The arrival of China's e-commerce giant Alibaba in Melbourne is a good thing for Australia, but it could put extra pressure on local retailers, the Australian Retailers Association warns.

Key points: Online retailer Alibaba is one of China's biggest tech companies, worth $205.4 billion

Online retailer Alibaba is one of China's biggest tech companies, worth $205.4 billion Conglomerate to set up headquarters in Melbourne, which could generate employment and competition

Conglomerate to set up headquarters in Melbourne, which could generate employment and competition Local businesses who pay penalty rates, rent and GST may not be able to compete

Global Chinese conglomerate Alibaba officially opened its first Australia-New Zealand headquarters in Melbourne on Saturday.

Russell Zimmerman, executive director of the Australian Retailers Association, said the foreign retailer would generate employment and competition in Australia, but he said growing pressures were reducing Australian businesses' ability to compete, including the high cost of rent, penalty rates, and loopholes in GST rules for online purchases from overseas.

"Local retailers in Australia are doing it tough," he said.

"They are doing it tough because things like penalty rates, that's always going to be an issue, whilst we're paying those penalty rates and whilst retailers have got to compete with overseas retailers sending product in directly."

Alibaba, worth $205.4 billion, according to Forbes, reaps massive profits in China on shopping spree days like Singles Day — which could be compared to the Boxing Day sales, but on a much bigger scale.

In 2015's Single Day sales, Alibaba's main retail site, Tianmao, sold more than $7 billion of merchandise in the first 90 minutes alone.

The shopping day has even been blamed for shortages of Australian infant formula, which is among the products being discounted.

The group's billionaire founder Jack Ma, who spent time in Australia as a young man, said he hoped the e-commerce giant would help Australian and New Zealand businesses "share their world-famous products with billions of customers around the world".

There are more than 1,300 Australian and 400 New Zealand brands on Alibaba's Tmall and Tmall Global, the company said in a statement.

Alibaba has already formed partnerships with Woolworths, Australia and in May 2014 signed a deal with Australia Post to connect Australian consumers with Chinese manufacturers while at the same time boosting Chinese consumption of Australian products.

It is the company's first expansion in the region as it seeks to tap growing global demand for products from the two countries, but Mr Zimmerman said the move was no surprise.

"We're seeing the international retailers look at Australia very carefully at the moment."

And he said Alibaba made a calculated business decision by choosing Melbourne as their Australian base.

"It's probably seen as the fashion capital of Australia anyway," Mr Zimmerman said.

"Secondly, I think it's really around the opportunity to work with governments and I've no doubt they will be.

"Melbourne is predicted to be the largest city in Australia I think in about twenty years' time."

The Australia Bureau of Statistics (ABS) said Melbourne is Australia's fastest growing capital city.

What is Alibaba? Founded in 1999, it is now the most popular destination for online shopping

Founded in 1999, it is now the most popular destination for online shopping Transactions on Alibaba sites total more than eBay and Amazon combined

Transactions on Alibaba sites total more than eBay and Amazon combined It has three main sites: Taobao, Tmall and Alibaba.com

It has three main sites: Taobao, Tmall and Alibaba.com CEO Jack Ma is China's second-richest man

CEO Jack Ma is China's second-richest man In January, Jack Ma met with US President Donald Trump to talk about creating US jobs

ABC/Reuters