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Alibaba Bolsters Import Capabilities With New Initiatives

Zacks Equity Research

Alibaba Group Holding Limited’s BABA robust efforts toward enhancing product offerings continue to aid its dominance in the Chinese e-commerce space.

In fact, the company’s latest retail strategies focused on bolstering the inflow of imported goods into China are completely in sync with its strategies.

Recently, the company’s online marketplace that is open for international brands namely, Tmall Global, has announced two such initiatives – Centralized Import Procurement (“CIP”) and Tmall Overseas Fulfillment (“TOF”).

Both the initiatives are likely to encourage sellers globally irrespective of scale to foray into the retail space of China and strengthen customer base by reaching out to the company’s 700 million active users.

Moreover, this will expand options of imported products on Alibaba’s Tmall platform which in turn will help it cater to growing consumer demand for imported goods.

Consequently, this will drive the company’s top line.

Deepening Focus on Import

Notably, CIP program focuses on proliferation of imported goods across all Alibaba’s online and offline stores such as Hema fresh food grocery chain, Intime Department Store and Tmall Supermarket. Alibaba will execute this program by utilizing its six procurement centers around the world.

Further, TOF initiative enables international brands to gauge the popularity of their products in China before making a full entry. Sellers from outside China can keep a small sample of their products at one of the TOF centers, currently located in Japan, South Korea and the United States. These products will then be sold in China via Tmall Global platform.

These initiatives bode well for Alibaba’s growing focus on bolstering its import capabilities and catering efficiently to the demand of Chinese consumers.

Additionally, the initiatives are likely to accelerate the company’s plans of bringing international goods worth $200 billion into China over the next five years.

Alibaba Group Holding Limited Revenue (TTM)

 

Alibaba Group Holding Limited Revenue (TTM) | Alibaba Group Holding Limited Quote

Import Initiatives to Aid Growth

The online retail market of China is witnessing a boom on account of increasing penetration of Internet and mobile use.

Per a report from Forrester, the country’s online retail market is anticipated to reach $1.8 trillion by 2022. Further, sales in this market is expected to witness a CAGR of 8.5% between 2018 and 2022.

Further, eMarketer’s report shows that China is anticipated to contribute 56% of the global online retail sales in 2019 which is expected to cross 63% by 2022.

Consequently, Alibaba with its expanding portfolio of imported goods and robust retail strategies is likely to gain further traction in this potential Chinese market.

Moreover, its latest move is expected to provide a tough competition to the likes of Amazon AMZN and JD.com JD which are also leaving no stone unturned to strengthen e-commerce market share in China.

Reportedly, Amazon is discussing terms about merging its China business with Kaola, a Chinese e-commerce firm owned by NetEase NTES in order to expand its exposure in China’s online retail space. We note that Kaola sells apparel, household appliances and other products which are imported from overseas manufacturers.

Nevertheless, Alibaba’s well-performing Tmall Global, known as the biggest cross-border platform in China, offering more than 20,000 overseas brands under 4,000 product categories from 77 countries is likely to continue its dominance in China.

Currently, Alibaba carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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