FORBES: Alibaba -- A Threat to Amazon, eBay, Walmart and Everyone Else
Alibaba Group is a private Chinese company that is the largest business- to-business and consumer-to-consumer company in the world. Headquartered in Hangzhou, China it has huge e-commerce revenues. It has a strong presence in retail and payment platforms, and a robust shopping search engine. According to recent reports two of Alibaba’s portals handled gross sales of $170 Billion in 2012 – that is more than eBay and Amazon gross sales combined sales. (Amazon’s gross trading volume last year was an estimated $95 Billion and eBay gross trading volume was an estimated $75 Billion).
The company is a master at on-line shopping. Part of the success is driven by the Chinese customer who does more more on-line shopping than any other consumer in the world. According to a study published by Focus Money magasin, Chinese consumers shop on-line 8.4 times each month, compared to 5.2 times in the United States; 4.3 times in Great Britain; 2.9 times in Germany; 2.8 times in the Netherlands; 2.6 times in France; and, 2.3 times in Switzerland. Considering its large customer base and their propensity toward repeat business, Alibaba a massive market opportunity in its home country and it shows in their gross sales numbers. With so much success at home, Alibaba’s management has voiced ambitions to grow globally.
The company was founded by Jack Ma (Ma Yun) in 1999. It was developed after American models such as Taobao, similar to EBay, and features a billion products. It is one of the most visited website globally. The wholesale platform, AliExpress, allows small buyers to buy small quantities at wholesale prices. Tmall is a business to consumer platform. eTao is a smaller search engine while, Alipay is a third party on line payment platform similar to PayPal. Aliyun is a cloud computing company which is building data-centric computers while China Yahoo! is a strategic partnership with Yahoo! Inc.
Yahoo!’s investment in Alibaba has grown tremendously. A recent return of some of t
Continued...Yahoo!’s investment in Alibaba has grown tremendously. A recent return of some of the shares to Yahoo! shareholders yielded them $7.1 Billion in cash plus some preferred shares. Yahoo! Still owns 24% of Alibaba’s shares – a valuable asset. It is likely that Alibaba will go public, driving further value for shareholders. Many investment bankers have made the trek to China to help Jack Ma make up his mind. An IPO could come as soon as later this year or in early 2014.
Like anything in retailing, there is always someone who will sell merchandise cheaper and gain market share. Costco and Amazon are examples on how price is driven down on commodity merchandise through high volume and low overhead. It would be unwise to underestimate the potential of Alibaba Group. I visited their website and saw a broad offering including merchandise for the home, the kitchen, furniture, etc., etc. There was perfume for sale, and I also saw t-shirts, skinny dresses and other apparel—just a few examples. The prices are compelling and very cheap; while cheap is not everyone’s cup of tea, I am sure this aggressive retailer will respond to consumer demand by adjusting its future offerings as it goes abroad. They are now talking about building brick and mortar stores – while taking their concept global.
This is a retailer who understands the market place and wants to own a significant share. The company is using very, very low retail prices as a competitive weapon. The Internet is already very competitive – this company’s aggressive stance may destroy the already thin margins of many retailers. For the first time, in a long time, I am afraid of what’s to come in global retailing.