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The dominant force in the e-commerce industry in China, Alibaba, reported a significant increase in
profit since the IPO earlier this fall. Despite sluggish Chinese economy recently, Alibaba posted a 16% jump in their profits compared to this period last year. The growth is largely ascribed to more and more Chinese consumers utilizing the internet, as opposed to brick and mortar stores, for shopping.
Since the IPO, shares in the e-commerce giant have risen fifty percent. The listing, which actually
surpassed the offerings of major American tech companies such as Facebook, demonstrates the
rising importance of the Chinese tech community. Currently, Alibaba is reported to have a market value
of more than $250 million, again more than the American company Facebook.
Jonathan Lu was named Alibaba CEO in May of
2013
Taking a closer look at consumer trends in China, company VP, Joe Tsai, has attributed
to growing customer base of Alibaba to the jump in people using smartphones as a shopping tool. Additionally, he remarked that this increase demonstrates a “strong
foundation for future growth.”
Analysts around the world are corroborating this Tsai’s claim. It is estimated that more than
half of China’s billion-plus population will comprise the company’s customer base over the ten years. This increase is more than the
entire population of the United States of America. Alibaba executives are hoping that the nation’s growth in online shopping will be enough to overcome the decreasing rate of
new Chinese internet users.
The Founder, Jack Ma, who is a former teacher, is
estimated to be worth more than $20 billion.
In the quarter that ended on September 30, Alibaba’s net
profit and revenue increased to $1.1 billion and $2.7 billion,
respectively, which roughly aligns with experts’ projections. With this promising announcement of this news, Alibaba’s stock rose
two percent at the beginning of this week.
The primary two drivers of the company’s growth are the Tmall
sites and the Taobao Marketplace. Tabao operates a similar business model to that of ebay. Tmall is a marketplace for larger brands to
set up their own CEO, Jonathan Lu, also points to another avenue for
the company’s growth
He notes how the rural Chinese population is largely untapped in the e-commerce industry as less than ten percent of the rural population shop
online. Thinking towards the future, Lu envisions providing an online
marketplace for farmers to sell their goods to the urban population, and
global customers.
Company executives and financial experts point out that growth will inevitably slow down one day. It is
equally important that Alibaba focuses on controlling costs, thus ensuring a
higher profit margin. This will likely be the biggest challenge that lies ahead,
and will prove instrumental in Alibaba’s future success.stores online to sell
directly to Chinese consumers.
