Retail

Alibaba Tracker: Partnership Is The New Acquisition

While 2016 values ended on a down note, Alibaba stock (BABA) has largely been on the rise since the new year for a few different reasons. Most notably, BABA rode a wave kicked off by the company’s strong Q3 results and Olympic sponsorship news in the end of January.

February was mostly flat, seeing relatively small share value fluctuations between $100 and $105. The trend has continued on through the first and into the second week of March, though a closer view indicates a minor downward trend starting off the third month of 2017.

The company closed out Tuesday flat from Monday’s open at $102.63, while pre-market trading on Wednesday pointed back upward, though will likely take more major news — a new deal, a new market, some resolution on the counterfeit controversy — to send stocks out of their plateau in any meaningful way. For now, it appears that investors are optimistic — but not too optimistic.

Wednesday morning trading opened up. At the time of writing, BABA hit $103.56, 0.91 percent in the green from Tuesday’s close and trending upward. Alibaba Group Holding’s market cap sat at just over $257 billion.

It’s been a good while since our last edition of this tracker, but that doesn’t mean that Alibaba has been in low power mode. Far from it, in fact.

First, Alibaba’s Q3 results, which were announced at the end of January, indicated significant growth in its core platform thanks to growing Chinese consumer interest. Alibaba also reported a boost to its top line thanks in large part to investments in cloud-based initiatives. Revenues were up 54 percent in the period to 53 billion yuan ($7.8 billion), well over analysts’ projections of 50 billion yuan.

Around that same time, Executive Chairman Jack Ma spoke of a new direction for the company. Following a years-long run of major acquisitions, Alibaba is looking to work with other corporate entities in 2017.

“I am not interested in acquisitions. I am more interested in partnerships,” Ma said at a news conference on Alibaba’s $800 million Olympic sponsorship deal when asked about his company’s plans for the year. “We want to look for partners and empower them to be powerful.”

Perhaps this shift in company policy — toward cooperation, away from domination — has something to do with Alibaba’s entry into the international spotlight among other top Olympic partner Coca-Cola, Samsung Electronics, GE and McDonald’s, and a few others.

Regardless of its motivations, Alibaba’s moves over the next month-and-a-half indicate that Ma looks to make good on this new approach for the time being, leveraging existing institutions and infrastructure to facilitate continued domestic and international growth in payments and eCommerce.

In China, Alibaba recently partnered up with the Qingdao arm of Haier Group, China’s largest home appliance supplier, said ECNS. The two will reportedly cooperate to launch new products and cater to appliance and smart home market demands, likely as part of a larger domestic push toward constructing smart cities.

One tenet of China’s thirteenth Five-Year Plan (2016–2020) for national economic and social development set goals to move ahead on construction of national smart cities. Ant Financial has already teamed up with 352 cities in 25 provinces with plans to construct credit systems and public mobile services.

On the brick-and-mortar end, Alibaba recently announced a strategic partnership with Bailian Group, one of the nation’s largest retail conglomerates, which boasts over 4,700 outlets across China. The companies will reportedly leverage Alibaba’s eCommerce strengths and combine them with Bailian’s vast physical retail presence to design cross-channel store operation and ordering systems for brick-and-mortar stores.

“New retail reimagines the relationship between consumers, merchandise and retail space by leveraging mobile Internet and big data,” said Alibaba Group CEO Daniel Zhang, “It will upend the traditional manufacturing and supply chain, the connection between merchant and consumer, as well as the overall consumer experience. Our partnership with Bailian is an important milestone in the evolution of Chinese retail, where the distinction between physical and virtual commerce is becoming obsolete.”

Alibaba also recently entered the South Korean market by way of a $200 million Ant Financial investment in South Korean mobile payments service Kakao Pay. As per the reported terms of the investment, the two companies will enter into a partnership whereby Kakao Pay will integrate with Alipay, allowing subscribers to switch between both systems.

The company recently raised its stake in Paytm E-Commerce Pvt., the eCommerce arm of the Indian payment company. Last year, Paytm announced it would spin off its eCommerce business from its payments business, aiming to take on Indian eCommerce leaders Flipkart, Amazon and Snapdeal. With its latest investment in Paytm, Alibaba now holds a majority of Paytm E-Commerce, seeming to position itself in a similar manner in India as it has in the Southeast Asian market

Alibaba-controlled Lazada is bracing itself for stiffer competition in the Southeast Asia, where eCommerce estimates point to double-digit growth for online B2C spending through 2020. Amazon is reportedly considering a launch in Southwest Asia, starting with Singapore sometime this year.

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