Follow the Money

Alibaba Next Google or Dud

ai-2Alibabba.com, a Chinese ecommerce company that’s being touted as the biggest thing since Google has filed for an IPO that’s described by many mass media outlets as the biggest ever. For those who are unfamiliar with Alibaba, the company runs a website that lets consumers connect with Chinese factories. It also operates Amazon.com type sites like AliExpress.com in countries that include the U. S.

The Wall Street hype machine is claiming that Alibabba could be worth as much as $200 billion. Retail analyst Mark Miller claims that Ali Express is a threat to Walmart and Amazon because some of its prices are lower.

However,there is a big problem with Ali Express that the analysts are ignoring. Its website stinks. Since I had never heard of it, I went to Ali Express’ website and did a little shopping, and guess what? I hated it. After hearing about the site’s great prices I decided to search for some 12×18-inch bubble mailers that I use in my sideline business. I typed in the term “12×18 Bubble Mailers” and it gave me several web pages filled with other size bubble mailers. After 20 minutes I gave up after not finding what I wanted.

Curious, I decided to compare this to Amazon. It took just a few seconds for Amazon to show me what I wanted and give me several choices for 12×18 bubble mailers. To make matters worse, I found Ali Express cumbersome and hard to navigate. Not being able to run a simple search was bad enough, but the site looks poorly designed.

Check things out for yourself before you believe the Wall Street hype. The analysts hyping up Alibaba must be hoping that nobody actually goes to the site and checks it out. Instead, they’re hoping that Americans eager to invest in China will buy into the hype. Alibaba is very successful in China, where the Communist Party conveniently keeps ai-3competitors like eBay and Google out of the online market. One has to wonder how long it will last in a real free market like the U.S.  full of ruthless and aggressive competitors like Walmart, Amazon and Google.

Online sales in China could reach $650 billion a year by 2020, but there’s no guarantee that Alibaba.com will participate. If the Chinese Communist Party collapses, its monopoly could vanish overnight, opening the door for Google to invade the China online space. Remember how quickly the Russian Communist Party and the Soviet Union disappeared back in 1991?

Walmart, eBay, Google and Amazon are now experimenting with same-day delivery options. I have to wonder how Alibaba is supposed to compete when Google’s Shopping Express or Walmart to Go can both have merchandise at your front door in a couple of hours. Instead of being the biggest thing since Google, Alibaba could be an even bigger bust than Facebook’s IPO. It could also be the stock that deflates the current tech bubble. If its IPO falls flat, Alibaba could bring down the tech bubble and even put the brakes on the current bull market on Wall Street.

Investors would be well advised to stay away from Alibaba until it proves it can make money. It’s a speculative venture that you should only invest in if you have money you can afford to lose.