Alibaba First-Quarter Net Income Triples to $669 Million

Guest post by Courtney Gordner

 

Alibaba, the Chinese e-commerce giant is set to become the largest initial public offering in American history. Many feel that the future of investment by Americans in Chinese businesses hinges on its success or failure as an IPO. Thus far, all signs point to success.

During its filing, the company valued itself at around $110 billion. Analysts feel this might even be an undervaluation given that the business’s e-commerce sites made over $250 billion last year alone. As the company was afraid of chasing investors away, it initially ran from the multibillion-dollar number, giving a $1 billion value instead.

There’s a reason Alibaba wishes to be modest: tech-related stocks have dropped off $150 billion since peaking in early March. It’s said that Chinese stocks are also out of favor.

However, the giants of e-commerce (Alibaba is expected to be joined by Baidu and Tencent), as well as smaller Chinese businesses, are making the jump anyway.

The End of An Era?

For many, Alibaba’s IPO signals the end of an era. Americans expected to continue dominating the e-commerce world through websites like eBay and eBay had at one time expected China to be its largest market. Instead, the company was shut out of major competition by Chinese-grown e-commerce businesses.

As these businesses have grown, they are no longer simply catering to hundreds of millions of Chinese consumers; the companies are boasting a growing number of global consumers as well, including American shoppers.

Previously, conventional wisdom dictated that American businesses would automatically be far more successful and valuable than those of any other country, including China. If an American wanted to research laser vision correction options, they used to remain stateside. Now products and services are very much about who can provide the best work, no matter where they’re located.

With Alibaba’s IPO set to break previous records, it could signal a powerful shift in thinking.

The Playing Field Levels

David Chao, co-founder and general partner of Doll Capital Management (DCM), said that in terms of market cap and the number of users, Chinese businesses have either matched or surpassed American businesses. Chao also said that the fact that Chinese and American businesses are competing “on the same footing” is a “sign of the times.”

Chao explains that this is new territory for American businesses; however, he believes this trend has been also developing throughout the past decade.

What Does This Mean For American Businesses?

With the rise of Chinese e-commerce giants and growing international competition for customers, American businesses may find themselves in a strange place.

Simply being an American business used to be enough to ensure superior consumer interest. But now? Not necessarily the case. American businesses may have to abandon such national rhetoric and more actively market to global consumers. Pricing will have to be far more competitive and shipping highly convenient.

Often those companies who have “rested on their laurels” find it difficult to truly compete when they have to. American businesses need to look at the Alibaba IPO as a sign that de facto dominance is over.

In truth, the Alibaba IPO is good news, not just for China but for the entire global market. The idea that a non-American company could potentially make such a historic splash is a true testament to the strength of global consumerism and the ability to use the internet to market and sell to anyone anywhere in the world. It represents a new day in e-commerce. It may also be another nail in the coffin of brick and mortar stores across the planet.

At the end of the day, it’s about the customers getting what they need and global competition is always going to be good for global consumers. Rather than looking at it from a point of national pride, it may be best to look at it from another point of view: the changing landscape represented by Alibaba will inspire American businesses to bring their A-game.

 

Courtney Gordner is a passionate blogger that loves sharing insight into news and law. You can read more from her on her blog: www.talkviral.com