Retail/Consumer

RETAIL: Alibaba, Tencent Take Wars to Convenience Stores

Bottom line: Alibaba’s move into unmanned coffee shops could stand a strong chance of success due to its relative simplicity, while WeChat’s move into Hong Kong convenience stores should also be relatively well received.

Alibaba samples coffee shops

Convenience stores are shaping up as the next battlefield in the wars for supremacy between Internet titans Alibaba (NYSE: BABA) and Tencent (HKEx: 700), at least based on the latest headlines. One of those has Alibaba preparing to roll out an unmanned coffee store concept in its hometown of Hangzhou, while the other has Tencent’s WeChat rolling into Hong Kong in a big way in a new tie-up with 7-Eleven convenience stores.

Starbucks (Nasdaq: SBUX) probably doesn’t need to be too worried just yet about the new threat from Alibaba in coffee shops, though many of the dozens of smaller coffee chains that have set up shop in China these last few years might take note. Likewise, Hong Kong’s incumbent electronic payments service, Octopus, probably doesn’t need to worry just yet either. Read Full Post…

E-COMMERCE: Beating Highlights Brutal Competition for Couriers

Bottom line: A major altercation between a customer and deliveryman from STO Express underscores the intense competition in the sector, which puts huge pressure on couriers and companies in general.

STO delivers controversy

An incident making the rounds in Chinese media is highlighting just how brutally competitive the parcel delivery business has become — literally. The incident is quite appalling but not really too surprising, with reports that courier STO Express  (Shenzhen: 002468) has fired a deliveryman who seriously beat a customer who filed a complaint about him.

This particular incident comes just a day after I wrote about the latest IPO by a parcel delivery firm, Best Inc, which is hoping to raise up to $750 million in New York. (previous post) That IPO is noteworthy because Best is still losing massive money, unlike most of the other courier companies that have made listings, even though the industry’s brutal competition makes it hard for me to believe the others are as profitable as they say. Read Full Post…

IPOs: Logistics Provider Beats Fintechs to NY IPO Gate

Bottom line: Best Inc.’s IPO is likely to price and debut weakly due to its loss-making status and concerns about China’s economy, which could also weigh on an upcoming flurry of fintech offerings in Hong Kong and New York.

Best Inc loads up logistics IPO

After waiting months for this year’s first major New York IPO by a Chinese company, I was surprised to read the distinction looks set to go to a logistics firm backed by e-commerce giant Alibaba (NYSE: BABA). In this case the winner in this race to the IPO gate appears to be a company called Best Inc, with plans to raise a relatively sizable $750 million.

I say I’m surprised because all this time I’ve been waiting for one of a number of financial technology companies, often called fintech, to finally break through the IPO gate with the year’s first big offering. Peer-to-peer (P2P) lender China Rapid Finance (NYSE: XRF) actually took the distinction for first notable IPO of the year with its May listing on the New York Stock Exchange. But that offering was quite small at just $60 million. What’s more, the stock hasn’t exactly been a huge performer since then, and is now trading just slightly above its IPO price. Read Full Post…

INTERNET: JD on the Rise, as Baidu and Weibo Stumble

Bottom line: JD.com is likely to pass Baidu this week and become China’s third most valuable internet company, while Weibo’s stock is likely to enter a period of correction while it awaits an official live broadcasting license.

JD on cusp of overtaking Baidu

The era of the Internet triumvirate of Baidu (Nasdaq: BIDU), Alibaba (NYSE: BABA) and Tencent (HKEx: 700), often called the BAT, is on the cusp of ending, as up-and-comer JD.com (Nasdaq: JD) looks set to pass Baidu in terms of market value. Meantime, I suspect the end of another era is coming for the soaring Weibo (Nasdaq: WB), which had some of the wind knocked out of its sails following some strict words from China’s heavy-handed regulator.

We’ll focus mostly on the Baidu/JD transition here, as that really does seem to mark a changing of the guard in China’s dynamic Internet sector. That move has seen Baidu experience a longer-term stagnation, as its core search business comes under assault from a few other newer players and it fails to find new revenue sources to offset the loss. On the other hand, JD.com seems unable to do any wrong these days, and is starting to resemble US titan Amazon (Nasdaq: AMZN) in the sense that people don’t really care whether it makes money. Read Full Post…

CONSUMER: Hon Hai, Hisense in Battle for Sharp Brand

Bottom line: A spat between Hisense and Sharp over the former’s use of the latter’s brand name spotlights the dangers of relying on such licensing agreements for Chinese companies going abroad.

Sharp sues Hisense over brand agreement

An entertaining battle is rippling through the headlines as we head into mid-week, pitting Taiwanese contract manufacturing titan Hon Hai (Taipei: 2317) against Chinese TV maker Hisense (Shanghai: 600060) in a battle for the Sharp (Tokyo: 6753) brand name. This is essentially the story of two giants with very little name recognition battling for a brand that, somewhat ironically, fell onto hard times as a company but still retains a relatively strong reputation.

Hon Hai is virtually unknown outside of industry circles, but is one of the world’s leading contract manufacturers that is most often cited as producer of iPhones for Apple (Nasdaq: AAPL). Likewise, Hisense is a relatively well-known TV maker in China, but is virtually unknown outside the country, creating obstacles for its global aspirations. Then there’s Sharp, the former Japanese electronics superstar that fell onto hard times was was taken over by Hon Hai last year. Read Full Post…

E-COMMERCE: Alibaba’s Tmall Steps Into Southeast Asia

Bottom line: Alibaba’s launch of its popular Tmall into several markets with large Chinese populations shows it is still looking for a strong overseas formula, underscoring its dependence on China for the foreseeable future.

Tmall marches into Singapore

E-commerce juggernaut Alibaba (NYSE: BABA) is making its latest global expansion noise with word that it will launch a version of its popular B2C Tmall online marketplace targeting overseas buyers in Southeast Asia. I have to admit I’m not completely sure about the significance of the move, since the company already has a wide ranging network covering a number of overseas markets through its AliExpress and Lazada services.

The bottom line seems to be that Alibaba is taking a somewhat fragmented and multi-brand approach to the overseas market, as it searches for formulas for success in an area that so far has been somewhat elusive. The company only derives about 10 percent of its revenue from overseas operations at the moment, despite numerous attempts to develop markets outside China. Read Full Post…

E-COMMERCE: SF Express, Alibaba’s Cainiao Tussle Over Data

Bottom line: Alibaba may have to tone down its aggressive style of data collection from its business partners following a tiff with SF Express, but its business won’t face any major impact.

SF takes on Cainiao in data wars

A conflict involving leading courier SF Express (Shenzhen: 002352) and Alibaba’s (NYSE: BABA) Cainiao logistics arm was all over the headlines at the end of last week, in a clash of titans that saw the pair suddenly sever their business relationship. At the center of the issue was data, and Alibaba’s near obsession with getting its hands on every piece of data possible as it tries to build up a big data empire.

But just as quickly as it consumed the headlines, this particular clash appears to have been resolved with some mediation by the government. There are a number of lessons in all this, but the biggest seems to be that Alibaba will need to rein in its bullying tactics that it wields by virtue of its huge market dominance. Otherwise it could face the wrath of companies like SF Express, and ultimately a commerce regulator that might decide the e-commerce juggernaut is unfairly abusing its near monopoly on the market. Read Full Post…

INTERNET: Alibaba Pumps Up Ele.me, Baidu Take-Out in Play?

Bottom line: Alibaba could take control of Ele.me after the latter’s latest fund-raising, and then make a bid for Baidu’s take-out dining service, leaving just two major players in the sector as it nears a more sustainable state.

Alibaba set to swallow Ele.me?

The take-out dining wars have taken another interesting twist, with word that one of the oldest players, Ele.me, is on the cusp of raising a fresh $1 billion in new funds. What’s interesting about this latest fund raising is that it’s being led by Alibaba (NYSE: BABA), which is also trying to carve out a niche in the market through its own Koubei take-out delivery service. But even more intriguing is the possibility that this new funding could be aimed at giving Ele.me the firepower it needs to buy out Baidu’s (Nasdaq: BIDU) take-out delivery service, which is reportedly being shopped by the country’s leading search engine.

There are many threads to this story, but the bottom line is an end game is slowly coming into sight for China’s take-out delivery business, following the typical boom period we often see for this kind of emerging sector. The current field of take-out dining services is dominated by three names, Alibaba-backed Ele.me, Tencent-backed (HKEx: 700) Meituan-Dianping and Baidu take-out. Read Full Post…

INTERNET: Sharing Economy Opens to Umbrellas

Bottom line: A new umbrella-sharing company reflects China’s tendency to overzealously jump into new trends, in this case shared economy ventures, and is likely to fold within its first two years.

Startup sees big bucks in shared umbrellas

China is rapidly emerging as ground zero for new concepts in the sharing economy. Our streets have already become flooded with shared bicycles, shared smartphone batteries are finding their way into our shops, and shared offices are taking over our cities. Now a new company has found yet another way to share, with word that a startup has just landed some angel investment for a shared umbrella firm.

In this case the company and the amounts of money are relatively insignificant, with Yisan Technology getting a modest 10 million yuan ($1.4 million) to begin its operations in the boomtown of Shenzhen. (English article) But the funding does highlight China’s tendency to go overboard with many new technologies, in this case pouring millions and even billions of dollars into causes with questionable futures. Read Full Post…

INTERNET: Alibaba Works on China’s Railroad

Bottom line: Alibaba’s potential new partnership with China’s rail operator could become a major new business opportunity, and could see the pair sign a strategic equity tie-up within the next year.

Alibaba ties with railway operator

Up until now, I’ve written about China’s mixed-ownership reform program mostly in the context of China Unicom (HKEx: 762; NYSE: CHU), the nation’s second largest wireless carrier, which is in the final stages of drafting a plan to sell some of itself to one or more private companies as part of a strategic alliance. But now the latest headlines on the program are coming from a decidedly low-tech source, with word that China’s railway operator has invited Internet giant Alibaba (NYSE: BABA) to participate in its own mixed-ownership reform plan.

This particular development is interesting because it marks the second time that Alibaba’s name has come up in the context of the mixed-ownership reform plan. The e-commerce giant has also come up in reports as a potential partner for Unicom, as have China’s other two Internet giants, Baidu (Nasdaq: BIDU) and Tencent (HKEx: 700). Read Full Post…

RETAIL: Yum Delivers, Starbucks and McDonalds Devour E-Payments

Bottom line: Yum’s purchase of a high-end take-out delivery service looks smart in targeting a higher margin, niche product in the competitive space, while McDonald’s and Starbuck’s rapid growth in mobile payments reflects rapid growth of the technology.

Yum buys take-out specialist Sherpa’s

Three of the world’s top restaurant chain operators are in the China headlines as we head into summer, in different moves that reflect their attempts to tap into the nation’s growing love affair with high-tech dining. The most interesting of the headlines has Yum Brands (NYSE: YUM), parent of the KFC and Pizza Hut chains, buying up one of China’s oldest take-out delivery services, hinting at a potential big push into the ultra competitive space. The other two headlines have McDonald’s (NYSE: MCD) and Starbucks (Nasdaq: SBUX) independently releasing new data that show just how hot electronic payments have become for both companies.

As someone living here in China, I have to admit I have completely embraced the country’s homegrown brand of mobile electronic payments, which has quickly become dominated by Ant Financial’s Alipay and Tencent’s (HKEx: 700) WeChat. But at the same time, I’ll also openly admit I’ve eschewed the home delivery services that are also all the rage in China, though the tide seems to be fading as people rediscover the fun of actually going out to eat. Read Full Post…