Seeking Alpha
Long/short equity, special situations, momentum, event-driven
Profile| Send Message| ()  

Retailers in the U.S. wait all year to make up for sluggish profits through the perfect storm referred to as Black Friday, which is a combination of the buying frenzy of Thanksgiving and Christmas and New Years day packed in one day. However, according to the Xinhua/Zuma Press, Alibaba's logistics center, located in Guangzhou, is currently preparing for a sales volume on Monday, November 11th that will dwarf what retailers make in the U.S. on Black Friday.

Exactly How Big Is Alibaba?
Alibaba outmatches the sales performance of the retail industry in the U.S. It also outperforms the e-tailer giants in the U.S.

Comparison with US Retailers

On 11/11, a lucky number for a culture historically invested in fortuitous numbers based on a long history of astrology, Alibaba Group Holdings Ltd, is expecting Chinese shoppers to flock to their e-commerce websites. These millions of discount shoppers will spend more in one day than America will spend on Black Friday as well as Cyber Monday.

Comparison with US E-tailers

Another way to gauge the financial clout of Alibaba, a fourteen year old company started by an English teacher from Hangzhou, is to compare it with cyber retailing giants in the U.S.. Alibaba is a blend of Amazon.com (AMZN), eBay (EBAY), PayPal, and Google (GOOG). While Facebook (FB) and Twitter (TWTR) are famous for offering the biggest IPOs in the technology sector, their stunning record could be eclipsed by Alibaba's IPO which Yahoo (YHOO) currently holds a 24% position in this valuable Chinese Company.

What Is Alibaba?

A rough analogy may help to explain Alibaba: Alibaba is to tech-investors what Berkshire Hathaway is to value-holding investors; like Berkshire, Alibaba has built its business on a broad-base of diverse industries. Alibaba is like retailers Amazon and eBay, financial services like PayPal, and search engine giant like Google. It consists of numerous parts of the e-commerce supply chain spanning from the supplier marketplace to a robust online shopping platform and payment processor. In all, it consists of an integration of nine online businesses. As might be expected, its online sales are exploding. In its second quarter, it reported a 61 percent increase in sales over 2012 with a net income increase of 145 percent.

Influence, Size and Scope

Alibaba is massive; huge in influence, size, and scope.

Influence:

Alibaba is considered China's hottest companies. In fact, even Hong Kong's conservative stock exchange is considering changing its regulatory rules to score the company's initial public offering.

Size:

Here's an example of its financial size: its two primary online shopping sites, Taobao and Tmall, earned $160 billion last year.

Scope:

Here is a quick overview of the nine companies that make up Alibaba:

• Taobao Marketplace is a shopping site that lists over 760 million products. (Incidentally, it is ranked 13th on Alexa.com.)
• Tmall is a shopping site lists 70,000 global brands. These are luxury brands like Adidas, Gap, and Nike, for instance.
• Alipay is a payment processor similar to PayPal. This third-party payment processor is China's most widely used e-commerce payment platform.
• Juhuasuan is an e-commerce business that works very much like Groupon. It has deals and promotes local businesses.
• ETao is a search engine that focuses on online shopping. It is used for rebates, hotel rates, discounts, coupons, and product searches.
• Alibaba.com is a B2B site, connecting small business enterprises with manufacturers and suppliers.
1688.com is a wholesale website for sourcing products from vendors. Its main clients are Taobao sellers.
• AliExpress is another wholesale marketplace, specializing in low cost inventory.
• Aliyun is a cloud computing business, selling services like cloud computing services and data management.

Final Thoughts and Conclusion:

Buy Yahoo ahead of Alibaba's IPO.

Alibaba Group Holdings Ltd is a behemoth. It is so big that Marissa Mayer, Yahoo's CEO, has used its stake in Alibaba to help Yahoo's turnaround. It's somewhat ironic that Yahoo's impressive stock rebound had little to do with Yahoo's core business offerings, which have been adversely affected by Google's domination of the search engine market.

Today Yahoo has a 24 percent stake in Alibaba. Although Yahoo's prime income source, its advertising business, remains problematic, Yahoo shares have gone up by an astonishing 90 percent over the past year thanks to Mayer's foresight.

Source: Yahoo's Alibaba Prepares For IPO As Its Online Sales Are Set To Explode