Today, China is the single largest e-commerce market in the world. Analysts estimate that by 2015, China’s e-commerce market will be worth $540 billion and by 2020, the country’s e-commerce market will be more than that of the US, the UK, Japan, Germany, and France put together. This remarkable growth is driven by the Chinese government’s ambitions of connecting 85% of their population to a 3G or 4G mobile Internet connection by the year 2020.
The market opportunity may be big, but existing government regulations make it difficult for online tech giants such as Amazon and eBay to put forward a formidable front in the country. Instead, locally grown Hangzhou-based Alibaba has taken the lead role in the market. And now, Alibaba is all set to go public later this month, making it the biggest tech IPO ever.
The world’s largest online and mobile commerce company filed their F-1 earlier this summer revealing record performance. According to the F1, for the year ended December 2013, Alibaba processed 11.3 billion orders worth $248 billion in Gross Merchandise Value (GMV) on their Chinese marketplace site. For the same period, they had recorded 231 million annual active buyers on their sites. As of last year, Alibaba had 8 million active sellers and accounted for 76.2% of all mobile e-commerce sales in China. According to iResearch, Alibaba’s Taobao Marketplace, which takes care of online sales between Chinese consumers accounts for 99% of the market while their virtual shopping center Tmall.com has 57% share of the B2C sales. In fact, between Taobao and Tmall, the company has more than 80% of the Chinese e-commerce market and accounts for over 100 million daily visitors.
For the recently ended quarter, Alibaba reported revenues of $15.6 billion, significantly ahead of the market’s estimates of $14.08 billion. They ended the June quarter with 279 million active buyers and saw mobile GMV rise 33% over the year. The company reportedly earned $2 billion in profits during the quarter.
Alibaba’s Expanding Offerings
Alibaba may be known for their etail services, but they also have additional revenue sources including cloud computing services and Alipay, their digital payment service. Additionally, Alibaba is also growing their offerings inorganically. Recently, they entered into an agreement with Lionsgate Studio to begin streaming popular US movies and TV shows such as Twilight and Mad Men. The streaming service will be available over Alibaba’s Internet TV set-top box. Earlier this year, Alibaba had also purchased stake in local Chinese video streaming and content companies as part of their focus to build their entertainment offering. More recently, they also purchased a local soccer club as part of this effort.
Alibaba is now preparing for the final sign-offs from the regulatory authorities in the US. The stock will trade under the ticker BABA and is expected to be priced between $60-$66 per depository share to raise $21 billion and valued at $156 billion. That is nearly as big as Amazon. The company will begin their road show this week and hopefully begin trading by September 19th.