Stock Spotlight: Alibaba Group Holding Ltd

A marketplace, an internet, AI and cloud company, a venture capital and investment firm and a bank – what used to be separate industries Alibaba is combining under one roof.

Founded by former English teacher Jack Ma from his apartment, Alibaba through its three main sites— Tmall, Taobao and Alibaba.com — serves hundreds of millions of users, and hosts millions of merchants and businesses today.

With nearly 60% market share, Alibaba is the largest retailer and e-commerce company in the world and the most popular destination for online shopping in China. In fact, transactions on its online sites totalled US$768 billion in 2018, more than those of eBay and Amazon.com combined.

From e-commerce and payment systems to cloud services and artificial intelligence, there are few sectors left in which Alibaba has yet to establish a presence.

What makes Alibaba’s rise all the more remarkable is the fact that it has achieved such prominence in less than two decades.

Engrained within its DNA, the company continuously innovates with a view of conquering new frontiers. Ant Financial Services Group (formerly Alipay) is Alibaba’s foray into the ‘TechFin’ world – a term coined by Jack Ma himself. While ‘FinTech’ focuses on legacy financial systems that can be improved upon through the use of technology, TechFin is where tech companies provide financial services with a more customer- and technology-centric approach.

This is most evident in China’s almost entirely cashless consumer economy, where popular mobile payment apps such as Alipay have enabled consumers to go straight from cash to e-wallets and smartphone payments, leapfrogging the use of traditional credit cards, cheques and bank accounts. Interestingly, Commonwealth Bank became the first major bank in Australia to accept Alipay as a payment system at the end of last year, making it easier for Chinese tourists to transact when travelling in Australia and for Australians who want to do business with China’s giant e-commerce platform Alibaba.

Grocery shopping is another frontier of e-commerce, and Alibaba’s supermarket – Hema – is the latest example of the “new retail’ and O2O (online-to-offline) movement. Hema has managed to overcome the many traditional challenges of both online and offline grocery shopping to create a new and unique experience for shoppers. With more than 85 stores, Hema leverages data collected from consumer purchases and big data analytics to ensure its shops are stocked with enough merchandise to meet consumer demand. Physical stores also double as a warehouse and fulfilment centre with scooter drivers delivering food to customers in as little as 30 minutes. Specific sections of the store, such as the fresh seafood section, have specifically catered to consumers’ preference to personally select their own food. The seafood is viewable in tanks that contain a digital price tag, which updates based on market rates and is equipped with QR codes that customers can scan to see the country of origin, when it was caught and even suggested recipes. Customers are then able to have these items cooked and delivered to their house.

The result is a better shopping experience for consumers, higher margins and less spoilage than traditional grocers.

The Crescent Wealth Super Fund’s International Equity portfolio holds a stock position in Alibaba Group Holding Ltd and has returned a healthy 24.2% (AUD) year to date.


1. eMarketer, April 2019.
2. Company reports and Statista.

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