Where Will Alibaba Be in 5 Years?
The Chinese company will celebrate its 20th anniversary in late 2019.
Natalie Walters
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Alibaba (NYSE:BABA) is best known for hosting the largest e-commerce platform in China. But while online retail may be its main revenue source, it's been aggressively pursuing other business ventures. These businesses, including its New Retail initiative and Alibaba Pictures, are already showing signs of growth and could be major revenue contributors in the next five years.
Since Alibaba is a large, ever-changing company, let's look at where it might be in 2025 when some of its smaller businesses have had time to become more established.
Alibaba is nearly 20 years old, but it's just getting started. Image source: Alibaba.
Alibaba's New Retail strategy will be flourishing
New Retail refers to Alibaba's plan to transform traditional brick-and-mortar stores into more efficient and more enjoyable shopping experiences. The company has been doing this by using its own data and technology to let stores know what they should be stocking more or less of, as well as to provide them with tech updates such as the option to accept mobile payment options.
Last year, Alibaba explained to investors that its market was once limited to online shopping, which represents just 15% of China's total $5 trillion retail market. But now with its New Retail business, Alibaba can target all of China's retail -- both online and off.
In five years, Alibaba will have been able to use its New Retail strategy to update numerous physical stores across China. That means a large percentage of China's previously outdated stores will offer updated features, such as home delivery, the option to scan items in a store for more information and reviews about them, and the ability to use mobile payment apps.
The best part about this strategy is that Alibaba doesn't have to buy stores to update them. It has proven that its New Retail strategy is effective, so stores are now hiring Alibaba to help them update their retail locations. This is a cost effective way for Alibaba to benefit from all retail sales across the country.
Check out the latest earnings call transcript for Alibaba.
Its platform will have spread across rural China
Alibaba has a comfortable hold on the urban centers in China. The next step is extending its prowess into rural China. The company said it wants its Rural Taobao platform to expand to 1,000 counties and 150,000 villages across China by 2021.
The company will have some help with this goal, since China announced in early 2019 that it wants its rural villages to be cashless by 2020. This would be huge for Alibaba, which recently hit 1 billion users for its Alipay mobile payment platform.
While it's tough to work out the logistics for delivery to more remote areas of China, Alibaba is making it work -- and quickly. The company has even invested in Huitongda, a logistics company that specializes in servicing rural areas.
In five years, large parts of China that were previously out of reach of Alibaba's popular Taobao shopping platform will be able to order food, common household products, and other items for home delivery. This will provide a better quality of life for rural dwellers, who have historically had to travel to the city for shopping.
Alibaba will be edging toward becoming the Netflix of China
Just like Netflix (NASDAQ:NFLX), Alibaba is currently spending billions each year to create engaging content to draw in subscribers to its Youku video streaming platform.
Right now, Youku is the third biggest video streamer in China, behind Tencent and Baidu. While eMarketer estimates that Youku claimed just 22% of the market in 2018, the research firm believes it can surpass Baidu's iQiyi by the end of 2019, moving into second behind Tencent Video.
But in five years, Youku could easily be the top video streaming platform in China. Tencent Video was the top player in 2018, but it claimed only 24% of the market versus Youku's 22%, according to eMarketer estimates. That's hardly a head start. And the firm believes that Youku increased its content spending more than its competitors in 2018, a good sign that the platform is being aggressive about its content output.
In the coming years, Alibaba said Youku will start collaborating more with its movie and TV production company, Alibaba Pictures. That means subscribers should start seeing bigger and better productions on Youku in the next five years.
Alibaba's sudden intense focus on its video streaming platform is just one example of how the company always retains flexibility to put money into whichever businesses are trending upward. Right now, people across the globe are tuning in to their favorite video streaming platforms, so that's where Alibaba is putting its money. And in five years, there will surely be other new businesses that Alibaba is investing in so it will never miss an opportunity to add to its top line.
Alibaba Group Holding Ltd.
NYSE:BABA
NASDAQ:NFLX
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