(Yicai) Sept. 9 -- Alibaba Group Holding has merged its 1688 and Alibaba.Com wholesale businesses into Global Wholesale, as part of the Chinese e-commerce giant’s efforts to further integrate its business-to-business e-commerce segment.

Global Wholesale, led by Alibaba.Com’s General Manager Zhang Kuo, will leverage artificial intelligence technology to consolidate the advantages of the Chinese supply chain and connect domestic and international markets, Yicai learned from Alibaba yesterday. 1688’s head Yu Yong will be reassigned to another role within Alibaba.

In its latest earnings report released late last month, Alibaba said that it will present its Alibaba E-Commerce Group’s revenue as China E-Commerce, China Quick Commerce, International E-Commerce, and Global Wholesale going forward to unlock synergies across the company’s domestic and cross-border e-commerce businesses.

Alibaba E-Commerce’s revenue rose 4 percent to CNY205.9 billion (USD30.3 billion) in the three months ended June 30 from a year earlier, with revenue from Global Wholesale up 7 percent to CNY13.9 billion (USD2 billion), accounting for 6.7 percent of the total.

The core challenge of merging 1688 and Alibaba.Com is breaking down the divide between domestic and foreign trade, allowing factories to serve both domestic wholesale orders and overseas inquiries within a single product portfolio, said Zhang Yi, chief executive officer and chief analyst at iiMedia Research.

One reason for the merger is increasing pressure from competitors. For example, Pinduoduo previously said it planned to invest CNY100 billion over the next three years to integrate the supply chain resources of Pinduoduo and Temu. Shein announced it aims to further strengthen its competitiveness by connecting long-tail demand with supply.

Another reason is the recent industry changes, such as rising customer acquisition costs in foreign trade, factories in industrial clusters aspiring to expand their reach overseas but lacking the resources to do so, and the popularization of AI procurement and AI agents making buyers more inclined to connect directly with factories.

AI technology will bring tremendous changes to B2B trading platforms and may even fundamentally transform the business model itself, said Jiang Fan, CEO of Alibaba E-Commerce. Accio Work, a plug-in AI agent helping small- and medium-sized businesses automate daily operations, launched by Alibaba.Com in March, is already being used by more than 50,000 paying merchants.

AI is changing users’ purchasing habits and empowering merchants in product selection. Promoting innovative AI applications in B2B and improving coordination efficiency between demand and supply chains will be among Alibaba’s main challenges after the merger.

“The trend of cross-border competition extending into the supply chain is irreversible,” Zhang Yi noted. However, connecting domestic and international supply chains and markets may bring risks, such as uneven product quality and increased quality control and compliance issues, which will further test platforms’ governance capabilities and raise governance costs, he added.

Editor: Futura Costaglione