Understanding the scale of Alibaba’s success
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Understanding the scale of Alibaba’s success

Alibaba is a dominant force in Chinese Ecommerce. In 2015, the company accounted for an incredible three quarters of China’s online retail, and it has plenty of other industries in its sights. Alibaba is also catering to a diverse consumer base – everyone from farmers in rural Chinese villages to American small business owners (more on international ambition in a minute).

Alibaba’s share price has risen by an incredible 113% year to date

alibaba1411

SOURCE: Yahoo Finance

Sitting atop the Chinese technology pyramid, Alibaba still seems to have plenty of room to grow (a position it shares with the other “big two” Chinese internet companies, Tencent and Baidu). At the end of 2016, China had 731 million internet surfers – more than twice the population of any other country on Earth, with the exception of India. Yet, its internet penetration rate (a measure of what percentage of the population is online) remained in the low 50s. In contrast, Europe has an internet penetration rate of 80.2%, and North America has one of 88.1%.

chn country

SOURCE: China Internet Network Information Center

Alibaba is expanding into new areas with frightening speed. The company has spent an incredible amount – billions of dollars annually, spread our over a number of deals – on acquisitions and investments. Its current priorities when it comes to expenditure include mobile, cloud computing, and virtual reality – but if you include companies that Alibaba has a stake in, that list gets incredibly long.

alib shop

However, it is Alibaba’s original conception as a “marketplace of everything” where consumers and businesses could get connected to facilitate the sales of “everything from Alaska salmon to Boeing 747s”. The company has pushed hard to get “mom and pop” small businesses using its platform, and currently has over 10 million. In 2014, that number was 7 million, and as much as 22% of it was in villages or towns – a powerful sign that Alibaba is monetizing the enormous amount of China that is not, currently, urban.

Alibaba also has its sights set on Hollywood – here’s the trailer for founder Jack Ma’s upcoming martial arts movie Gong Shou Dao (yes, that’s him)

Jack Ma’s Hollywood ambitions aside (although movie making is definitely an area Alibaba is taking seriously), the most important news about Alibaba today is the early report from Single’s Day. Taking place on 11 November, the company attracted a record-breaking $25.3 billion in sales for the day – that’s 39% better than it did in 2016. As Alibaba looks to romance American small businesses and does battle with fellow Ecommerce titan Amazon in India, many observers will wonder whether Alibaba can replicate its incredible Chinese track record globally.

Disclosure

Dominion holds Alibaba in its Global Trends Ecommerce Fund.  


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The views expressed in this article are those of the author at the date of publication and not necessarily those of Dominion Fund Management Limited. The content of this article is not intended as investment advice and will not be updated after publication. Images, video, quotations from literature and any such material which may be subject to copyright is reproduced in whole or in part in this article on the basis of Fair use as applied to news reporting and journalistic comment on events.