If investors are still clueless about whether or not to invest in the Alibaba stock, they can be advised to take a close look at the write up to know how prospective the stocks can become in the future. The company is close to launch its IPO in the U.S. People who are unaware of the company’s accomplishments must know first that, as of now, Alibaba is a dominant player of the e-commerce industry in China.
If investors know about Amazon, Paypal, eBay and Google, it can be said that Alibaba exemplifies some of the key features of those sites. All of them are distinctively good for both the buyers and sellers. From the buyer’s and seller’s point of view, security of transactions and reliability of service matter most while doing business online. Alibaba is well equipped to ensure both of the facilities through its site. If someone has to define Alibaba in a simple term, it would be best to describe it as one of the most trusted online trading platforms that connect Chinese manufacturers with the overseas market or consumers.
Jack Ma started this company in 1999. At that point of time, the idea of doing business online was a fairly new concept to the Chinese trade association. However, Ma didn’t put his dream in a back seat just because his ideology was advanced than his peers. He believed in his thoughts and developed Alibaba as a very reliable middleman. After he launched his website, it soon became one of the biggest marketplaces for buying and selling products made in China. Alibaba doesn’t sell products on its site; instead, it acts like a common platform shared by both buyers and sellers. Both manufacturers and overseas clients come together on this website and confirm deal that best fit their requirement. The middleman role of the Chinese site is identical to eBay’s style of doing business online.
Taobao is a site run by Alibaba. This site got huge attention from the Chinese merchants because of its unique business model. It doesn’t charge any fee for selling products; instead, merchants have to pay the site for advertising and other product promoting facilities. So, if a manufacturer wants to be noticed first or showcase its products differently than its millions of competitors, he has to pay Taobao to advertise its products before anyone else. Taobao’s search results highlight these types of merchant’s ads first. The site has almost 760 million product listing from almost seven millions Chinese sellers.
This doesn’t end here. Apart from Taobao, which is mostly used by the small merchants, there is another one called Tmall. Tmall is another website operated by Alibaba and a great place for the bigger merchants. However, its business model is different than Taobao as the site charges its sellers a deposit amount, an annual fee as well as commission on sale. Even the big brands like Nike, Apple Inc. and Gap Inc. have joined the site and opened stores for online sale.
The volume of sales on both of these sites has been overwhelming. Even Alibaba was proud to announce the combined volume of Taobao and Tmall sale of 2012. It was $163 billion, which was clearly larger than the combined sales volume of Amazon and eBay.
If someone wants to make a choice based on the company’s revenue, its almost one tenth of Amazon’s. However, it’s because Alibaba doesn’t sell products on its site like Amazon. The real worth of Alibaba’s stock should be decided based on its growth margin. The company has a mesmerizing profitability result. Alibaba showed a 51 percent growth in its third quarter revenue and 44.6 percent profit margin as compared to Amazon’s $17.09 billion revenue and loss of $41 million.
Alibaba’s online transaction process has been backed by its own payment system Alipay. Alipay is great in terms of securing buyer’s interest. The whole idea is now very popular in China and has helped Alibaba become the largest player of this country’s e-commerce industry. This company is now also into building private banks. Along with Chinese Government, Alibaba is working on setting up five private banks in some cities at present.
Alibaba Group Holding Ltd. is a type of company that is known mainly because of the service provided to both the buyers and sellers in the most secured way. Although a lot of merchants have been using Alibaba’s websites as a medium to reach out and deliver products to international clients, it won’t be fair to say that the company doesn’t have any unparalleled competitors in its country of origin. Apart from a few domestic companies participating in the same industry, there are also big names like eBay trying its luck in this country for quite a while now. eBay entered the China market by buying a stake in a domestic company operating in this country.
People using Smartphones also have other options of online shopping except Alibaba. From that perspective, this company has been facing a fierce competition created by the Smartphone users. Different social media companies and Tencent Holdings Ltd., which is an online game company, have been quite appealing to the average consumers. Especially Tencent has been very deliberate in terms of helping customers with its powerful chat messaging service – WeChat. This service can be of great help for people interested in online shopping. Tencent is trying to become more innovative in the e-commerce domain. The company has recently bought a 15 percent stake in the JD.com, which is the second largest e-commerce market player in China at present.
Alibaba didn’t hold it back as well. The company announced an investment of $585.8 million in Sina Weibo last year. Apart from that, the company is also working toward a proposed investment of $1.13 billion in AutoNavi Holdings Ltd., which is an online map company located in China. In all, it can be said that Alibaba is growing and can be expected to see a sharp increase in its profit margin as China’s internet savvy population have also been found to grow steadily.
