EBay and Amazon beware, Alibaba’s coming IPO means time to protect home turf

Australia leads the way to Globalisation with triple FTA with Asia’s big threeThe world’s biggest e-commerce company is set to go public in the world’s biggest retail market, the latter is true at least for now. Alibaba announced its decision to “commence the process of an initial public offering in the United States” on Sunday.

After last year’s failed attempt to persuade Hong Kong, Alibaba turned to the US for what set to be the biggest IPO since Facebook’s 2012 feat.

The Chinese giant will work with Credit Suisse Group AG, Deutsche Bank AG, Goldman Sachs Group Inc., JPMorgan Chase & Co., Morgan Stanley and Citigroup Inc. in finalising the IPO, which could launch as early as April.

“Alibaba has evolved from a company selling two dozen items back in 1999 to a truly 5-star business network, with a transaction volume bigger than Amazon and eBay combined in 2012.

The essence of Alibaba’s success lies in its super network, connecting millions of consumers, retailers and suppliers. Its value addition strategy has moved beyond synergy and into something known as value synchronicity”, said Vivek Sood – CEO of Global Supply Chain Group.

Analysts expect the e-commerce giant to raise around US$15 billion, making it the top 4 biggest IPOs ever behind Visa, General Motors and Facebook.

The company also signaled its intention to list in China. “Should circumstances permit in the future, we will be constructive toward extending our public status in the China capital market in order to share our growth with the people of China”, Alibaba said in a statement.

Worth as much as US$200 billion, behind Google in the Internet field, Alibaba boasts annual profits five times those of Amazon last year after increasing its revenue by 61% and gross profits by 71%.

Serving more than six million retailers and 300 million consumers worldwide, Alibaba’s empire extends beyond its well-known e-retail operations on Taobao and Tmall sites.

The company also has its affiliate payment system Alipay, comparable to EBay’s PayPal, as well as financial services, logistics, mobile phone operating systems and TV set top boxes.

“China will soon become the world’s biggest retail market and Alibaba’s US IPO will lay a crucial springboard to gain a bigger share of the pie in China, which is currently 5%.

Amazon, whilst still upheld as a prime example of a 5-star business network, should level up or risk being outwitted in the game,” said Sood – the author of widely acclaimed book “The 5-Star Business Network”.

Sheer number of consumers, and their increasing purchasing power provides the fuel to Alibaba machine. Combine these numbers with the fact that in most cases Alibaba is not replacing a traditional business model, but rather creating blue ocean new business models and you can see the immense potential of the company. Now combine that with the access to the producers and understanding of production economics and you can truly see a challenging behemoth emerging.

It remains to be seen whether Amazon’s consumer understanding will trounce the above advantages that Alibaba enjoys.

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  • Tresparso says:

    In the merging digital world how Alibaba Tackles Amazon, eBay
    This is like China’s Alibaba Group Holding launched a U.S. shopping website, in what would be its biggest foray into the home turf of e-commerce giants Amazon.com Inc. and eBay Inc.

    Since some Amazon sellers use Alibaba from time to time, I thought I would share this. :grinning: I had an e-checking payment fail on Alibaba. The e-checking account has been used many times in the past, and according to Alibaba is 100% setup. The funds left my account in the US but failed on the Alibaba site. They are now requiring a blank voided check for a “more secure” account. :roll_eyes: Whatever.

    Buyers who need to make a purchase, and the purchase is urgent, could incur additional fees if they decide to go ahead and pay with the credit card option. That’s an extra 2.95% versus the no transaction fee e-checking. I’m not sure who gets the 2.95% or if there is a benefit to Alibaba, but somebody will.

    And if there is a benefit to Alibaba, this would be a nice technique to generate millions from time to time. Just keep failing payments, blame it on the system for increased security.

    Thought this could be useful to somebody. :fist_left:

  • […] for instance, all the happenings at Alibaba. The Chinese e-commerce giant went public in the US with an IPO that stirred the world at large and the online retailing world in […]

  • David says:

    Appreciate to write about the deep analysis of Alibaba and it’s competitors. I just suffer at the internet and found this readable content to know about giant companies doing in the market.

  • […] for instance, all the happenings at Alibaba. The Chinese e-commerce giant went public in the US with an IPO that stirred the world at large and the online retailing world in […]

  • Laurane says:

    Alibaba, no doubt, is China’s largest e-commerce platform. As I was reading its latest report few days back, the company disclosed having 636 million annual active consumers on its China retail marketplaces. That’s almost double the entire population of the United States. Alibaba’s reach today expands far beyond e-commerce. Its realm now covers cloud computing, digital media and entertainment, logistics services Alibaba is also part owner of financial services company Ant Financial. Amazing indeed.

  • Eileen Tammy says:

    Despite its enormous Chinese following, Alibaba is still not a well-known brand to many Americans. The amount of competition Alibaba’s IPO could offer is significant. Alibaba moves more goods and off late with its IPO announcement, it may force big names like Amazon and eBay to cut prices. Alibaba’s IPO is expected to create an impact on eBay and Amazon due to its low product prices, payment method, and fulfillment that might attract more and more westerners, average American shoppers, in the near future.

  • Jafferson says:

    The risk applies to both eBay and Amazon. How will the company deal with an e-commerce business three times as large that offers a number of similar small business services through online shopping sites? Product pricing has been the main concern for Amazon as it sells its own products and conducts the fulfillment, while Alibaba offers low-priced products as they do not do fulfillment on their own. This will result in more and more westerners prefer it as an online shopping destination, leaving Amazon at a risk.

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