By Tom McGregor, CNTV Commentator
The online retail giant, Hangzhou-based Alibaba Group Holdings, has enjoyed outstanding sales growth. But has Alibaba peaked? Can the online retailer continue to soar ahead? Will there be growing pains coming soon? In all likelihood, the company will stay on the right path for greater prosperity.
In fiscal year 2015 ending March 31, Alibaba is expected to have sold 3 trillion RMB ($US463.3bn.) of goods (GMV) gross merchandise volume via its shopping Websites, including Tabao.
Its subsidiary, Ant Financial manages Alipay, Alibaba’s online payment affiliate, and claims to have over 500 million active users and 200 million credit cards in use in China.
Alibaba has taken measures to expand its online sales networks worldwide, as well as spending $US15bn. on mergers and acquisitions (M&As) to acquire companies, such as Youkou Toudu Inc.
Upgrading logistics and technology networks
China’s e-commerce sales hold the key to Alibaba’s remarkable success story. According to its fourth quarter fiscal year 2015 financial report, its online sales in China had accounted for 86.5 percent of the company’s gross revenues.
China has already surpassed the United States as the world’s largest e-commerce market last year, while Alibaba’s CEI Zhang Yong is targeting 6 trillion RMB ($US980bn.) GMV by 2020. He believes the company can service more than 2 billion global customers and create tens of millions of new enterprises by 2024.
“Booming online shopping provides more variety and convenience to customers, thus refueling their spending desires,” NDTV quotes Kiki Fang, managing director of Nielson China, as saying.
Alibaba intends to develop further into cloud computing, Big Data technologies with IoT (Internet of Things) capabilities and consumer terminal equipment.
Eyeing more rural consumers
Alibaba is tapping into more lucrative sales channels. The Fung Business Intelligence Center had published a report saying that China’s e-commerce urban markets are nearing a saturation point, but by boosting logistics support online retailers could capture the rising rural markets. Online sales in rural China could reach $US75bn. this year.
The Hangzhou-based retailer has invested over $US1.7bn. to build more distribution centers that can deliver goods to residents in over 100,000 rural villages. The strategy could attract 139 million more digital buyers by 2019.
Alibaba plans to train one million teenagers from rural China to launch their own online businesses. Ant Financial would invest $US155 million to encourage college graduates to return to their hometowns to start entrepreneur careers there.
Breaking into the Indian market
With improved logistics networks, Alibaba is moving ahead big time into India and has committed substantial investments in the e-payments and e-commerce sectors in the country.
The company had invested in Paytm, a third party payment platform, and Snapdeal, an Indian-based e-commerce platform. Alibaba is in talks with the Indian conglomerate, Tata Corp., to forge an e-commerce partnership, according to Retail Drive news Website.
Industry experts believe India will witness e-commerce sales growth rates reaching 60 percent or higher on an annual basis for the next few years. Alibaba’s iconic founder Jack Ma had visited India for the first time in Nov. 2014. He pledged to boost investments and to cooperate with Indian companies and experts.
Alibaba has made significant headway in China’s rural markets, and they would likely enjoy success fighting for India’s rural residents as well.
Soaring past Walmart
Walmart Stores Inc., ranks as the world’s largest retailer, posting $US478.6bn in sales for fiscal year 2015. Yet, Alibaba comes in at a close second and may surpass the US-based retailer as soon at the end of this fiscal year.
Alibaba Group Holdings has taken the right approach to expand globally and stands ready to win over many more online shoppers.
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