Observers speculate over 'open sesame' strategy

Alibaba refocuses its growth, looking at finance and other platforms, while considering potential IPO

While managers at Alibaba, the country's largest e-commerce retailer, mull over a potential listing, the wider industry is speculating what the prolific empire will finally encompass.

According to market watchers, Alibaba has embarked on a steady course to become a comprehensive, service-oriented company by upgrading its existing businesses and expanding product portfolios on other fronts.

Alibaba.com, the company's namesake business-to-business unit, is refocusing its growth amid tepid trade figures through big data backed platforms.

Alibaba will leverage data it collects from overseas buyers to precisely locate relevant Chinese suppliers, a move that will enhance transaction efficiency by 28 percent, said Wu Minzhi, president of the company's international business.

"Today we see a changing export environment in which producing bulky orders is no longer a common practice like it was 10 years ago. Instead smaller-cap foreign buyers are seeking diversified products and want to find the appropriate suppliers in China as soon as possible," she said.

That would require Alibaba to move beyond playing a mere intermediary role by connecting the demand and supply side via the so-called "direct procurement platform" by sharing key commercial information such as emerging business trends.

The fact that Jonathan Lu, who also serves as the company's chief data officer, took the helm of the company after founder Jack Ma resigned, indicated the growing importance of data for the company, said Qiu Lin, an IT analyst with Guosen Securities Co in Hong Kong.

Meanwhile, Alibaba's most popular online trading units, Taobao and Tmall, easily exceeded the combined sales of its foreign counterpart Amazon.com Inc and eBay Inc last year, aiding the Alibaba empire to secure a solid footing in hot e-commerce competition.

The breathtaking development has started an Alibaba frenzy within the capital market, which is desperately pursuing profitable investment bids in the current turbulent economic conditions. Some even said the company could fetch a valuation as high as $100 billion.

Alibaba is pushing beyond its core businesses to ones dominated by large State-run operations such as banking or nascent service industries that are largely fragmented.

After making loans for several years, Alibaba recently tapped investors to finance a small-business lending effort that would use its electronic platform in a new move the company has crept toward as it slowly expands its financial territory.

The firm, awash with cash, was under the spotlight last month when it started to offer users of its online payment platform the option of depositing money, in the same way a bank operates but with the promise of better returns.

The firm has long envisioned Internet companies to be an essential part of the country's financial reform. That is why it launched the Paypal-like Alipay transaction tool for every online and offline payment, analysts said.

According to Hong Bo, founder of IT consultancy company IT5G, the company's determination is best reflected by a straightforward bylined article by the company's charismatic founder Ma in People's Daily, an influential government newspaper, in June.

"China's banking industry currently only serves 20 percent of potential clients out there. I don't see the rest covered by their services," Ma said in the article.

It is clear Ma, who is behind the scenes ushering in major strategic transformation, has mapped out a clear picture to reshape the industry he dominates.

The financial sector will only be a fraction of Alibaba's intention to beef up its product line, analysts said.

In May, Alibaba paid about $294 million to become the largest shareholder of AutoNavi Holdings Ltd, China's leading digital mapping provider in a bid to boost its competitiveness.

This was followed by an earlier investment into micro blog operator Sina Inc's Weibo services, which allows Alibaba to both boost the number of users and give the company more data to crunch.

Alibaba also vowed to build a national logistics network, which further demonstrates its ambitions to tap into the service sector.

"Apparently, Alibaba is extending its resources and strengths in the e-commerce arena to the services sector, in which it positions itself as a service infrastructure provider," said Li Zhi, principal analyst with domestic IT consultancy Analysys International.

Hong believes Alibaba has always read the Chinese economy perceptively and grabbed historical opportunities.

"For instance, its business-to-business development took off a decade ago when China's competitive edge in low-cost mass production ruled the world. Now Alibaba has seen the tide turning and is reorienting itself to focus on the services sector," he said.

But it is not going to be straightforward for Alibaba, experts warn.

"It's coming under criticism for being too dominant. So how they address issues such as anti-trust allegations would be very critical for foreign investors," said Mark Konyn, chief executive officer of Cathay Conning Asset Management Ltd.