Credit Suisse commented on Alibaba Group Holding Ltd BABA after the company’s Chief Strategy Officer, Mr. Ming Zeng, presented at the firm’s 18th annual Technology Conference.
According to analyst Dick Wei, “Mr. Zeng highlighted benefits of the C2B model. Demand is driven by consumers rather than manufacturers. Through Taobao, merchants now know customer behaviour. Consumers provide feedback and give suggestions on products via internet.”
Alibaba “plans to maintain an asset-light model as it expands into new markets” and its “near-term focus will be around leveraging its presence in China via (1) bringing global brands to Chinese consumers via Tmall and (2) bringing Chinese merchandise to global consumers via Aliexpress.
“In the medium term, the company finds other emerging markets, such as India and Indonesia, attractive as the company can leverage its core technology and expertise in building a C2C/B2C ecosystem in environments where brick-and-mortar infrastructure remains under-developed," Wei reported.
“The company noted that 98 percent of power sellers on its Taobao platform were running their ERP systems on BABA’s cloud, which is a phenomenon that can only emerge when you are building an ecosystem that leap-frogs the build-out of offline retail infrastructure.
“As a result, the company is seeing a reversal of the traditional B2C model (“C2B”), where instead of large vendors forecasting expected demand and either under/over-manufacturing inventory, sellers on BABA can react in real-time to consumer demand and let the buyer determine what is sold,” according to the analyst note.
Wei concluded, “In the long term, it aims to build a global marketplace for all merchants to sell to anywhere.”
Credit Suisse maintained an Outperform rating on Alibaba with a $118 price target.
Alibaba Group Holding Ltd recently traded at $108.66, down 0.47 percent.
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