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Tuesday, August 19, 2014

Alibaba's Entry Could Rattle U.S. Players

With Alibaba's IPO imminent, analysts weigh in on how the Chinese giant's entry into the U.S. market may threaten American dominance in e-commerce.

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Alibaba's entrance into American markets will be big - very big, possibly the largest U.S. stock offering ever.

But what does the Chinese e-commerce giant's arrival mean for its American competition?

S&P Capital IQ analyst Tuna Amobi says Amazon and eBay are probably safe in the short term. But in the long-term, Alibaba is a gamechanger:

[Tuna Amobi, Analyst, S&P Capital IQ]:
"It opens up a whole lot of options both for merchants and consumers. And for investors, clearly if you're an Amazon or eBay investor, I think you have to wonder what Alibaba's entry is going to do to the business model of these established players."

Amobi says Alibaba's ability to handle eye-popping volumes of merchandise makes it a force to be reckoned with.

Many analysts agree that's a better measure of Alibaba's disruptive power than revenue.

Last year, company filings show Alibaba brought in relatively meager $8 billion in revenue compared to E-Bay's $16 billion and Amazon's 75 billion.

But the American e-commerce giants pale in comparison on transaction volumes.

SICA Wealth Management reports Alibaba's Gross merchandise volume in 2013 was $248 billion. Amazon moved half that... Ebay less than a third.

But President Jeffrey Sica says American companies have a key differentiator for now:

[Jeffrey Sica, President, Sica Wealth Management]:
"Alibaba has a very big problem with counterfeiting. They have a very big problem with companies that are either counterfeiting or commiting some kind of fraud in their transactions. If Amazon is going to succeed, I believe that Amazon should make a point to say they are the most trusted source."

American e-tail also has the advantage of being here first.

Still, Amobi says Alibaba has deep pockets and a strong track record.

It's launched 11 Main, an online marketplace that offers a window into Alibaba's U.S. approach.

Mike DeSimone is the CEO of Borderfree, which facilitates foreign transactions for long list of familiar retailers.

He expects Alibaba to bring the philosophy that worked so well for it in China and apply it here.

[Mike Desimone, CEO, Borderfree]:
"I don't think that's that different really from what Amazon has done. If you look, Amazon has fulfillment around the world...they've got customers around the world so I would expect Alibaba will step into that global stage much like major e-commerce players have from the U.S.. and from other markets."

...A stage that is getting crowded, as yet another giant joins the fray.

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