Alibaba Group Holding Ltd (NYSE:BABA) Competitor Amazon Opens Store-Front On E-Commerce Website

Alibaba Group Holding Ltd (NYSE:BABA) announced that its US competitor, Amazon, has opened a store-front on its e-commerce website. Amazon added the storefront o Alibaba’s business-to-consumer Tmall platform in a move to boost its brand awareness to consumers in China. Amazon has struggled to generate any substantial interest in the Chinese market and this is seen as a deliberate effort to do so. The E-Commerce marketplace is dominated by smaller domestic offerings and is considered a valuable prize to those that can effectively utilize it. Alibaba said its welcomes the move by Amazon and feels it will broaden the product selection while also enhancing the users shopping experience. This effort is a test-run for Amazon as it tries to find ways to penetrate that marketplace. The official launch is scheduled for the end of March, or early April at the latest.

Why is momentum shifting in BABA?  Read this analyst breakdown.

Cross Selling

US E-Commerce giant, Amazon, will offer consumer electronics, food and beverages, household and baby and maternity offerings. Most analysts feel that this is a signal that Amazon is admitting it cannot penetrate the market without help. Tmall is an effective method for creating exposure within the Chinese market without having to lay out the capital and take the risk of wasting a valuable investment opportunity.

Domestic Dominance

Two E-Commerce websites currently dominate the Chinese market, Tmall and JD.com. Tmall owns 57% of the market share in the sector and JD.com owns another 21%. It could also be an attempt to familiarize Chinese online shoppers with Amazon’s product line which is not well known in the area. This could be a wise move as they will surrender revenue up front to Alibaba Group Holding Ltd (NYSE:BABA), but in the long run create a visible brand that can be utilized for further expansion. Chinese spending on E-Commerce sites totaled 203$ billion inn2013 and is expected to expand by 20% every year until 2019.

Technicals

BABA continues to struggle at its current level but some technical gains have been made as the stock recovers from its recent sell-off.

About the Author

Terrel is US Markets Daily's business news reporter. She joined US Markets Daily after five years as a print reporter.

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