China is the biggest ecommerce market in the world – but it’s not done growing yet. As easy wins in the country’s major cities begin to dry up, sights are set on what comes next. Alibaba has an answer: smaller cities, which are thus far underserved in the ecommerce world, will be a crucial driver of growth for the sector going forward. And that’s good news if you invest in China’s preeminent ecommerce company, because Alibaba has an early lead in those markets.
Alibaba’s share price has appreciated by 25% so far this year
Source: Yahoo Finance
Alibaba’s first quarter ended on a strong note, with its 618 Shopping Festival at the start of June. This festival is a run of promotional events that run from June 1 to June 18 commemorating the business’s launch (June 18, 1998). Along with Singles Day, it’s one of the big events in the Chinese online retail calendar, with the company’s competitors and smaller outfits looking to piggyback to greatness by taking part themselves. But if Alibaba is going to build on the success it saw in June, it will need small cities to get onboard.
At this year’s event, the gross merchandise sold by Alibaba’s Tmall platform grew by 38.5% against the previous year. And a driver of that growth was the uptick from China’s second-tier cities. Juhuansuan, Alibaba’s channel for targeting these cities saw an outsized 80% in the number of shoppers it managed to attract. And transaction volume from these cities doubled. That paints a very clear picture: Alibaba has a lead over its competitors in these cities, and they are where tomorrow’s growth in online retail is coming from.
Disclosure
Dominion holds Alibaba in its Global Trends Ecommerce Fund.
Author: Theo Leworthy
Disclaimer: The views expressed in this article are those of the author at the date of publication and not necessarily those of Dominion Capital Strategies Limited or its related companies. The content of this article is not intended as investment advice and will not be updated after publication. Images, video, quotations from literature and any such material which may be subject to copyright is reproduced in whole or in part in this article on the basis of Fair use as applied to news reporting and journalistic comment on events.
