How Valuable Is Alibaba’s International Retail Business?

by Trefis Team
Alibaba Group
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E-commerce giant Alibaba (NYSE:BABA) has successfully established itself as the dominant player in the domestic online retail market through its websites Taobao, Tmall, Juhuasuan and the domestic online wholesale market through The company has also diverted focus and resources towards its international business in both the retail and wholesale segments. Alibaba operates and for its international retail and wholesales businesses, respectively. Recently, the company acquired a controlling interest in Lazada for $1 billion, valuing the Singaporean e-commerce giant at $1.5 billion. [1] Alibaba is poised to benefit from the expected growth in a fast-growing market space – particularly in Asia. According to our estimates, the international commerce business makes up around 6% of our $88 price estimate for Alibaba’s stock. Below we take a look at Alibaba’s presence in the online retail market outside China.

See our complete analysis for Alibaba

Alibaba’s Presence Outside China

Alibaba’s international retail business has a sizable presence across Russia, the United States, Spain, Brazil, France and the United Kingdom. To complement the strong market presence in these countries, the company has decided to enhance its focus on growing markets, particularly in the Asia-Pacific region. The company aims to attain a customer base of 2 billion – from around 420 million currently – over the next 20 years. [2]

Alibaba’s international retail revenues have surged from RMB 200 million in 2011 to RMB 2.1 billion in 2015. The company typically charges a 5% commission on the net transaction value to sellers on all transactions made on its website. [3] The company generated around RMB 2.1 billion from international retail sales in 2015 – at a 5% commission the gross merchandise volume (GMV) of all transactions in that period can be estimated at around RMB 45-50 billion.


Last month Alibaba announced that it will open its first office in Melbourne, Australia to help expand its presence in the region.((Chinese retailing giant Alibaba to target Australia as part of global expansion, Shanghai Daily, July 2016)) Despite a relatively limited consumer base due to a smaller population (at least relative to China), e-commerce in Australia is growing at a fast pace, outstripping sales in brick-and-mortar stores. [4]

The other key development for Alibaba this year has been the acquisition of e-commerce company Lazada in April, as well as a $200 million investment in Indian e-commerce company Snapdeal. ((Alibaba Expands in Southeast Asia With $1 Billion Lazada Deal, Bloomberg, April 2016)) Lazada has a presence in multiple countries in Southeast Asia, including Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam. The Lazada acquisition gives Alibaba access to a huge potential customer base of 560 million, of which the total number of internet users currently stand at 200 million. Moreover, there is no clear market leader in the e-commerce space in the region currently.

According to a Forrester report, the total e-commerce revenue for China, Australia, Japan, South Korea and India combined will double from around $730 billion in 2015 to $1.4 trillion by 2020. [5] China’s e-commerce market (in terms of gross merchandise volume) has overtaken the U.S. online retail market and became a $611 billion market in 2015, which could further increase to $1.1 trillion by 2020. [6] Comparatively, the online retail market in the U.S. stood at $342 billion in 2015. [7] Although the Chinese market forms a huge chunk of the combined market growth estimated by Forrester, the smaller markets in Japan and India are expected to grow at a faster pace.

We forecast Alibaba’s international retail segment revenue to grow at a CAGR of 30% from 2016 through 2020 to generate RMB 10 billion by 2020. Note that the massive jump in revenues from RMB 2.1 billion in 2015 to RMB 3.5 billion in 2016 is primarily due to the Lazada acquisition in April this year.


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  1. Alibaba Expands in Southeast Asia With $1 Billion Lazada Deal, Bloomberg, April 2016 []
  2. Alibaba gears up for global expansion to serve 2 billion people, China Daily, October 2015 []
  3. Alibaba 20-F Filings, SEC, May 2016 []
  4. E-commerce sales up 22% as Aussie shoppers jump online after work to spend their hard-earned cash, Smart Company, May 2015 []
  5. China e-commerce market to hit $1.1T by 2020, India $75B, ZD Net, March 2016 []
  6. Retail Sales of China Consumer Goods Exceeded $4,573B in 2015, China Internet Watch, February 2016 []
  7. U.S. e-commerce grows 14.6% in 2015, Internet Retailer, February 2016 []
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