Marketplaces 2014: Alibaba - Online Retailing in China

Marketplaces 2014: Alibaba - Online Retailing In China

Release date: June 12th, 2014 (121 pages)
PDF/Powerpoint format. Price: GBP1,500.00


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:, Alibaba’s closest competitor, the Tencent linkup p42
China: Walmart’s Yihaodian p43 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 –, 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$, margin 2012/13 p72
Alibaba: facts and figures, Analysis p73
Alibaba: facts and figures, GMV revenues, fee equivalent 2013 p74
Alibaba: revenue growth outpacing costs, cashflow generation p75 p76
Taobao: buyer and seller interaction, defeating eBay, size in US$ 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