Alibaba IPO is in high demand, but who are its customers?

Alibaba's IPO could break records in US markets, even if most Americans have never heard of it. But whether you know it or not, there's a good chance you have purchased goods procured through Alibaba. 

Chance Chan/AP/File
People walk at the headquarters of Alibaba in Hangzhou, Zhejiang province. Chinese e-commerce company Alibaba Group Holding Ltd said its expects to price its initial public offering at between $60 and $66.

You may have never heard of Alibaba — the Chinese company likely to break records with its IPO later this week — but you may have purchased goods procured through the e-commerce site. You just didn’t know it.

Like the “Designed by Apple in California. Assembled in China,” note festooned on Apple products for sale in the U.S., American companies large and small buy supplies or assembled goods from China for products sold here.

Since its inception in 1999, Alibaba has been catering to Western companies as a business-to-business portal that connects suppliers and manufacturers in China with commercial customers globally. Alibaba’s customers make and sell just about anything you can name: buttons for shirts, components for smartphones, bulldozers for construction companies or dog bowls for pet stores.

You can buy a fart-sound bottle openera barf bibkangaroo meat or a caveman robot.

“If Amazon.com is the everything store, Alibaba wants to be the everything company,” USA Today says.

In China, Alibaba is now Amazon, eBay and PayPal all rolled up into one. Alibaba makes its cash acting as a matchmaker among businesses — and increasingly hooking up Chinese consumers with direct online sales. The company gets paid through commissions and online advertising on its sites.

AliPay, Alibaba’s online payment service, handles half of all online transactions in China, the world’s No. 1 Internet market with a mind-blowing 618 million people online — nearly double the population of the U.S.

Alibaba’s online auction site, Taobao, helped shutter eBay’s early entry into China. Analysts say Alibaba showed it understood Chinese consumers better than the eBay, which just migrated its U.S. business model to China.

“Taobao was quick to recognize that people wanted to buy new products online rather than secondhand goods,” Edward Yu, chief executive of Analysys, a Beijing market analysis company, told me in 2010. EBay, which had 79% market share in China when Taobao opened in 2003, left China in 2006 after its business there cratered. EBay now is back in China — but with a much lower market share.

New businesses, such as Tmall Global, are helping foreign companies tap into the growing spending power in China by selling directly to Chinese consumers — a boon in a nation rife with counterfeit products and concerns about domestic food after tainted formula poisoned tens of thousands of babies in 2008.

But there still are concerns that Alibaba can be like the “Wild West” when it comes to the flow of illegal goods. The Financial Times notes a recent ad on Alibaba for the rare metal gallium, used to stabilize plutonium. (Alibaba later took down the listing.) That comes after the FBI used Alibaba in a botched sting with an ad looking for yellowcake, a partially refined uranium ore used for nuclear weapons. The Sierra Leone man who answered the ad was arrested, but later acquitted in Florida.

Alibaba is using its IPO to bankroll global expansion. But for U.S. investors wondering whether to buy into the IPO, the company’s lock on the Chinese e-commerce market may hold the most appeal for those wanting to cash in on China’s explosive growth.

For investors looking for opportunities in China, “Alibaba is a top pick,” Henry Guo, senior research analyst at JG Capital, tells NerdWallet. “This company is well prepared to dominate there over the next 5 to 10 years.”

You've read  of  free articles. Subscribe to continue.

Dear Reader,

About a year ago, I happened upon this statement about the Monitor in the Harvard Business Review – under the charming heading of “do things that don’t interest you”:

“Many things that end up” being meaningful, writes social scientist Joseph Grenny, “have come from conference workshops, articles, or online videos that began as a chore and ended with an insight. My work in Kenya, for example, was heavily influenced by a Christian Science Monitor article I had forced myself to read 10 years earlier. Sometimes, we call things ‘boring’ simply because they lie outside the box we are currently in.”

If you were to come up with a punchline to a joke about the Monitor, that would probably be it. We’re seen as being global, fair, insightful, and perhaps a bit too earnest. We’re the bran muffin of journalism.

But you know what? We change lives. And I’m going to argue that we change lives precisely because we force open that too-small box that most human beings think they live in.

The Monitor is a peculiar little publication that’s hard for the world to figure out. We’re run by a church, but we’re not only for church members and we’re not about converting people. We’re known as being fair even as the world becomes as polarized as at any time since the newspaper’s founding in 1908.

We have a mission beyond circulation, we want to bridge divides. We’re about kicking down the door of thought everywhere and saying, “You are bigger and more capable than you realize. And we can prove it.”

If you’re looking for bran muffin journalism, you can subscribe to the Monitor for $15. You’ll get the Monitor Weekly magazine, the Monitor Daily email, and unlimited access to CSMonitor.com.