Alibaba prepares for “Double 11” – Chinese “Black Friday”

November 10, 2013 8:38 am

Alibaba is an e-commerce businesses including business-to-business online web portals, online retail and payment services, a shopping search engine and data-centric cloud computing services. The 14-year-old company, founded by a former English teacher, is hard to categorize. While it is often called the Amazon.com of China, Alibaba is more of a mix between eBay Inc. and Google Inc.

As Alibaba plans for what could be the biggest technology IPO since Facebook Inc., it is recognized as the dominant player in China’s surging e-commerce industry. Alibaba is the world’s largest e-commerce platform by total volume of merchandise handled last year. Company’s two main shopping sites reported one trillion yuan ($160 billion), larger than last year’s totals for Amazon.com and eBay combined.

In a Barclays report, lead author Alicia Yap, the firm’s head of China internet research, said: “We believe the total sales volume this year is likely to reach another record for the major players, with particular attention focused on the Alibaba Group.

“We expect that [use of] mobile devices could drive overall [e-commerce] transaction volume higher.” Alicia Yap said.

Alibaba’s has two leading online shopping platforms, Tmall.com and Taobao Marketplace, which hit a record total gross transaction value of 19.1 billion yuan on November 11 last year, up 260% from 5.3 billion yuan a year earlier.

“Mobile e-commerce is becoming increasingly popular. We expect this to increase significantly this year, and have taken technical steps to stabilise and optimise the shopping experience for users via the Tmall.com mobile app,” an Alibaba spokeswoman said yesterday.

November 11, which is also referred to as the “Double 11”, or Chinese “Black Friday” , has become the most important date for e-commerce players.

In the second quarter, Alibaba’s group net profit more than doubled to $707 million, while revenue rose 61% to $1.74 billion, according to Yahoo Inc., which holds 24% of the Chinese company.

SoftBank Corp., a Japanese Internet and mobile-services company, is Alibaba’s largest shareholder, with a 36.7% stake.

Alibaba’s second-quarter revenue was much smaller than Amazon’s $15.7 billion, because the Chinese company doesn’t sell products directly the way Amazon does. But its operating profit margin of 49% for the quarter far exceeded Amazon’s 0.5%.

However, Alibaba has to overcome some internal issues along with fierce competition. As Tmall and Taobao get more crowded, sellers have to spend more on ads to draw attention to their storefronts. This may drive some sellers away as they are facing rising costs. The company also has a range of competitors including Beijing Jingdong Century Trading Co.’s JD.com, an Amazon-like online store with its own delivery service.

To stay competitive in e-commerce industry, Alibaba is heavily investing in mobile services, popular with Chinese smartphone users.

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