Ecommerce giant Alibaba splits its b2c unit, maybe before an IPO

16 June 2011 15 h 53 min 65 comments

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On Thursday 16 June, China’s largest e-commerce company Alibaba Group Holding Ltd. announced that it will restructure its consumer online shopping platform Taobao into three separately managed companies.

This could be the first step before an initial public offering of the privately held parent company.

The 3 new divisions of taobao will be organized as following.

. Taobao Marketplace will operate its main shopping website linking individual buyers and sellers (CtoC);

. Taobao Mall will be the main venue where brands seek to sell their products directly to Chinese consumers (BtoC);

. and eTao will provide search geared to products and services across various Chinese websites (Search).

As part of the reorganisation, Jonathan Lu will step down as the chief executive officer of Taobao to focus on his role as chief executive of Hong Kong-listed, the group’s business-to-business unit. Each of the three Taobao companies will be managed by their own president, Alibaba said. The divisions will allow managers to “focus on their respective customer bases and also takes into account different business models behind each of its three main shopping websites”, the company said. “The move is part of changes designed keep up with changing trends”, Ma, Alibaba’s founder and chief executive, said in the statement. “Over the past two years, search, social networking and e-commerce have witnessed disruptive changes … while countless new companies have popped up,” he said.

Jack Ma, Alibaba’s founder and chief executive, said: “The reorganisation will create more value for the company and shareholders. We won’t rule out the possibility of taking Alibaba Group public in the future,” but the Company statement didn’t include a timetable. The Hong Kong-listed unit of Alibaba Group,, has a market capitalization of  HK$57.07B.

Ironically, the restructuring is announced when Alibaba Group founder Ma is fighting with its major shareholders, Yahoo Inc and Japan’s Softbank over ownership of Alipay, a third-party online payment platform. And Ma recently suggested yahoo to split in order to increase its value. The payment tool was divested from Alibaba without approval of the shareholders to comply with new China Central Bank’s credit and electronic payment licensing rules.

370 million registered users and 40% market share

Taobao, which reported more than 370 million registered users as of the end of 2010,  currently hosts more than 800 million product listings with a daily trade volume up to 1.95 billion yuan (about 300.93 million U.S. dollars). Analysts believe Taobao’s turnover exceeded 400 billion RMB in 2010 and revenues surpassed 5 billion RMB.

The statistics from Enfodesk, the Seasonal Survey of China Online Retail Market in Q1, 2011, released by Analysys International at the end of May 2011, shows that the transaction value of China B2C market was 47.07 Billion Yuan in Q1, 2011. Taobao Mall and 360buy took over 40% of the total market share.

Affected by seasonal factors, the sales in domestic retail industry slowed down in Q1. Concerning statistics related to B2C, the sequential growth rate of Taobao Mall was 23% in Q1, representing over 30% market share. The seasonal factors had greater influences on B2C clothing than electronic products, which continued to grow in Q1. As for B2C transaction value, top 10 enterprises include 360buy, Newegg, Suning, Icson and Coo8.

SOURCES: Alibaba, Xinhua, Straits Times, China Daily (16/06/2011)

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