Emerging e-commerce market of China and a perspective into valuation and growth of Alibaba

Abstract

Nearly two decades ago, global retailing in the developing markets was the most attractive domain. Companies jumped into the band wagon and controlled a lot of resources of real – estate while plotting strategies for future growth. Today they are either closed due to high operational costs or fighting in the market by re-engineering the processes. E-commerce, the process of buying or selling goods over the internet, has now completely altered how consumers shop. Instead of traveling to far away stores, people are comfortable buying and receiving products in the comfort of their homes with just few clicks. Globally over past 5 years, online retail has grown at a 17% CAGR, with growth particularly strong in Latin America (27%) and Asia Pacific (25%). This ecommerce boom started with new millennium is now being fuelled by m-commerce. Mobile commerce is still in a very nascent stage driven by increased usage of mobile devices like smartphones and tablets and larger penetrations internet connectivity. Online marketplace models are the new rage. With inevitable heavy investments in supply chain, inventory holding costs were a real burden on the wafer margin ecommerce companies. To leverage the last mile connectivity of offline players, offer a long tail selection and wide assortment, the marketplaces bring the sellers and buyers on the same platform and act as a facilitator. If we consider the normal business life cycle model, most of the e-commerce companies are still in growth and expansion phase