to trend up as more and more Chinese consumers go online and gain access to goods and services. That is on top of an emerging middle class whose brick-and-mortar shopping habits abroad indicate that there is a strong and underserved market for Western goods online.

Alipay is now making a play to be that expansive and expanding base of consumer payments – and it just might capture more of the global eCommerce market while it’s at it. How does it work, who does it help and how is it pushing the world domination plan forward? We have your guide sheet here.

ePass – A Simple Premise With A Big Promise

Alipay is leveraging its close ties to eCommerce mega player Alibaba as a positive benefit for U.S. retailers looking to enter into the potentially very lucrative Chinese marketplace. Some Western players – H&M, Gilt, Airbnb –  already accept Alipay as a payment method, and ePass is essentially an expansion on those services.

Specifically, the service will look to help retailers deal with currency exchange, customs, and shipping logistics so that merchants can eliminate the friction associated with reaching Chinese consumers who want to shop their sites online.

Additionally, through ePass, Alipay will provide marketing assistance to U.S. retailers trying to reach Chinese consumers without having to physically open stores in China.

“We’ve been there for 14 years: we know the customers, know their marketing channels,” Li said in an interview. “We know how to turn a visitor into an actual shopper.”

Alipay will take a cut of sales in exchange for its services, though the company declined to provide details on how much.

To tie in ePass, a retailer must first install it as an API on their site. During the installation process, merchants also select what currency they want sales to be converted into. Chinese consumers pay in yuan – currency conversions are done at checkout, and Alipay provides the cross-border payment processing.

“The eCommerce market will be a $650 billion market in 2020,” Alipay’s Li noted. “Cross-border and global [commerce] is going to be a significant part of it.”

And, it seems, Alipay is set on being a significant part of that eCommerce marketplace.

Today only $15 billion in sales goes from the U.S. to China. This could increase to $291 billion by 2020, and Alipay could be responsible for a lion’s share of that growth by connecting markets to consumers without them having to invest in a physical presence in either country to do so.

Changing The Playing Field

Because ePass is relatively new to the market, it remains to be seen if it will live up to its potential.

But there does seem to be at least some early indications that ePass and the more globally-minded Alibaba ecosystem are filling in a hole in the eCommerce marketplace. Especially if one takes a close look at emerging marketplace ShopRunner.

Nearly a year ago, MPD CEO Karen Webster asked if Alibaba + ShopRunner could = “Open Sesame” for digital commerce.

“We have a tendency, I think, to read all of this and think that Jack Ma has sure done a great job of tapping into the Chinese market. Except that he’s not just building a Chinese company to operate in China. Now some 20 years since its launch, the company started by a former English teacher has built and acquired the assets and the knowledge that could shape the nature of commerce in China, the U.S. and around the world,” Webster wrote, before explaining at some length why Alibaba’s big investment in ShopRunner – and giving customers a new place to use Alipay – might just be the smart way to play for international exposure.

ShopRunner is often compared to Amazon – and they are both online marketplaces that offer free two-day shipping to members. ShopRunner, however, is not about lowering prices, instead advertising itself as a digital space where retailers can cultivate consumer relationships with particular brands: partners like Cole Haan, Under Armour and Neiman Marcus.

“These businesses spend a lot of money to do the right thing with their brands. I want the segment of customer who says I want to pay a fair price, but I want the experience to be predictable,” noted CEO Scott Thompson. “It’s that age-old tenant in the mall that draws customers in, and people around it benefit from the traffic.”

ShopRunner had a strong 2014 and doubled its membership to 2.4 million; it is also expecting a strong 2015 with another double over in users. And part of that is creditable to the Alipay customer using ShopRunner to gain access to American brands.

“ShopRunner’s ability to drive growth and profitably for our retail partners has increased dramatically this past year with the rapid expansion of our member base as well as the launch of our first cross-border program with Alipay in China,” Thompson noted when the ePass integration was announced last fall. “This particular offering will help to eliminate many of the obstacles that have stood between our retail partners and the dynamic Chinese domestic market.”

And, it seems, Alipay and Alibaba may soon be working to lower barriers to entry to the Chinese market in a way that no other player can quite match. Also important: by making it easy for a marketplace like ShopRunner to bring that army of underserved, eCommerce-enthused and brand-particular Chinese shoppers to its mall,  it allows them to better compete with players like Amazon by guiding consumers worldwide to their site via their payment mechanism.

It’s hard to compete with the largest IPO in history for the headlines. But, if Alipay can really blow open cross-border commerce for Chinese consumers and create an active competition among Western merchants for China’s digital spend, that “one more thing” from 2014 might just end up being the biggest thing that happened.