Beijing’s New Open Door Bodes Well for Alibaba and Other Online Retailers

Jun 03, 15 Beijing’s New Open Door Bodes Well for Alibaba and Other Online Retailers

Posted by in Amazon and eBay News

Students of history, and those Americans that bothered to pay attention in high school history class, might remember something in the early 20th century called the Open Door policy. For those of you who did not pay attention, the Open Door policy was a U.S. policy designed to open China up to U.S. and other foreign imports after centuries of trade restrictions. Hundreds of hand-selected titles, from space odysseys to fantasy favorites: Join Science Fiction Book Club today. Guess what? After more than a century, the Door finally seems to be open; Beijing is actually allowing more imports, particularly of consumer goods. The first companies to benefit are Yahoo! (NASDAQ: YHOO) and, not surprisingly, Alibaba (NYSE: BABA). Bloomberg reported that Yahoo Japan’s (OTC: YAHOF) share value increased by 12% after the announcement of an alliance between that company and Alibaba. The alliance would give Japanese retailers that listed on Alibaba’s super popular Tmall and Tmall Global shopping sites support and lower fees. The alliance reflects a new openness by Beijing to allow in more foreign consumer goods by dismantling as many import barriers as possible, Forbes contributor Doug Young noted. Young predicted that the Yahoo–Alibaba alliance is just the first of many such retail alliances we’ll soon see. Why Is China Allowing in More Consumer Goods? The Chinese government is allowing in more consumer goods for a number of reasons: To facilitate approval of the Trans-Pacific Partnership, a controversial trade deal; in countries like the U.S. and Canada. The TPP has run into a lot of opposition from critics on both the left and the right in the United States and in Canada. China is not part of the TPP yet, but it would like to be; opening up to e-tail deals could facilitate this. Our new customers report average savings of $522 on car insurance! Click Here! To win support among the increasingly affluent but restive Chinese people by providing the populace with more access to more consumer goods. This policy proves the...

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eBay Is Now an Acquisition Target

Investors and online retailers need to pay close attention to the situation at eBay (NASDAQ: EBAY) right now. The online marketplace is getting ready to spin PayPal, its payment solution, off into a separate company. That should concern us because PayPal generates around 44% of eBay’s revenues. eBay reported a TTM revenue of $17.9 billion on Dec. 31, 2014, of which $7.786 billion came from PayPal. Get the picture, folks; without PayPal, eBay’s value and revenues drop by nearly half. That puts eBay in a very vulnerable position because its other business, the online marketplace, has only been growing by around 1% a year. Most of the revenue growth at eBay is coming from PayPal. eBay could survive without PayPal, but it would not grow very fast without the payment solution. eBay Has Lost Its Momentum If eBay wants to remain relevant and regain its momentum, it will have to restructure its business in a big way. eBay’s core business is no longer growing; it is facing aggressive competition from rivals like Walmart (NYSE: WMT) and Amazon.com (NASDAQ: AMZN). Much of Amazon’s recent growth has been driven by third party sales and its Fulfillment by Amazon (FBA) operation. VentureBeat estimated the value of Amazon’s third party sales at $17 billion in 2013. Tech Crunch reported that the volume of merchandise moved by Amazon’s FBA business increased by 65% in 2014. Since third party sales are eBay’s core business, you can see the problem here. eBay is trying to restructure its core business by offering a solution similar to Fulfillment by Amazon. For those of you unfamiliar with it, FBA is a service in which Amazon warehouses, packs, and ships merchandise on its website on behalf of customers. The problem is that eBay’s answer to FBA looks like too little too late; its Valet service is limited, and it is not clear if eBay has the resources to match Amazon’s capabilities. eBay’s Future as an Acquisition Target Despite its lack of momentum, eBay has two...

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