A company larger than the market value of two major e-commerce companies of U.S. including Amazon.com, Inc. (NASDAQ:AMZN) and eBay Inc (NASDAQ:EBAY) makes its record debut at $25 billion in U.S.- yes, it is certainly Alibaba Group Holding Ltd (NYSE:BABA). The question arises that is U.S. market the next target of this e-commerce giant.
Alibaba Group Holding Ltd (NYSE:BABA) has done tremendously well in China, thanks to its several business entities including Alibaba marketplace, Alipay, Taobao marketplace, and pretty much any form of business that is possible online. However, Alibaba has a different work model and the best chance of growth for the e-commerce giant is to focus on markets that resemble its domestic market.
Further, Alibaba doesn’t sell products directly to the customers like Amazon.com, Inc. (NASDAQ:AMZN) and it rather facilitates the sale by offering a common ground for seller as well as the buyer. Alibaba somewhat resembles eBay Inc (NASDAQ:EBAY) in its work model and it might get difficult to compete against stores like Amazon.com, Inc. (NASDAQ:AMZN) with their own warehouses and inventory units.
The primary difference between eBay Inc (NASDAQ:EBAY) and Alibaba Group Holding Ltd (NYSE:BABA) is their advertising revenue. A large portion of Alibaba’s revenue comes from the sellers paying for premium listings on Alibaba unlike Amazon.com, Inc (NASDAQ:AMZN) or other e-commerce retailers that advertise on Google Inc (NASDAQ:GOOGL).
Alibaba Group Holding Ltd (NYSE:BABA) has its primary focus on cross-country trades something similar to what it is doing in Washington and Alaska. Brazil is a potential market for Alibaba and it suits its current working model. Alibaba Group Holding Ltd (NYSE:BABA) reported 10% of its revenue from international units including Brazil and the company registered 32% increase in its sales in second quarter 2014.
Alibaba started an e-commerce site in the Portugal in collaboration with local payment facilitator, Boleto, and made a delivery logistics deal with state-owned postal service in Brazil. Alibaba Group Holding Ltd (NYSE:BABA) continues to expand its reach in markets with less competitive local stores and virgin markets. This is the right strategy for Alibaba to grow its global coverage and major U.S. retailers, Amazon.com, Inc. (NASDAQ:AMZN) and eBay Inc (NASDAQ:EBAY), do not face an immediate threat from the largest online store of China.
This article has been written by Prakash Pandey.
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