Alibaba: A Fruity Perspective

Everyone’s going bananas over the Alibaba IPO filing this week.  Not that a $109 or $121 or $250 billion valuation is anything to sneeze at, for sure.  I’m just trying to put it in perspective…I mean we’ve got global warming – ahem, excuse me – climate change – with our spring whipsawing to fall every other day (to say nothing of landslides, tornadoes and earthquakes), the economy is moving now (…I don’t buy at 50% off, but I do buy at 70% off….) and we’ve got The Muppets in Toyota commercials.  What’s the world coming to?!?!

A retailer, from China, filing for an IPO in the U.S.?  It couldn’t be!!

Bigger than Amazon?  It couldn’t be!!

What IS the world coming to?!?

Let me pick my own jaw off of the floor and gather myself for a wee bit of perspective.  Alibaba’s active customer base is 320 million.  That’s just their active customer base, not just their total customer base.  And check my math, but that’s more than the 2014 projection for total U.S. population at 317 million.

While we are talking math, let me get my calculator-watch-weather station-iPhone and calculate this: Alibaba makes $0.43 in net income for every dollar in revenue vs. Amazon’s penny in net income to every dollar in revenue.  Last I checked I can’t eat revenue.  Net income is what feeds the beast.

Part of the reason Amazon’s profitability can’t hold a candle to Alibaba’s is that they are as different as apples and oranges (or maybe blueberries and watermelons are more to scale).  Amazon’s profitability has been compared to that of Walmart, and that of a tech start-up (again, bananas and strawberries, but who’s even counting fruit at this point?).  This comparison ignores that Amazon has spent years plowing dollars into the barren soil of warehousing and distribution.  But that has yet to bear fruit consistently – Amazon’s profitability has bounced over the years but it’s ratio to sales is nil.

In that sense, Amazon is arguably more like the United States Postal Service than “the most innovative retailer” in this country.

Seriously though, Alibaba, a trio of marketplaces, Taobao Marketplace, Tmall and Juhuasuan, connect buyers and sellers with a paid-search-like ad model.  Sounds more like Google, EBay or Etsy on steroids than your local Macy’s.  Not that U.S. retail – from mass, to big box chains, to department stores, to luxury retail – needn’t worry….it’s still business, and may the best win.

But it’s also not just just math, fruit and Gonzo hawking Toyotas.  No one ever said, “Check out my new Pumas, they’re from one of the biggest companies in the world!!!!”  You might buy Puma because the shoes kick butt, buying Puma online or in store is fun, or Puma furthers the ongoing evolution of the uniqueness that makes you awesome.

So there’s an important place for the best brands and the best retail experiences.  They will win, whether they are blueberries or watermelons.

So eat that.

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