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Alibaba's IPO could be 'open sesame' for global expansion

Zach Miners and Michael Kan | Sept. 19, 2014
Alibaba, an e-commerce giant in China, wants to make new friends in the U.S. Especially friends with money.

Alibaba, an e-commerce giant in China, wants to make new friends in the U.S. Especially friends with money.

The firm is expected to begin offering shares Friday for US$68 a pop on the New York Stock Exchange, in one of the biggest IPOs ever. At that price, the company could raise almost $22 billion, on par with the Agricultural Bank of China's record-setting $22 billion 2010 offering, and handsomely beating Facebook's $16 billion in 2012.

Outside of the investor community, Alibaba is also making nice with a growing number of U.S. consumers and tech companies, as part of an international expansion that could accelerate following its listing.

Don't expect any consumer-facing store ready to steal Amazon's or eBay's thunder. At least not yet. The Chinese company certainly has its eyes on becoming a global Internet player, according to industry analysts and close observers. The path to its goal, however, may not depend only on e-commerce, but also on carving different niches in countries including but not limited to the U.S.

"The IPO claims Alibaba's stake as a global company," said Kelland Willis, an analyst at research firm Forrester who studies e-commerce.

"So much of the world's transactions take place in the U.S.," echoed Scott Strawn, an analyst with research firm IDC. "If you want to compete on a global stage you need to be competing in the U.S."

Earlier this week, the company's founder and executive chairman, Jack Ma, told reporters in Hong Kong that Alibaba plans to "strongly expand" in the U.S. and European markets after its U.S. listing.

Despite its international ambitions, Alibaba's short-term plans will probably target the low-hanging fruit — growing its existing e-commerce websites in its home market by attracting more foreign merchants and overseas Chinese to them.

Two of Alibaba's biggest consumer-facing sites are Tmall and Taobao, which although dominant in the Chinese market, still have plenty of room to grow and must fend off competition from local e-commerce firms.

"I don't think they have a global plan yet," said Bryan Wang, an analyst with Forrester, adding, "Alibaba's marketplace model may not work in every single country, especially the U.S."

The U.S. has its own entrenched e-commerce companies in Amazon and eBay, and analysts don't envision Alibaba competing with them head-on. The probability of success is low, and meanwhile the Chinese market is still teeming with business opportunities.

Nevertheless, Alibaba has been active in the U.S. Most recently, it launched 11Main, an invitation-only marketplace offering specialty goods, that went online as a beta this past June.

In 2010, it founded AliExpress, an English e-commerce site designed for foreign customers who want to buy retail goods from Chinese merchants. The site is growing, especially in Russia, Brazil and the U.S., the company said in a recent securities filing.


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