Alibaba goes public – eCommerce news of the week

The long awaited Alibaba IPO has come and gone. The Chinese behemoth went public amid a huge amount of PR and celebration. Needless to say – I believe that it is a line in the sand moment. We will most probably look back at the past week in years to come as a watershed moment for Chinese technology companies.

Alibaba – a Chinese company now has billions of opportunities to disrupt regions, single markets or competitors. The major story that broke on the day of the IPO was that Alibaba was supposedly looking into funding Snapdeal. If that is the case then Indian ecommerce is the first market in which all of the heavy weights are seen competing. Alibaba will be looking at going into India, the Middle East and Latin America as currently they have little or no presence there. I cant help but feel that a lot of the investment into Alibaba is more an investment into China than in the company itself..

In the next 6 months we will get an idea on how profitable Alibaba really is. I believe strongly that in the last 12 months they did a lot of promotional events to ensure that their IPO prospectus have a lot of amazing numbers.

Secondly – I also think that a fair comparison to Amazon is still in order – are they really that profitable? I understand that they don’t have logistics and last mile delivery like Amazon does, but with the exclusion of the massive Chinese scale – this business does seem to be to good to be true.

The ecommerce news that caught my attention this past week:

  1. Alibaba’s IPO to end US dominance in technology sector: expert (XihuaNet) – ” “Alibaba’s annual growth rate of more than 30 percent shows that the gap between the Chinese companies, Alibaba and Tencent, and U.S. companies is getting ever closer,” said Qing Wang, professor from Warwick Business School, one of the most prestigious and highly selective business schools in the world.”The ability to understand customers intimately and continuously innovate should enable them to expand overseas with US dominance in the world technology sector gradually being broken,” said professor Wang.”
  2. How UPS Is Gearing Up for the Holiday Shopping Season (EcommerceBytes) – “One improvement that may be especially welcomed by sellers are upgrades to Web and mobile apps to provide better information on package location and shipment status. Last year, some readers reported that buyers looking at tracking information for packages that were delayed due to weather events saw the tracking status as “unshipped.” The problem resulted in buyers blaming sellers, “causing huge headaches, damaging feedbacks and metrics and costing a ton of money,” as one seller described.Rosenberg said with the upgrades they made this year, “Both shippers and consumers will see improved package status detail, simplified messaging and more help resources.””
  3. An Alibaba in the making from the land of Ali Baba (CNBC) – “A few e-commerce companies, including Souq and MarkaVIP, are beginning to navigate the tricky waters toward exits. The 500-employee MarkaVIP has raised $20 million so far from investors who also include New York City-based Invus Financial Advisors, said Alkhatib, who worked on Zazzle, a hot e-commerce start-up that specializes in customized brand products, before he left to found MarkaVIP. He was drawn to open a company by the potential wealth he knew existed in the region. Both Souq and MarkaVIP are seen as possible IPO candidates, though Naspers, which invested in Souq, is a holding company.”
  4. New York’s “ecommerce” companies are more fashion than tech. But that’s a good thing (Pando) – “It seems so easy with its clear cut business model. At times the budding Web ecosystems of San Francisco, New York, and LA have all been lulled by the ecommerce siren song, only to see a wasteland of once-hyped companies that couldn’t scale or come up with a customer acquisition cost that didn’t make Wall Street want to barf. So is it a worry that some of the more promising New York companies are still in the ecommerce category in the wake of Gilt and Fab’s struggles? Not necessarily, said Bessemer’s Jeremy Levine at last night’s PandoMonthly.”
  5. Sweden’s Klarna: With U.S. Launch, It’s All About Online Payment ‘Friction’ (WSJ) – “Enter Klarna, a Swedish company that will try its wings in the U.S. starting early next year. The company–which is tiny in comparison with some of its larger rivals–will face stiff competition, from behemoths like PayPal and billion-dollar upstarts like Stripe. Klarna, however, thinks it’s different. It touts a risk algorithm that Klarna Chief Executive Sebastian Siemiatkowski says removes much of the “friction” when shoppers buy online. Upon clicking an online store’s checkout button, the technology assesses a chunk of data about shoppers’ behavior in addition to their credit scores. The purpose is to reduce the amount of information required from buyers, and make online purchases less of a hassle.”
  6. Ali-Nada: Chinese e-commerce giant Alibaba not as profitable as it seems (Fortune) – “The problem is that Alibaba’s high profit margins are actually a mirage. When it records sales, Alibaba only counts the commissions it receives for completing transactions between buyers and sellers on its website. As a result, the company’s operating margins (operating profits as a percentage of sales) come to 51%. Wal-Mart WMT 0.81% and Amazon AMZN 1.94% , however, report sales as the total dollar volume of goods sold in their stores (for Wal-Mart) or on their site (for Amazon, and Wal-Mart). Compute Alibaba’s operating profits that way and, alakazam, the e-commerce company’s profitability doesn’t look so hot. Its operating profit shrinks to an unimpressive 1.4% over the past 12 months. Even compared to Wal-Mart’s just over 5%, that doesn’t look so hot.”
  7. Amazon and Google: Friends, Enemies or Frenemies? (Clickz) – “The relationship between Amazon and Google is becoming more and more interesting: On the one hand, Amazon reportedly plans to take on Google’s online ad business. On the other, a number of reports show that the online retailer has invested big in Google’s search ads. To wit: Amazon spent $157.7 million on Google U.S. search ads in 2013, topping Ad Age’s list of Google’s 25 largest U.S. search advertisers. In comparison, other retailers like Walmart and Sears spent $59.7 million and $59.2 million, respectively.”
  8. Will spend over $100 million on supply chain this year: Rohit Bansal, Snapdeal (Economic Times) – “Online marketplace Snapdeal has become one of the largest clients for ecommerce logistics companies in India. The Delhi-based company, unlike rivals Flipkart and Amazon, outsources its entire logistics. We had earlier mentioned that we would end up spending Rs 450 crore in supply chain this year. But, with the kind of sales happening, we may well end up spending somewhere between $100-125 million (Rs 600-760 crore) in supply chain.”
  9. Q&A: Rakuten Marketing CEO Talks Ebates and Ecommerce Prospects (Performancein) – ”
    Rakuten’s $1 billion purchase of cashback publisher Ebates has created something of a media storm within our performance boundary. On one hand, Ebates’ position as one of the leading rebate sites in the US would suggest that Rakuten now has quite the asset on its hands. On the other, several cashback sites have raised concerns over the company’s ownership of affiliate network LinkShare – through Rakuten Marketing – which itself hosts partnerships with rebate publishers such as Quidco and TopCashBack among others. “
  10. Analyzing The Impact Of Amazon’s Departure From Google’s Search Network (Search Engine Land) – “All told, if Amazon drops Google search ads entirely, we’re probably talking about this impacting somewhere in the neighborhood of 0.2-0.4% of Google’s revenues overall. For advertisers, the picture is a little more fuzzy. For starters, like many aspects of paid search, the share of clicks Amazon contributes exhibits a pretty wide range across individual retail sites. It is not uncommon to see Amazon’s share reach 5-10%. That is a pretty big chunk of traffic to be up in the air.” A good read on a complicated relationship..
  11. Flipkart launches fulfillment service for sellers (Medianama) – “At a time when Amazon India is at loggerheads with the Karnataka’s commercial tax department over its fulfillment service, Bangalore-based e-commerce major Flipkart seems to have launched its own fulfillment service for third party merchants called ‘Flipkart Advantage’ (Hat tip – Deals For Geeks) There is currently no information on how sellers can opt for this service, although we noticed that Flipkart Advantage badge has started appearing on some of the third party merchant listings.”
  12. Wikimart.ru raises $40 million from domestic investors after failing to attract foreign VCs (EWDN.com) – “Wikimart, a major Russian B2C marketplace, has agreed a capital increase with a group of Russian investors, including Finprombank chairman Anatoly Goncharov. The news was revealed last week by business daily Kommersant and confirmed to East-West Digital News by Wikimart’s press service. The $40 million capital injection will be used in part to acquire Terminal.ru, a multichannel retail group that comprises a network of 25 outlets in 13 Russian cities as well as e-commerce sites Terminal.ru and Mallstreet.ru.”
  13. Alibaba in funding talks with Snapdeal as it looks to enter India’s booming online retail space (Economic Times) – “China’s Alibaba has been in talks with Snapdeal as it looks to enter India’s booming online retail industry, according to two people aware of the development. Alibaba, whose mammoth share sale in the US is underway, is considering investment in Snapdeal as one of its options while it sizes up the online consumer market in this country. “India is a huge opportunity for Alibaba,” said a person directly aware of the matter.”
  14. Amazon Has Turned On Bango Carrier Billing For Apps, First In Germany With O2 (TechCrunch) – “Amazon, the e-commerce giant that recently added smartphones to its growing mobile empire, is now turning on another element to bring more users and usage into its mobile business. It will now enable carrier billing, so that when people buy paid apps and make in-app purchases through Amazon’s appstore, they can charge that directly to their phone bills.”
  15.  Amazon Hopes to Attract Chinese Small e-Retailers Selling Overseas too (TechNode) – “Amazon China apparently has sensed the trend, too. Amazon Global Selling platform was introduced to China in 2012. In 2013 the number of Chinese retailers on Amazon Global Selling increased 196%, and total sales from UK increased 560% in the year, according to Amazon China.The company held a conference yesterday in Guangzhou to pitch Amazon Global Selling marketplace to Chinese e-retailers.”
  16. Amazon reveals plans to spend whopping $1.1 billion on Ohio data center (Geekwire) – “Seattle-based Amazon.com is considering a big expansion in the Buckeye State, revealing plans to spend us much as $1.1 billion on a new data center in Dublin, Ohio — just outside of Columbus. Reports in The Columbus Dispatch and The Seattle Times in the past few weeks detail plans to build the facility on 68 acres at Dublin’s West Innovation District, with the City Council set to vote on the proposal on Sept. 22nd. The facility would employ 120 people, with government incentives, including free land, totaling some $81 million, according to the Dispatch.”
  17. Quidsi Co-Founder Raises An Additional $20M For A New E-Commerce Biz (TechCrunch) – “In less than a year after leaving Amazon, Quidsi co-founder Marc Lore began work on a new startup called Jet.com. Today, the company is officially announcing it has raised an additional $20 million in growth capital from Western Technology Investments, and a $5 million asset-backed facility from Silicon Valley Bank, bringing its Series A round to a total of $80 million at its close.”
  18. Alibaba is not the Amazon of China (CNN Money) – “The analogy has been used widely as Alibaba prepares for its IPO. But it is only partially accurate, and masks big differences in business models. Sure, Alibaba (BABA) and Amazon both do business on the Internet. They both enable consumers to buy huge volumes of goods without stepping foot in a store. And both have a stranglehold on their home markets.”
  19. Ahead of IPO, Rocket Internet CEO tells staff to conquer ‘all four corners’ of the world (The Next Web) – “Rocket Internet is out to bring its e-commerce empire to all four corners of the world. That’s according to founder and CEO Oliver Samwer, who relayed his ambitious global goals in an internal email to staff after the Germany-based incubator last week confirmed its intention to list on the Frankfurt stock exchange this year. The email, which was obtained by The Next Web and is enclosed in full at the bottom of this post, tells of the determination of Samwer and his brothers (who also co-founded the organization) to build “one of the world’s greatest Internet companies.””
  20. New breed of payment gateways set to revolutionize Arab e-commerce (Wamda) – “To combat these barriers retailers face when looking to get a piece of the e-commerce pie, several players with, in some cases, decades of experience in the regional e-commerce sphere, are establishing localized payment gateways that they say will make breaking into e-commerce much easier for MENA companies of all sizes. Among these are Telr + Innovate Payments, Hyperpay, PayTabs, PayFort, and White Payments, among others.”
  21. WeChat introduces payments for Dairy Queen and other chains (TechinAsia) – “Tencent has introduced in-store mobile payments in WeChat, its popular mobile messaging app, for nine retail chains across China. As Pingwest reports, Chinese WeChat users will spot a new “Small Payments” (shuaka, or “swipe card” in Chinese) feature inside the “Wallet” section of the app. Pressing the icon and entering one’s password for WeChat Payments will subsequently generate a QR Code or a barcode that retailers can scan to accept payments for in-store purchases.”
  22. The Postal Service is losing millions a year to help you buy cheap stuff from China (The Washington Post) – “Under this decades-old arrangement, which is overseen by an agency of the United Nations and has participation from nearly every country, national postal services give each other discounted rates on international mail under a certain size and weight. Here’s how it works. Say someone from Germany wants to sends a letter or package (under 4.4 pounds) to Chicago. The German postal service will handle the Germany-to-U.S. leg. After the package arrives in, say, New York, the USPS takes over, delivering it to its final destination.”

Till Next Week. Onwards.