Chinese e-commerce giant Alibaba’s first attempt to make inroads in the U.S. market has soured. The Hangzhou-based company announced Tuesday that it is selling its U.S. subsidiary 11 Main to OpenSky. Another three companies – Auctiva, Vendio, and SingleFeed – that Alibaba acquired in 2010 and 2011 to provide fulfillment and logistics services will also become part of OpenSky.
Alibaba to get 37.6% stake in OpenSky
It was a stock-swap deal. Upon competition of the deal, Alibaba will own 37.6% stake in the New York-based online marketplace OpenSky. Though 11 Main’s website will continue to operate separately for now, its management team will be integrated into OpenSky. Inside sources familiar with the matter told TechCrunch that a large number of 11 Main employees will be laid off as part of the deal.
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Several top 11 Main executives, including VP of product and merchandising and VP of marketing, have already left the company. Alibaba launched 11 Main in June 2014 amid much fanfare. But the subsidiary has struggled since its inception. Analysts have said in the past that Alibaba was just testing the waters in the U.S. with 11 Main. The U.S. subsidiary contributes little to the Chinese company’s total revenue.
Alibaba to focus on cross-border transactions
Earlier this month, Alibaba founder Jack Ma made it clear that the company’s goal was to act as a facilitator between the U.S. small businesses and Chinese consumers. He encouraged American businesses to set up shops on Alibaba platforms and sell their goods to vast Chinese middle-class consumers. Alibaba will focus on cross-border transactions, he said.
Selling 11 Main is not the end of Alibaba’s U.S. ambitions, though. In March, the e-commerce giant opened its first U.S. cloud data center. Alibaba is also secretly backing Jet.com, which aims to take on Amazon. Jet aims to have 15 million customers and $20 billion in GMV by 2020. Alibaba has also made strategic investments in Snapchat, mobile search provider Quixey, and taxi-hailing service Lyft.
Alibaba shares rose 0.84% to $86.39 in pre-market trading Tuesday.