 | Marketplaces 2014: Alibaba - Online Retailing In ChinaRelease date: June 12th, 2014 (121 pages) PDF/Powerpoint format. Price: GBP1,500.00 |
Abstract
As they are being manufactured in China, most consumer products can be bought on Alibaba’s marketplaces at discounts of between 30-90% compared to Amazon and eBay (if one is ready to leave the issue of counterfeits aside for a moment). Viewed from this perspective, Alibaba has a lot of disruptive potential in global ecommerce and could become a threat to eBay and Amazon.
Price competitiveness is not the only reason why Alibaba could become a threat to the established western players. Alibaba has tied the manufacturers in China closely to its ecosystem already, through Alipay and the logistic offering, and these companies may trust Alibaba more than any American platform. In
any case the more integrated Chinese manufacturers are with Alibaba the higher their switching costs. (A 3P seller presence on one marketplace does of course not preclude appearance on another. The issue for manufacturers who list on all marketplaces is then managing price parity between websites and countries. Quite a challenge)
The second big opportunity for Alibaba is facilitating cross border commerce into China and changing Chinese society from a manufacturing country into a consumer society. Alibaba is doing this through Tmall and its C2C marketplaces and is making great strides to enable more western brands to sell directly to Chinese consumers.
The question is then whether Alibaba should be seen more of a conduit out of China or a conduit into China. We argue that to realise its full potential, the business needs to be both and raise synergy and cross platform effects to the greatest extent possible. We believe that the two big opportunities post IPO lie in driving these two business arms further, i.e. cutting out western middlemen and letting western consumers go to Chinese manufacturers directly (its Aliexpress business) as well as enabling Chinese consumers to buy straight from the west (through Tmall) and taking better care of the last mile in China.
The growth story investors will buy into is growth in China’s consumer society and Alibaba as the platform through which this happens and can be tapped into.
Table of contents
| Executive summary: Alibaba 2014 – Retailing in China | p14 |
| The core of the business model: the marketplace | p21 |
| Strengths of marketplaces: The model | p22 |
| Strengths of marketplaces: the data benefits, monetisation | p23 |
| Strengths of marketplaces: the data benefits, pricing power | p24 |
| Strengths of marketplaces: pricing power, beneficial cash flow | p25 |
| Strengths of marketplaces: beneficial cash flow, unlimited range | p26 |
| Strengths of marketplaces: unlimited range, perfect OSA | p27 |
| Strengths of marketplaces: network effects | p28 |
| Context – China | p29 |
| China: if you could sell every Chinese a toothbrush, … | p30 |
| China: demographic profile, from abject poverty to a booming luxury sector | p31 |
| China: credit boom post 2009, real estate bubble? rebalancing the economic model | p32 |
| China: politics, endemic systemic corruption | p33 |
| China: risks, erosion of trust, future direction of travel | p34 |
| China: the 2013 reforms | p35 |
| China: GDP 2006 - 13 in yuan, volumes and growth slowdown | p36 |
| China: GDP 2006 - 13, in US$, versus USA, the golden era is over | p37 |
| Online Retailing in China – on track to become the world’s leading market | p38 |
| China: retail jumping over an evolutionary stage – going straight to online? | p39 |
| China: becoming the biggest online market globally, sizes in US$, forecast 2013-18 | p40 |
| China: ecommerce evolving from C2C to B2C, sizes, forecast 2013-18, growth | p41 |
| China: JD.com, Alibaba’s closest competitor, the Tencent linkup | p42 |
| China: Walmart’s Yihaodian | p43 |
| Alibaba.com | p44 |
| Introduction: Alibaba – historic overview | p45 |
| Introduction: Alibaba – ownership and revenue structure | p46 |
| Introduction: Alibaba’s marketplaces, price competitiveness and building trust | p47 |
| Alibaba: The network effects on the marketplaces | p48 |
| Alibaba: list of marketplaces, description, key metrics | p49 |
| Introduction: Alibaba – 1688.com, blocking search engines, earning ad revenue | p50 |
| Recent key developments | p51 |
| May 2014: acquiring a 10.4% stake in SingPost | p52 |
| May 2014: designs on SE Asian e-commerce | p52 |
| May 2014: facilitating cross border commerce into China | p53 |
| May 2014: launching the IPO | p54 |
| April 2014: investment into video, the Youku Tudou acquisition | p55 |
| April 2014: Grocery offer relaunch, aggregating orders | p56 |
| April 2014: Grocery offer relaunch, 400% growth, challenging Yihaodian | p57 |
| March 2014: Alibaba invests in b&m department stores, offline to online | p58 |
| December 2013: Alibaba invests in Haier, consumer electronics & logistics | p59 |
| December 2013: Haier’s customised online sales | p60 |
| November 2013: singles day records – Alibaba’s invention | p61 |
| November 2013: singles day records – sheer scale, the data | p62 |
| November 2013: singles day records, offline promotions and non retail spend | p63 |
| November 2013: Alipay ownership restructuring, targeting tourism, financial services | p64 |
| October 2013: Alibaba invests in app search engine | p65 |
| July 2013: Alibaba’s web TV | p66 |
| Financials, KPIs, Benchmarks | p67 |
| Alibaba: facts and figures, quarterly GMV in RMB, US$, growth, active buyers | p68 |
| Alibaba: facts and figures, buyers vs. total internet users, Alibaba vs. China ecomm 2013 | p69 |
| Facts and figures: Analysis, order volumes | p70 |
| Alibaba: facts and figures, revenues by segment, in RMB and US$, 2012/13 | p71 |
| Alibaba: facts and figures, net income in RMB and US$, margin 2012/13 | p72 |
| Alibaba: facts and figures, Analysis | p73 |
| Alibaba: facts and figures, GMV revenues, fee equivalent 2013 | p74 |
| Alibaba: revenue growth outpacing costs, cashflow generation | p75 |
| Taobao.com | p76 |
| Taobao: buyer and seller interaction, defeating eBay, size in US$ | p77 |
| Taobao: the counterfeit problem | p78 |
| Taobao: more similar to eBay or to google? | p79 |
| Tmall | p80 |
| Tmall: the marketplace for brands, fee model, sizes in US$ | p81 |
| Tmall: extremely promotional, similar to Amazon 3P | p82 |
| Alipay | p83 |
| Alipay: overcoming lack of trust, 50% of all online payment in China | p84 |
| Alipay: conflict around ownership structure | p85 |
| Alipay: the importance of Alipay to Alibaba, how it works – unlike PayPal | p86 |
| Alipay: the logistics angle, integration | p87 |
| Financial services | p88 |
| Yu’e Bao: the money market account for young Chinese shoppers | p89 |
| Alipay: Alifinance, beginning to monetise the big data on sellers, more integration | p90 |
| The Tencent rivalry | p91 |
| Tencent: winning hands down on mobile phones | p92 |
| Tencent: WeChat payments, why traditional online marketing doesn’t work in China | p93 |
| Mobile strategy: go fishing where the fish are | p94 |
| Strategy – it’s all about the risks | p95 |
| Risks: 1) losing trust, and how to overcome the distrust barrier | p96 |
| Risks: 2) Counterfeits – the solution will need to come from the state | p97 |
| Risks: 3) mobile – staying relevant, shopping versus social networking | p98 |
| Risks: 4) mobile payments – Alipay’s value to Alibaba | p99 |
| Risks: 5) legislation and regulation from the PRC, hacking | p100 |
| Risks: 6) China’s IT infrastructure, servers located in China | p101 |
| Opportunity 1: Conduit from China to the world | p102 |
| Alibaba: changing China into a consumer society – the bull case | p103 |
| Alibaba: IPO – cash mountain, buying back Yahoo’s stake, acquisition spree? | p104 |
| Aliexpress: connecting Chinese sellers to the world | p105 |
| Alibaba: coming to EU and US? Chinese manufacturers integrated into ecosystem | p106 |
| Alibaba: CP’s platform to guarantee market access for Chinese factories? | p107 |
| Alibaba: coming to Europe and the US? Significant hurdles remain | p108 |
| Alibaba: how far involved is the CP in the company? | p109 |
| Opportunity 2: Conduit for the world into China | p110 |
| Opportunity: facilitating cross border commerce into China | p111 |
| May 2014: the shoprunner deal, integration with Cainiao and Alipay | p112 |
| Alibaba: shopping on western websites doubles year on year in China | p113 |
| Alibaba: 3P sellers specialising in western brands, Alipay’s new business model | p114 |
| Cainiao: process flow, special agreement with Chinese customs | p115 |
| Alibaba: low fees attracting 3P sellers to its ecosystem | p116 |
| Outlook | p117 |
| Outlook: on track to become one of the world’s most valuable companies | p118 |
| Outlook: the rise of Chinese consumers, but will it transfer well abroad? | p119 |
| Outlook: targeting low-trust, emerging economies, changing China | p120 |
| Amazon China: average price per category | p121 |
| Sources | p122 |
