Alibaba and’s Competitive Nature Might Lead to Vipshop

Alibaba and are soon to be public companies, and following their IPOs, don't be surprised if both show an interest in Vipshop.

May 17, 2014 at 9:45AM

Chinese e-commerce leaders and Alibaba have both filed for IPOs, creating two of the biggest IPOs this year, challenging Amazon (NASDAQ:AMZN) as Wall Street's favorite online retailer. While the timing of their filings appears in unity, it more than exemplifies a competitive nature of not allowing one to gain an advantage over the other, such as investments in Weibo (NASDAQ:WB) and from Tencent Holdings (NASDAQOTH:TCEHY). However, given the cash both companies are about to earn, and the ever-growing competition, don't be surprised if Vipshop (NYSE:VIPS) becomes a spotlight stock.

2 new e-commerce companies to hit Wall Street
The filings have occurred, and one day very soon, both Alibaba and will be public companies on U.S. markets. These are two of the most anticipated IPOs of the last few years, especially Alibaba, as the growth of both companies is stunning. While similar as e-commerce juggernauts, the two are very different, as Alibaba creates the majority of its revenue through advertising, and's business model appears similar to Amazon.

In regard to Alibaba, its IPO filing showed revenue of $5.5 billion in 2013, growth of 73% over 2012, and net income of $1.35 billion. The company created this revenue with its industry-best $248 billion worth of gross merchandise volume, including more than 230 million active buyers. The company's valuation is expected to fall in the range of $150 billion-$200 billion, and in selling a 12% stake, it should raise $18 billion-$24 billion. filed a $1.5 billion IPO back in January, which has likely risen, and many believe the company's market capitalization will now exceed $15 billion. As previously noted, the company operates a business strategy that is similar to Amazon, thus investing heavily into its own company, including its own couriers and warehouses. saw growth of 71% in the first nine months of 2013, creating revenue of $8.04 billion and net income of $10 million. Hence, with a profit margin of 1.2%, not only looks like Amazon, but is considered by many to be a second chance to invest in fast-growing Amazon.

Their growing competition
Despite the size disparity between these two companies, with Alibaba clearly being larger, and Alibaba are highly competitive, neither allowing the other to gain much of an operational advantage. This is most evident in the timing of the IPOs, but also investments in social media channels to bolster advertising presence. In many ways, they follow each other's lead.

Specifically, Alibaba is a large investor in Weibo and owns 32% of the company. Last year, Weibo's revenue growth increased 190% to $188 million, and Alibaba's advertising/marketing sales accounted for 26% of its total revenue, a figure that's expected to rise. Thus, with Weibo's monthly active users growing 33% year over year, and at 129.1 million, Alibaba likely made a good investment. followed Alibaba, with a partnership in Tencent's WeChat. In particular, Tencent purchased a 15% stake in, which occurred in March. Essentially, this helps both companies, as it increases's exposure and will likely drive revenue growth for WeChat. For Tencent, WeChat has become increasingly valuable, as it finished its last quarter with 355 million monthly active users, an increase that's 121% over last year and three times larger than Weibo's users.

Where might they spend new money?
After the Alibaba and IPOs are complete, both companies will have a substantial amount of cash to spend. Therefore, with each company seeking a competitive edge, Vipshop might make an intriguing stock to watch.

Vipshop is another Chinese e-commerce company, smaller than, that operates a much different strategy of flash-selling. Essentially, the company buys products in bulk from its 350 different partnered brands, then sells certain goods at specific times. Hence, the increased quantity allows for cheaper prices, as brands are willing to work with Vipshop for promotional reasons.

On Wednesday, the company reported earnings, producing quarterly revenue of more than $700 million, good for year-over-year growth of 125.9%. Moreover, it expects growth of 118% in the second quarter and $785 million in revenue. The company saw its gross margin rise 150 basis points to 24.9%, and its number of active customers increased 5.6 million to 7.4 million total.

Final thoughts
Vipshop is becoming a legitimate e-commerce company, and therefore, it's a growing threat to Alibaba and With Vipshop's market cap being $10 billion, its valuation is relatively similar to's implied worth. However, a combined Vipshop and would create quite a power to battle Alibaba.

For Alibaba, Vipshop would give it access to an e-commerce channel that is growing rapidly, including its flash-sales model, which also provides access to more than 350 brands that may be willing to discount aggressively.

The final scenario is an Amazon take-over. Already, plans have been discussed of Alibaba and entering U.S. markets. Hence, Amazon acquiring Vipshop would give it a growing channel and a presence in China, perhaps even a hedge against Alibaba and

Regardless, and Alibaba are likely to remain competitive, and even more so once becoming a public entity. After successful partnerships with fast-growing social media channels, the next phase might be to absorb the competition. Examining the market, Vipshop looks like the best option, a company that would add value to any platform.

Are you ready to profit from this $14.4 trillion revolution?
Let's face it, every investor wants to get in on revolutionary ideas before they hit it big. Like buying PC-maker Dell in the late 1980s, before the consumer computing boom. Or purchasing stock in e-commerce pioneer in the late 1990s, when it was nothing more than an upstart online bookstore. The problem is, most investors don't understand the key to investing in hyper-growth markets. The real trick is to find a small-cap "pure-play" and then watch as it grows in EXPLOSIVE lockstep with its industry. Our expert team of equity analysts has identified one stock that's poised to produce rocket-ship returns with the next $14.4 TRILLION industry. Click here to get the full story in this eye-opening report.


Brian Nichols has no position in any stocks mentioned. The Motley Fool recommends The Motley Fool owns shares of Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers