Game Changer!

$ 155 Bn & Climbing

Jack Ma’s Alibaba Group Holding Ltd. or Alibaba will commence its pre-market debut roadshow  tomorrow, Monday, September 9, 2014. The anticipated first day of trading on the New York Stock Exchange is Friday, September 19, 2014. That could well mark the ‘game changing’ day for global eCommerce.

The anticipated resulting market capitalization is $155 Bn U.S., however, many analysts see a range in excess of $200 Bn. The anticipated market capitalization would place Alibaba in the top 10 NYSE Market Cap valuations on its first day of trading. The low end of the estimated market cap would place Alibaba in the market cap range of Jeff Bezos and Amazon.

The big difference between the two companies is that Alibaba apparently makes money while Amazon currently does not. The importance of the Alibaba story is that a non-U.S. based tech company is now competing on the global stage and is right up there with the big guys. Even more important, however, will be five years from now … which companies will dominate the global market?

93%

There are now enough feature phones and smartphones in service today for 93% of the world’s population to be connected. That’s roughly 6.5 billion connected devices and we really have not started to connect the Internet of Things yet. The market opportunity is therefore huge!

Once every 6.5 minutes

According to the NY Daily News, “Perhaps the most startling statistic is that currently, 1.3 million Android devices are activated every day — that means that every 24 hours, more than four times as many new smartphones and tablets are set up than babies (300,000 a day) are born. And once the devices are activated, they are checked on average 150 times a day — once every 6.5 minutes. Use is focused on apps, of course, some 127 minutes a day but surfing the web via a browser also accounts for just over an hour’s use every day.”

Alibaba is different!

THE ASSUMPTIONS ON WHICH MOST ECOMMERCE BUSINESSES ARE BASED MAY NO LONGER BE RELEVANT

What makes Alibaba different is that it is a platform for retail, rather than a retailer itself. In that respect it is far different than Amazon and other brick and click retailers. Alibaba’s revenue in 2013 was triple the size of eBay and double the size of Amazon.

Earlier this year Alibaba debuted its U.S. 11 Main site with an initial 1,000 curated independent U.S. dealers. 11 Main is seen by many as Alibaba’s first step into the U.S. market.

CUSTOMERS AND THE COMPANIES WHO SERVE THEM NOW HAVE AN ASTOUNDING GLOBAL REACH

Alibaba knows how to connect the world’s market of buyers and sellers. It provides connection, security, payment systems, information, ease of transaction and the experience of connecting to the world’s global bazzar where you can easily find almost anything you want at a price you want to pay and get fast delivery.

The Economist in a 2013 article wrote, “Gordon Orr, a senior partner at McKinsey, thinks a healthy IPO valuation could be just the beginning. He says that if Alibaba can sustain its leadership in its current market and expand strongly into finance, the management of the supply chain and other services, it could become one of the world’s most valuable companies five years from now, with potentially more than $1 trillion of sales passing through its platforms each year.”

Great Expectations

The prospects for Alibaba are strong even if it does not move out of China. The Economist chart above shows the tremendous eCommerce growth potential for Alibaba in its own home market, China, compared to the total U.S. eCommerce market.

If Alibaba is successful in its launch, it is possible it could impact Google’s U.S. and potentially global  growth too. The Economist notes, “Alibaba also now has the advantages that come with dominating its domain. In the West, shoppers often search for items on Google, and then follow a link, possibly one in an ad, to a retailer’s website or to Amazon; the ads are what make Google its money. In China Taobao’s scale means it can afford to block the “spiders” that search engines like Google, or its local equivalent, Baidu, use to find out what is on a site. It can do this because shoppers more or less have to come to it anyway. This makes adverts on Taobao more valuable; it gets a fair whack of the revenue that would otherwise go to the search engines.

Alibaba — A New Solution Space

The premise of this series, Chasing the Customer is dedicated to my interpretation of thoughts by Drucker, Toffler, Levitt, Leo Burnett and a host of others, plus my own experience in the market — that there are no longer competitors. Companies that are focused on competitors are focused on the past, not a future full of technological and demographic opportunities. Business as we knew or know it is disappearing. A business today must focus on the outside with the customer … it is the customer who ultimately determines what it produces, what a business is and whether or not it will prosper. Therefore managers must focus on what the customer wants and needs … not what the competitor is doing.

Observation 1: A business can no longer simply sell the products it makes or services it offers to its customers. Instead, a business must make the products or develop the services it can sell. Customer connection, analytics and marketing skills enterprise are now critical.

Observation 2: Companies are no longer just selling products they are also selling experiences. Better customer solutions and more choices that can be put together in more ways.

Observation 3: The winners will be the organizations that offer the most varied menu to their customers from which they can pick, choose and customize. The ability to put together and connect the pieces in different ways with the customer — all the time — defines the business’s performance.

At this point in time, it looks like Jack Ma and his team understand Observations 1, 2 and 3 above.