Alibaba is more than a “Chinese Amazon” – it’s a gateway to the world’s biggest Ecommerce market
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Alibaba is more than a “Chinese Amazon” – it’s a gateway to the world’s biggest Ecommerce market

China is the world’s largest Ecommerce market. And Alibaba, one of the country’s top 3 tech titans, is the unquestionable king of online retail within its borders. Frequently, analysts in the west regard Alibaba as a kind of “Chinese Amazon” – but this is a misconception. Alibaba is interesting for plenty of reasons of its own.

Discussions over international trade are weighing on Alibaba’s share price – but it’s still up by 5% so far this year

graph 0307 alibaba

SOURCE: Yahoo Finance

At the end of May, Citron Research released a report that addresses these misunderstandings head on. It wrote:

“Amazon’s market cap is about 70% larger than Alibaba’s yet China’s e-commerce market alone is going to be larger than the rest of the world… by 2020, Asia is projected to account for 66% of global e-commerce sales with China accounting for 58%. Alibaba has a more dominant e-commerce business than Amazon… though Amazon claims about 40-50% of all online US retail sales, Alibaba claims about 80% of all online Chinese retail sales. While most commonly referred to as 'The Amazon of China,' Alibaba has a differentiated business model from Amazon… If investors needed a catchphrase this would be more appropriate: ‘The tollbooth to middle class consumption in China.' ”

The scale of Alibaba’s business is incredible: According to a February 2018 SEC filing, it has 617 million monthly mobile users, and 512 million active users on Tmall and Taobao (its online marketplaces in China). 100,000 of those customers fit into a special category called “Alibaba Passport holders”, which have an average spend of $45,000 per year. This customer base is too powerful for any brand to ignore.

That’s why one area Alibaba is unquestionably valuable is as a “way into China” for small to medium size businesses operating outside the country’s borders. It’s holding “Gateway” events in North America designed to encourage businesses onto its platform, and so far, they seem to be working.

Alibaba Group president Michael Evans discussed the success of one such even in Toronto: "The interest in Gateway '17 Canada has been incredible and signals that companies of all sizes are keen to go global. China is such a big opportunity for Canadian businesses who have the high-quality brands, products and travel experiences that are in demand by today's China's booming middle class."

Disclosure

Dominion holds Alibaba in its Global Trends Ecommerce Fund.


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