What Does the Alibaba IPO Mean for Chinese eCommerce?

TMO Group TMO Group

You may or may not have heard already, but on Tuesday May 6, Chinese eCommerce giant filed for its American IPO.  While they’re primarily known for their eCommerce functions similar to Amazon, they also provide services similar to Paypal and eBay.

Analysts value the company at up to $245 billion.  It claims to have sold goods at a value of $248 billion in its marketplace in 2013, and that’s more than Amazon and eBay – combined.

And one New York Times article notes in grew more than 57% in the first nine months of the 2013 fiscal year.  Whew – that’s impressive!  Interestingly, Yahoo owns 22.6% of Alibaba, although conditions of the IPO require Yahoo to sell off half of its stake in the company.

So What Does This Mean, if Anything, for Chinese eCommerce?

Well, the impact for you and I will probably be minimal, at best.  For now, anyway, Chinese can already purchase from the site.  So if you want to buy bulk quantities from Chinese entrepreneurs, no problem.  However, the question is: how can you be sure of the product quality?

1.  The Competition Between Alibaba and Amazon will be Interesting

The distinct advantage for Alibaba versus any US company is that it maintains almost no inventory.  Rather than selling items directly, it mostly acts as a matchmaker between buyers and sellers.  Some reports claim the company has up to 45% profit margins – far higher than Amazon or eBay.

It’s still primarily based in China though, so the interesting part will be to see how Alibaba earns trust in the eyes of Chinese consumers.  Amazon already has a ton of credibility, and they’re already working on building regional distribution centers all over the country so consumers can get their orders the same day.

2.  How will Alibaba Expand?

What Alibaba has that the US does not is an incredibly huge population of 1.3 billion.  So even though Alibaba’s already massive by American standards, it may still be very small compared to its potential.  And, the Chinese economy is one of the fastest-growing in the world.

So, it’ll be interesting to see what else Alibaba concocts to take over in the future.  Some speculate it will continue to expand into finance, supply chain management, and other similar services.

There’s no way to predict the future with Alibaba.  The company does many innovative things like offering website design services to merchants selling on its platform and giving them business loans (they already have data on the companies).

Will this be a good, bad, or indifferent thing for most Chinese eCommerce companies?  Hard to say, but we’re sure to find out.

More details, please refer to : Chinese eCommerce solution

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