Alibaba’s online payment platform processed over $US150 billion in mobile transactions. PayPal processed only $US23 billion.
To add further scale, Alibaba’s business is mostly conducted in Asia. Since only 42 per cent of China’s population (564 million users) currently have internet access, there is still significant room for growth in the East. Coupled with a growing presence in the West, Alibaba has the potential to achieve unprecedented size and power.
Until recently, Alibaba was not well known outside Asia. The announcement of its forthcoming float on the New York Stock Exchange has made businesses stop and take notice, and has set tongues wagging.
Many analysts expect the e-commerce giant to write itself into US history with one of the largest technology IPOs ever, with an equity value in excess of $US200 billion and an expected capital raising of around $US26 billion.
Alibaba’s business model differs from those of eBay and Amazon. Unlike Amazon, Alibaba does not incur costs to store, deliver or distribute inventory. It doesn’t even have a distribution centre.
The group operates an e-commerce platform that brings together like-minded buyers and sellers, similar to eBay. At last count, Alibaba’s online 'community' had over 8 million active suppliers and 231 million active buyers.
Alibaba’s revenue model is supplier-centric. By levying a subscription fee, the group offers suppliers a suite of business tools to set up a virtual storefront, market products, implement search engine optimisation, recommend seller statuses, and other activities.
Alibaba has a vision: to make buying from Alibaba seamless, anytime, anywhere, on any device. It has been on a rampant acquisition strategy over the last year, investing $US3.5 billion in businesses that create synergies with its core strategy and enrich its value proposition.
Investments include cloud-based platforms, a mobile operating system with apps under development, online payment platforms, and messaging and free calling applications.
From even a small glimpse, we can see that Alibaba has taken a discerning and strategic step towards offering services that add value to the online retailing experience, viewing e-commerce as a social transaction and providing a platform that complements this view.
James Stewart is a partner and retail practice leader at Ferrier Hodgson