Need another sign that Alibaba Group wants to make a splash in the U.S. e-commerce market?
Alibaba Owns 40 Percent of ShopRunner, the Company That Wants to Take on Amazon
The Chinese company made a $202 million investment in the Amazon Prime competitor last year.
ShopRunner
Jason Del Rey has been a business journalist for 15 years and has covered Amazon, Walmart, and the e-commerce industry for the last decade. He was a senior correspondent at Vox.
The company said in today’s IPO filing that the $202 million investment it made last year in e-commerce outfit ShopRunner gave it a 39 percent stake in the privately held company. That obviously doesn’t give Alibaba majority control of ShopRunner (yet), but it’s a sizable chunk of a company that has designs on competing with Amazon.
So what is ShopRunner anyway? Right now it’s best known as a competitor to Amazon Prime, the $99-a-year membership program that gives Amazon shoppers free two-day shipping on millions of products.
ShopRunner, on the other hand, sells a $79 annual membership that gives online shoppers free two-day shipping on orders from an array of big brands and retailers, including Toys R Us, Neiman Marcus and Calvin Klein. It also makes money by taking a cut of somewhere between two percent and five percent of the purchases its members make on partner sites.
But beyond that, the company is being aggressive in its bid to lure customers away from Amazon Prime. For one, it’s giving away a free year of its service to Amazon Prime customers in the wake of Prime’s price hike.
It also doesn’t charge an annual fee for American Express cardholders; American Express is also an investor.
Still, this is just a 1.0 version of what ShopRunner hopes to become, its CEO Scott Thompson told me in an interview last year. (Yes, that Thompson — the former PayPal president best known for his short, scandal-ridden tenure as CEO of Yahoo.) His description of future plans was low on details but high on ambition:
We are assembling a very, very large group of consumers in the network who turn out, even today, to be the best digital shoppers … high lifetime-value customers. And then, as a result of being in the network, we’re getting those high-value consumers to concentrate spend among our retail partners.
You can begin to imagine, then, if Scott and team are able to grow the network to be 10 or 12 or 15 million of these consumers, and then what can he do with 15 million people actively engaged in this way. I wouldn’t want you to let your imagination run wild, but there are three or four or five things, when you thought about it, that are adjacent opportunities that we’re going to tackle over the next two to three years.
(My imagination is still running, Scott!)
Who knows whether Alibaba will eventually take majority control of ShopRunner and use that business as the foundation of its e-commerce play in the U.S, with other investments such as luxury e-commerce site 1stdibs feeding off it. At a minimum, it is making a big bet that ShopRunner will continue to make inroads in the increasingly competitive e-commerce landscape against Amazon and others.
This article originally appeared on Recode.net.
