Reportedly, Alibaba Group Holding Limited (BABA - Free Report) has agreed to partner with office supplies retailer Office Depot Inc. (ODP) to create an online store on Alibaba.com. The deal will help both the companies to expand their reach with small businesses.
The deal is aimed to empower and grow U.S.-based small and medium-sized businesses by selling their products to American and international clients on Alibaba.com.
Per the deal, both the companies will invest in marketing to make small and medium businesses (SMBs) aware of new products, services, as well as opportunities on the Alibaba platform. Alibaba aims to offer its big data capacities to U.S. merchants to help them explore new retail opportunities across technology, customer relationship management, supply chain management and logistics.
The Chinese e-commerce giant expects the deal to help it expand its share in United States, increase e-commerce activities and gain greater efficiency.
Competitive Move to Tap U.S. Sellers
The deal is a strategic motive behind tapping U.S. sellers. It is probably Alibaba’s strategy of countering tough competition from established players such as Amazon, eBay and JD.com in the United States.
The strategy behind attracting small businesses appears to be part of its efforts to tap the relatively untapped portions of the retail market. Unlike big brands, small businesses cater to niche markets and tapping them could help Alibaba bring these markets into its fold.
E-Commerce is benefiting from robust online sales growth, which is expected to continue in 2019 as well. Increasing mobile usage for browsing and shopping, as well as growing proliferation of devices like Echo will help the company in sustaining its momentum.
Additionally, increasing business-to-business (B2B) e-commerce sales is noteworthy. The segment is projected to hit $1.2 trillion in the United States by 2021, according to Forrester Research.
The deal aims to help SMB’s, which currently represent 99.7% of all U.S. companies, to grow and take advantage of this growing B2B e-commerce.
The head of North America B2B at Alibaba, John Caplan said, "With Office Depot, we will be able to offer SMBs more choice, greater access, and further opportunities to grow."
Zacks Rank & Stocks to Consider
Currently, Alibaba has a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader technology sector include Expedia Group, Inc. (EXPE - Free Report) , AMETEK, Inc. (AME - Free Report) and Inphi Corporation (IPHI - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Long-term earnings growth rate for Expedia, AMETEK and Inphi is projected to be 13.4%, 9.6% and 18.5%, respectively.
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