UPS Takes a Magic Carpet Ride

"On a cloud of sound I drift in the night
Any place it goes is right
Goes far, flies near, to the stars away from here

...
Why don't you come with me little girl
On a magic carpet ride."
-- Steppenwolf

If UPS (NYSE: UPS  ) doesn't license the rights to Steppenwolf's Magic Carpet Ride to advertise its new partnership with Alibaba -- well, it's dumber than doughnuts.

UPS yesterday announced a strategic alliance with AliExpress, the new wholesale marketplace established by Chinese business-to-business star Alibaba.com. From now on, when an international buyer uses AliExpress to hook up with a Chinese manufacturer on a small contract, UPS will be the preferred means of moving the contracted goods. UPS is also integrating its online "shipping and tracking processes" into AliExpress' platform, permitting customers "to print UPS shipping labels and request pick-up for their UPS packages all from within the AliExpress website."

It's another step toward one-stop, B2B shopping for Alibaba, and a big win for UPS in its struggle with FedEx (NYSE: FDX  ) for global marketshare.

But it isn't just a win for UPS. Far from it. I mean, ordinarily you think of China as the place where foreign companies seek out local partners to acquire an edge. Think Activision Blizzard's (Nasdaq: ATVI  ) partnership with NetEase.com (Nasdaq: NTES  ) to distribute World of Warcraft or pretty much any automaker's tie-up with local car-parts makers. But in this case, the bigger benefits flow the other way.

According to Alibaba, the "initial supplier base" expected to use AliExpress "includes companies from mainland China." However, "the platform eventually will be open to international suppliers as well." In other words, Alibaba aims to use its alliance with UPS as a springboard to global B2B dominance. In this regard, you'll also want to tick the "wins" column for Yahoo!, for taking a prescient stake in Alibaba's parent company, Alibaba Group Holding.

Foolish takeaway
Seeing as Alibaba doesn't trade on either of the major U.S. exchanges (only on the liquidity-challenged pink sheets), your first instinct may be to discount this news as "not something I can invest in." That would be a mistake.

Think about Yahoo!'s hidden interest in Alibaba and UPS' overt benefit from embedding itself ever-deeper in the Chinese economy, alongside its more U.S.-centric catalysts. If you look hard enough, this deal offers investing angles aplenty.

"Close your eyes girl
Look inside girl
Let the sound take you away ..."

Fool contributor Rich Smith owns shares of Activision Blizzard. Netease.com is a Motley Fool Rule Breakers recommendation. Activision Blizzard and FedEx are Motley Fool Stock Advisor picks. United Parcel Service is a Motley Fool Income Investor selection. Motley Fool Options has recommended a synthetic long position on Activision Blizzard. The Fool owns shares of Activision Blizzard. Try any of our Foolish newsletters today, free for 30 days. The Motley Fool has a disclosure policy.


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