Friday, September 12, 2014

Friction Points for Alibaba As It Goes On Global Stage

It’s interesting to hear astute China-US venture investors Gary Rieschel of Qiming Ventures and Chris Evdemon of Innovations Works say they wouldn’t invest in Alibaba stock as the Chinese e-commerce company gets set to go public in New York late next week. With a portfolio full of Chinese tech startups poised to go public if Alibaba’s IPO does well, you would think they would be more rah-rah. But no.
“At a price of $160-$170 billion, I think they’ve already done enough to help other Chinese startups,” says Rieschel. “In my opinion, they’ve priced the company in a fairly rich way.”
A host of competitive pressures and strategic management issues at Alibaba in China and overseas could erode Alibaba’s value, he and Evdemon point out.
Within the Chinese market, challenges are building over increased rivalry from newly public e-commerce companies such as “Everybody is out there to erode Aliababa’s share,” observes Evdemon, on Silicon Dragon Talk. “They cannot show any form of complacency.”’
Morever, Alibaba faces erosion in its seller fees as an increasingly number of larger merchants opt to spin off from handling transactions through the e-commerce company and instead handle trades independently. Alibaba’s counter? Merchants who are TMall clients face cut-off access to AliPay if they cancel, Rieschel notes, a tactic he says would be illegal elsewhere.
Such managerial issues point to new tension points for Alibaba outside China as expansion continues globally and strategic decisions are made. The issue will be whether Alibaba continues its comfort zone as a China company or moves up as a global player.
Read Forbes for full article: Not much love for Alibaba.