Alibaba

[Wildreamz]

That said, personally, my Alibaba position is small. If China is determined to curb Alibaba's market power; immediately they have 2 tools that they can use: Data security laws and anti-trust laws.

There are many things they can do to, perhaps not to dismantle completely, but greatly cripple Alibaba's market strength in Ecommerce, Mobile Payments, Fintech, and Cloud (they are already doing it to a certain extend, by favoring government cloud contracts to state-owned Huawei Cloud).

Going in big on Alibaba right now, would mean you are betting on being right on an almost binary outcome. 

This is not a bet I will personally take.

2c.

[Choon]

Thanks.

What baffles me is why is there no direct clone competition to Amazon i.e. another platform aggregating third-party merchandise.

Whereas Ali have to spent so much to defend against PDD and JD and Shoppee.

Why are there no PDD and JD equivalents burning cash to compete with Amazon in the US market?

[Choon]

..

An interesting question is why Amazon does not seem to need to defend against other e-commerce providers. Why Amazon's competitive position in US appear so much stronger than Ali in China?

I guess you missed my previous post; check out Shopify:

https://www.marketplacepulse.com/article...arketplace
https://www.forbes.com/sites/petercohan/...4755887d9d

And Shopify is just the tip of the iceberg (Amazon's serious competition includes, Costco, Facebook, Pintrest, Google and more (Facebook, Google and Pintrest are all collaborating with Shopify)).

With regards to Alibaba; let's ignore the e-commerce business for a moment. It currently holds 40% of China's cloud market share (https://www.chinainternetwatch.com/30820...-services/). If this lead holds, then it doesn't matter who "wins" China ecommerce (I think it will likely be a oligopoly).

(vested in Alibaba and Shopify)

That said, personally, my Alibaba position is small. If China is determined to curb Alibaba's market power; immediately they have 2 tools that they can use: Data security laws and anti-trust laws.

There are many things they can do to, perhaps not to dismantle completely, but greatly cripple Alibaba's market strength in Ecommerce, Mobile Payments, Fintech, and Cloud (they are already doing it to a certain extend, by favoring government cloud contracts to state-owned Huawei Cloud).

Going in big on Alibaba right now, would mean you are betting on being right on an almost binary outcome. 

This is not a bet I will personally take.

2c.

Regulatory risk I can accept because I believe over a long period of time, that would apply equally to all competitors. I would actually be receptive to more regulations since that can bring the entire industry to a more sustainable footing. 

What bothers me is competition. And that in many areas, Ali seems to be losing. e.g. Lazada usurped by Shopee, Ele dominated by Meituan. 

Could this be telling something, that the conglomerate/homogenous culture in Ali puts Ali at a structural disadvantage when competing against focused, entreprenuer-led and hungry competitors?

[Wildreamz]

Regulatory risk I can accept because I believe over a long period of time, that would apply equally to all competitors. I would actually be receptive to more regulations since that can bring the entire industry to a more sustainable footing. 

What bothers me is competition. And that in many areas, Ali seems to be losing. e.g. Lazada usurped by Shopee, Ele dominated by Meituan. 

Could this be telling something, that the conglomerate/homogenous culture in Ali puts Ali at a structural disadvantage when competing against focused, entreprenuer-led and hungry competitors?

(1) While Shopee clearly has larger market share right now, and trending up, I'm not sure if they have won the market completely. The South East Asian ecommerce market is far from settled (especially without substantial platform subsidy). I ask everyone I know, they will instantly buy from Lazada or Qoo10 if they can find cheaper options. There is no "brand loyalty" to Shopee. 

(2) Need to note that regulatory risk is far higher for Chinese companies, and even among Chinese companies could be disproportionately disadvantageous to Alibaba if they happen to cross the line with the Chinese government (I don't think they have reached that point yet).

(3) Why there isn't similar platforms directly competing with Amazon: that's the key, you can't compete with Amazon doing exactly the same thing (aggregating third party sellers, then try to undercut them with your own in-house private label); you can out-maneuver them (e.g. Best Buy), out price them by having better unit economics (Costco), serve a niche better than them (e.g. Home Depot) or serve third party sellers in general better than them (e.g. Shopify). If you try to do exactly the same thing, you will always end up losing; they have their secret sauce: AWS, Prime membership, advertising and more, which they use to subsidize their ecommerce business.

(4) While Alibaba is losing market share overall to competition, I think they are simply carving out their niche, and serving a profitable part of the market in each sector they choose to compete in (ecommerce, food delivery etc.). The economics of ecommerce in China is dynamic and complex, I do not believe 1 entity should and could dominate everything (especially not without drawing the ire of the CCP). 

Organic competition is actually my least concern, tbh; the market is big, and Alibaba has the ecosystem, tech, and strategic vision to do very well for themselves for many years to come. My concern is more with whether or not, the CCP wants to permanently limit the power of their most powerful private individuals/businesses, while giving advantages to entities like, say Huawei (that they have more control over) to dominate their home market.

2c.

[brattzz]

"My concern is more with whether or not, the CCP wants to permanently limit the power of their most powerful private individuals/businesses, while giving advantages to entities like, say Huawei (that they have more control over) to dominate their home market."

CCP wants to have TECH GLCs/NTUCs which does not give away home strategic advantage, ie, having their home population electronic (data & information) exposed to anti-CCP's external parties/influences which will swing "influences" away from them

If it's China made, it must be CCP-made/control/influenced to a certain extend.

Just like how Sg gov controls the inflow of tourists from each countries to avoid over-reliant and exposure to them.... what feeds you can also bite you i guess...

:O

[PenroseCondo]

Is this still a good buy ?

[Wildreamz]

Is this still a good buy ?

This is subjective to your own risk profile, and investment goals. 

Personally, I think it's cheap compared to it's peers, and am vested and added recently, but overall exposure is small.

Partly because I am increasingly skeptical of the Chinese government's ability to win over the trust of the global community in the short term; and partly because the potential upside of a USD$573bil company based in China, may be somewhat limited compared to say, a $3 - 30bil high growth company domiciled in the US, if that makes sense.

[karlmarx]

Alibaba (and most of its tech peers) has a big market, but it is not a worldwide market. Most of their business will be restricted to PRC and SEA. It is not likely that they will be able to grow outside of these markets because of Western competitors.

Given its market share and scale, Alibaba will likely still remain relevant and play a major role in the Chinese people's daily activities. Its ability to grow revenues, however, may slow.

The Chinese economy will continue to grow, and will probably surpass the US in the coming decades to become the largest economy. With higher income and consumption, the market for e-commerce and its ancillary services will continue to grow.

From my perspective, competition is still the biggest wildcard. Any app that can scale up is a potential threat to other/current super apps, even if they provide/sell different services.

The only thing I am sure is that the Chinese economy is where you want your money to be for the foreseeable future.

[Wildreamz]

https://www.bloomberg.com/news/articles/...on-profits

China Considers Turning Tutoring Companies Into Non-Profits

China is considering asking companies that offer tutoring on the school curriculum to go non-profit, according to people familiar with the matter, as part of a sweeping set of constraints that could decimate the country’s $100 billion education tech industry. Shares sank.

[Choon]

Alibaba (and most of its tech peers) has a big market, but it is not a worldwide market. Most of their business will be restricted to PRC and SEA. It is not likely that they will be able to grow outside of these markets because of Western competitors.

Given its market share and scale, Alibaba will likely still remain relevant and play a major role in the Chinese people's daily activities. Its ability to grow revenues, however, may slow.

The Chinese economy will continue to grow, and will probably surpass the US in the coming decades to become the largest economy. With higher income and consumption, the market for e-commerce and its ancillary services will continue to grow.

From my perspective, competition is still the biggest wildcard. Any app that can scale up is a potential threat to other/current super apps, even if they provide/sell different services.

The only thing I am sure is that the Chinese economy is where you want your money to be for the foreseeable future.

From my perspective, competition is still the biggest wildcard. Any app that can scale up is a potential threat to other/current super apps, even if they provide/sell different services.

I share the same thoughts. For example consumption of consumer services could one day be bigger than consumer spending on goods. Meituan being the largest platform for consumer services today, may then displace Taobao, as Meituan evolves into a merchandise platform too. 

The recent re-organisation of Ali's Group Services, replacing its head, and likely positioning Gaode Amap at the centre as as a traffic generator, may allow Ali to catch up with Meituan.

But it seems that neither Ali nor Meituan has a superior competitive advantage in consumer services. It likely boils down to who can execute better.

The re-organisation does point out a more durable underlying strength of Ali - that it is able to continually re-organise internally to address challenges (organisational resilience).

That said, Ali's weakness is also that as a conglomerate, it is less nimble and aggressive (at burning cash, amongst others) than other more focused competitors. A big pack of wild dogs can kill a lion.

But if Ali can outcompete Meituan, then the growth potential could be huge - assuming that Chinese spending on consumer services would one day surpass their spending on consumer goods. Imagine if >50% of Chinese hotel bookings, flight bookings are booked through Ali.  

Thus on balance, I think 9988 is a good gamble at current HKD200 level.


Another wild thought is if the big crash does come and money becomes scarce worldwide, loss-making competitors may find it harder to raise cash to continue competing with self-sustainable Ali.