If you’ve never heard of Alibaba, don’t worry, you’re not alone. Almost 88% of Americans have never heard of this company, until this week.
Here is an overview of Alibaba, in 60 seconds:
According to reports, Alibaba dwarfs Amazon, Ebay and PayPal and might be the largest public tech IPO in history. While the company has been in business for many years, its success is making headlines across the world.
Why is it different? Well, first, it marries the concepts of Amazon and Ebay in that it is not a traditional online “store” like Amazon, but rather a marketplace more similar to Ebay. It is one of the largest e-commerce site in the world, and sells more than Amazon and Ebay combined. On Friday, the company went public, with much anticipation from investors. There is anticipation that Alibaba will expand into the US in the future, creating more of a rivalry for Amazon.
While revenue is not quite as strong as Amazon, at least right now, Alibaba has some advantages over the e-commerce giant:
1. Because Alibaba is a marketplace, the company does not have expenses related to fulfillment centers, purchasing products for sale, and other associated costs that Amazon has. As competition increases, the lesser amount of overhead costs will benefit the Chinese based company.
2. Alibaba has its own PayPal-like segment, Alipay, for a streamlined experience for both the company and its customers.
3. Historically, they have had better success with online shopping for major holidays. Alibaba “invented” a holiday, Singles Day, which has become a major shopping event. In 2013, the company generated $5.6 billion on that day alone, compared to the $1.7 billion in online sales on Cyber Monday in the US.
4. China is more populated than the US, so the customer base is larger. If and when Alibaba expands into the US, it could be a game changer for the company and its rivals. Current reports indicate that less than 10% of Alibaba’s revenue comes from outside of the country; as the company goes public and makes a name for itself in the US, that could easily change.
I found a great infographic from CKGSB Knowledge that highlights the differences among the big players in this game, and explains a bit as to why all eyes are focused on Alibaba at the moment. As you keep up with the news over the next few days, watch for signs that the competition may heat up in the US, especially as the holiday shopping season gets closer.
