Alibaba roars into Wall Street — India’s e-commerce
Alibaba’s long stride to Wall Street
In its maiden foray into Wall Street, Alibaba, the Chinese e-commerce company has blazed a new trail. In the biggest ever Initial Public Offering (IPO), it has mopped up a whopping $25 billion. In doing so, it has broken all previous records of spectacular successes made by iconic companies of the capitalist world.
Alibaba today has a yearly turnover of $278 billion that is more than the combined turnovers of eBay and Amazon.Com. Alibaba is China’s and undeniably the world’s largest online commerce company. Hundreds of millions of buyers source their needs from its three arms – Tabao, Tmall and Alibaba.com. Started by the Chinese entrepreneur Jack Ma in 1999 with a meager capital of just $60,000, the company has recorded meteoritic rise in its popularity and business. Jack Ma is the richest man in China today with individual net worth of $22 billion.
In almost all parameters used to measure a company such as market capitalization, customer loyalty, yearly growth etc. it has left the giants like IBM, Coca Cola, Procter & Gamble way behind.
Alibaba’s spectacular rise throws some disturbing questions. With its low-cost manufacturing prowess, China has pushed all American and European companies out of the U.S. market. China’s exports have soared, so has Chinese dollar holdings in U.S. treasury bonds. Today, China stands as the largest debtor of America, a position many view with alarm. After all, China is in a different wave length politically and militarily. It is not a historical ally of America as Britain, Germany and France are. In times of crisis, it can pull the rug from under the American feet by demanding a pay back of a good part of its dollar holdings. The Alibaba’s roaring stride into the Wall Street makes America the largest fund provider for the Chinese behemoth’s future growth.
It is pertinent here to point out that the Chinese bank Agricultural Bank of China had raised $22.1 billion in 2010 in a similar way. Many other Chinese companies have mopped up sizeable amounts from American public and investment companies.
Indian companies like Infosys had made forays into American markets through issue of American Depository Receipts and listings in Nasdaq, but their performance pales into insignificance when compared to that of the hyper-active Chinese entities.
Alibaba’s success has triggered some justifiable fears too. On the day of the listing day, its worth had soared to $231 billion. Now, questions arise about its true worth. Could it be a build-up of a bubble?
Alibaba’s ownership structure is not transparent, which is discomforting. Mr. Ma and his coterie control disproportionately high voting power. Apart from this, many similar Chinese companies have come up offering stiff competition to Alibaba. Are these adverse factors being ignored by the euphoric build-up to the IPO sale? The story of the boom and bust of the dot.com days is still fresh in investors’ minds. Is there some possibility of Alibaba going down along that slippery path?
Some analysts discount such fears. They point to the solid infrastructure, operational base and manpower pool of Alibaba. Alibaba has delivered, where as the dotcom companies just sold dreams promising the moon. Alibaba has etched a place for itself in the hearts of millions of Chinese. Such trust simply can not melt away.
The Indian rising e-commerce companies are watching the Alibaba story with great interest. Flipkart is one of them. It is highly improbable that the Chinese e-commerce companies will ever be locked in competition with their Indian counterparts like Flipkart. Both operate in separate areas. Flipkart, the trail-blazer of India’s e-commerce space, has secured impressive FDI leveraging its popularity and growth. Flipkart has also to contend with fierce competition from companies like Amazon.in having deep pockets. So, competition is going to get fiercer with time. Amazon has already rolled out an aggressive marketing strategy to woo the Indian customers away from Flipkart.
To foster the growth of e-commerce through healthy competition, the government has to remove some of the bottlenecks like poor broadband access in many areas, confusion with regard to sales tax applicability and poor logistical base.