1/ $BABA added half an $AMZN of GMV and increased top line by $PDD total revenue just last year…
Investor sentiment?
Competition is going to smoke them...
2/ But wait, I thought they were a monopoly? They were just fined by the SAMR.
Investor response: Regulation is a big concern too
3/ Well, does China really want to cripple the engine that facilitates over $1.2tn of commerce that millions of merchants’ livelihood depend on?
We don’t think so.
4/ But what about the competition?
Frankly, it’s ruthless…
$PDD is gaining share on lower end commerce, $JD is relentlessly attacking the high-end, Meituan is going after high-frequency local, and Kuaishou, Douyin, and others threaten share in discovery commerce…
5/ We know this means margins likely go down...
… but that’s nothing new. Adj. EBITDA margins dropped 30 points in the last 5 years
Innovator's Dilemma is clearly the wrong framework
6/ But what about their competitive position?
We think they will lose market share, but can they still grow? Or could they see GMV shrink for the first time ever?
7/ Dismissing BABA could be a mistake… they seem to have a strong hand to remain relevant with the deepest product selection, the most selling formats, a unique product description platform, the most purchase data with a 3rd party ad network to drive traffic and…
8/ … over 10mn merchants who are highly invested in BABA’s platforms with it often being their most important sales channel.
9/ Add in 800mn+ buyers who buy an average of twice a week, seamless integrations with the country’s largest payment method–which itself is a large funnel of traffic–and Cainiao’s logistics network and you can see why $BABA may be underestimated…
10/ This is before mentioning all of the other strategic initiatives and assets in New Retail, Money-for-value, augmented reality, and many more that can further create a unique value prop.
11/ So why is the market pricing $BABA like it’s in secular decline?
PDD does have more buyers than BABA now and some think Taobao is stale...
12/ … Buyers clearly have other options and there is no “Prime” lock-in on the consumer side or widely adopted fulfilment to create exclusive inventory on the merchant side.
13/ Is the market wrong or is it missing something about the Alibaba Ecosystem?
14/ And what about all their other businesses like Alicloud, Taobao ad network, Alipictures, Eleme, Lazada, Youku, 1688, Dingtalk, and New Retail?
15/ We answer all this and more in this month’s paid 24,000 word $BABA deep dive informed by dozens of industry executives, ex-employees, merchants, and consumers.
"'Stay close to the money.' If you're not close to the stream of cash flow, if you're not directly responsible for winning the bread, and bringing in cash, you're expendable... Cash flow is a lifeblood."