Alibaba files for $1 billion IPO in US

By Meng Jing (China Daily) Updated: 2014-05-08 06:42

But some analysts are skeptical about the group's potential for growth.

"Alibaba is by far the largest e-commerce company in China (and the world) by transaction volume. It will continue to stand its ground over the next couple of years but will be facing challenges from rivals who focus on better customer experience," said Bryan Wang, vice-president and principal analyst with US-based consultancy Forrester Research Inc.

According to Wang, compared with Amazon Inc, which is the largest e-commerce player in the US, Alibaba has much less control over product quality and customer service.

"Amazon is using a direct merchant plus marketplace model; so are some of Alibaba's local rivals," he said. "But Alibaba is 100 percent using the marketplace model to attract merchants to open stores on its websites.

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It would be difficult for Alibaba to control all the third-party retailers online," Wang said, adding that he does see the revenue growth from Amazon-like Chinese rivals such as JD.com Inc.

Statistics from Beijing-based IT consultancy Analysys International showed that the market shares of both Alibaba's Tmall (48.4 percent of China's business-to-consumer market) and Taobao Marketplace (95 percent of China's consumer-to-consumer market) dropped slightly in the first quarter of this year compared with last year.

"I don't think Alibaba's domination will be challenged, but the rise of JD is unstoppable, especially after teaming up with Tencent Holdings Ltd's popular mobile messaging app

Lin said that more than 80 percent of Alibaba's revenues were from its three retail marketplaces in 2013.

"With the group vigorously bolstering its reach with investments and acquisitions in China and abroad, Alibaba is expected to see more income from new sectors rather than purely e-commerce," he said, emphasizing that the group may spend more money on online-to-offline businesses.

Jane Zhang, principal analyst with Gartner Inc, agreed, saying that most of the profit Alibaba has made on its online platforms are generated by the promotional fees and commissions it charges online merchants.

"The growth potential of this part is not going to be huge," she said. "Alibaba has made it clear that its mission is to make it easy to do business anywhere."

Zhang noted that with the money Alibaba is expected to raise from its IPO, it may be making more mergers and acquisitions in order to offer new services.

In the first four months of this year, Alibaba invested roughly 37 billion yuan in various companies, ranging from traditional media to video to owning department stores, becoming one of the most aggressive investors among China's big three Internet giants (the other two being Tencent and Baidu).