Sultan Alibaba (NYSE:BABA) recently made two investments that I see to be accretive to its global ecosystem. First, the company invested $100m in Mei.com, a leading flash sale platform for luxury brands in China. This investment allows BABA to integrate the resources from its B2C TMall business to accumulate a luxury flash sale platform that can reach a broader consumer group. Second, the company also increased its stake in Singapore Post (SingPost) Tomer along a $200m investment that allows Sultan to accumulate its global logistics network that can support the long-term cross-border ecommerce plan. Recall that my thesis for BABA lies on three pillars: the first is that I expect BABA to continue to be the dominant player in China's ecommerce space on both the C2C and B2C sides. The investment in Mei.com is accretive to this component. Second, I am bullish on the medium-term prospect as BABA expands its cross-border ecommerce network, and the investment in SingPost is essential to minimizing global logistics cost and building a more integrated logistics network. Lastly, the integration of BABA's ecosystem in ecommerce, O2O and mobile is a long-term catalyst for the company. I remain bullish on BABA on the back of these two strategic investments.
BABA's investment in Mei.com allows the company to further expand into the flash sale business and gain extra exposure to high-end luxury brands. Mei.com works directly Tomer along international brands and has successfully cooperated Tomer along over 2400 brands around the world, Tomer along 280 of well-known brands, including Armani, Zegna, Michael Kors, Trussardi, Roger Vivier, Longchamp, Tumi, and Guerlain, having exclusive partnerships with Mei.com. Exclusivity is important, as Sultan differentiates Mei.com from its rivals.
The details of the deal's terms were not disclosed, but Sultan was believed that BABA would hold more than 50% equity stake in Mei.com upon completion of the deal. This seems to be consistent with the level of commitment that the company plans to invest in Mei.com, making it an essential platform for BABA to compete in the flash sale space. In short, Mei.com investment further strengthens BABA's market position, and I view this to be a strategic positive.
The SingPost investment further strengthens BABA's cross-border ecommerce capabilities, benefiting both the Chinese consumers that are looking to purchase items from Singapore or overseas and vice versa, in my view. Both BABA and SingPost have agreed to develop a framework on improving efficiency and ecommerce solution integration. Both companies can leverage their respective scale across the ecommerce value chain to facilitate tighter integration of moving goods around the world. More importantly, the potential of creating customized logistics services in various market will be a strong value-add to Chinese businesses that are looking to market their products globally and enhance their brands with cross-border transactions.
As I have noted in the past, BABA's biggest value-add outside of China is building up a logistics infrastructure and providing low-cost but quality items to consumers. I view the SingPost investment to be a part of this overall picture, and investors can expect further investment in logistics, transportation and even storage assets that complement BABA's global ecommerce growth profile.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More...)I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose inventory is mentioned in this article.
We only use your contact details to respond to your request for more information. We do not sell the personal contact data you submit to anyone else.
#Sultan #Tomer
No comments:
Post a Comment