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New Trade Network Can Boost Alibaba Stock

James Brumley

Amazon.com (NASDAQ:AMZN) may be the top-of-mind name when it comes to e-commerce stocks. But that might not be the case five years from now. Though it’s taking a different path to attaining market domination than Amazon, China’s Alibaba Group Holding (NYSE:BABA) may well supplant its American counterpart as the most feared and respected name in the sector.

That’s not as outrageous as it sounds.

The seeds of Alibaba’s growth have only just begun to be planted. Indeed, it’s unlikely that many American owners of BABA stock even realize that those seeds are now taking root.

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But give BABA time. Once the full potential of BABA CEO Jack Ma’s newest vision starts to become apparent, Amazon’s chief, Jeff Bezos, may be asking “Why didn’t I think of that?”

It’s Called an Electronic World Trade Platform

Alibaba’s Electronic World Trade Platform (or eWTP, for short) is, in simplest terms, a way to cost-effectively stimulate international trade while simultaneously simplifying the often-complicated process of selling goods overseas. Along the way, Alibaba also hopes to, for the first time, develop accepted standards of international trade.

The need for such standardization is clear. Not only is the world — and trade — more global than it’s ever been, but the recent tariff wars have demonstrated that governments can and will impede commerce.

But the most interesting part of the non-profit Electronic World Trade Platform is Alibaba’s effort to attract small and medium businesses, rather than huge corporations, to it. Small and medium businesses are often prevented from selling their products to overseas customers because of logistical difficulties or steep customs costs.

Of course, the platform will eventually steer sellers and buyers to Alibaba’s revenue-bearing properties, boosting Alibaba’s results and BABA stock.

Seeds Planted

Although the final touches have not yet been put on the design of the eWTP, Alibaba is successfully peddling the concept. Malaysia signed on early last year. Rwanda was the first African country (and the first non-Asian country) to launch eWTP back in October. Belgium has become the first European nation to embrace the idea, inking a deal in early December.

It’s Belgium’s eWTP initiative that could and should get Amazon’s attention, and delight investors who are considering buying BABA stock.

Plans have been laid to build a 2.2 million square-foot-logistics facility at Belgium’s Liege airport, which will be able to handle what Alibaba hopes will be a deluge of deliveries.


The company doesn’t intend to stop there, however.

Strategy

The question remains, though: What’s in it for Alibaba?

There’s certainly an altruistic element to the idea. Remote countries that are home to smaller companies have something to offer the world, but can’t readily access the world’s marketplaces. When such access is obtained, the whole world wins.

Jack Ma is also already a proven supporter of smaller organizations, even encouraging the United States’ small-scale manufacturers early last year to — with his help — offer their goods to Chinese consumers.

The eWTP concept, however, still has capitalistic elements. Alibaba’s TMall and its other assets are the go-to solutions in China simply because, like Amazon in North America, Alibaba owns the most expansive marketing networks in its home market. But BABA needs more, and more unique, goods to sell. Its eWTP will lower trade-barriers, clearing the way for the introduction of those goods in China.

Perhaps most important, however, is that once Alibaba establishes strong relationships with various countries and their small companies, BABA can make bigger and better deals with them. Conversely, Alibaba’s rivals like JD.Com (NASDAQ:JD) just aren’t able to lay the groundwork for a network of trading partners.

The Bottom Line on BABA Stock

But current and prospective owners of BABA stock shouldn’t get overly excited about the eWTP just yet.

Rwanda’s eWTP hub is still in its infancy and will crawl before it can walk. Malaysia’s  venture is also in its early stages, though thanks to geography and existing relationships among BABA, Malaysia and Malaysian businesses, Malaysia’s eWTP is further along than Rwanda’s. The centerpiece of Belgium’s hub, the logistics facility that’s slated to be built at Liege airport, won’t begin operations until 2021.

eWTP is a long-term initiative, to be sure, and will likely change as time marches on.

Still, there’s little argument that Alibaba’s development of a global trade network makes the company’s growth outlook very enviable, even though the network’s future is uncertain.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can follow him on Twitter, at @jbrumley.

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