The stake that Alibaba purchased totaled 11.5 million shares at a price variation in the range of $10.816 to $12.255, the transaction took place between March 6 and March 8. On average, Zulily trades about 3.2 million shares a day, but during Monday’s trading session over 20 million shares were traded. Effectively this purchase makes Alibaba more than a 9% stakeholder in Zulily.
The big question is why Alibaba would want to take that large of a stake in Zulily.
For some background on Zulily, the company provides merchandise to moms purchasing for their children, themselves and their homes. Its merchandise includes men’s, women’s and children’s apparel, accessories and shoes. Other merchandise this e-commerce retailer sells ranges from infant gear to electronics to pet accessories. Overall Zulily has a broad spectrum of products that it sells within the United States, Canada, United Kingdom and elsewhere.
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Most likely, Alibaba is using this purchase to further expand its holdings in the U.S. market — or perhaps to reach a new demographic of moms in the United States.
In some ways, this is similar to the way that Coca-Cola Co. (NYSE: KO) has used its ownership in Monster Beverage Corp. (NASDAQ: MNST) and Keurig Green Mountain Inc. (NASDAQ: GMCR) to diversify, grow the brands and break into the different beverage markets.
In some ways, one might even ponder if Jack Ma’s new team wants to have the same sort of advantage that Warren Buffett gets when Berkshire Hathaway Inc. (NYSE: BRK-A) invests in other public companies — on top of the investment, he gets to learn the ins and outs of a business or a sector, and Alibaba has a lot to learn about e-commerce and online business transactions in the United States.
It may even possible that Alibaba wants to own more points of distribution on the international commerce and wholesale channels.
Revenue from Alibaba’s international commerce retail business in the quarter ended March 31, 2015, was RMB437 million (US$70 million), an increase of 53% compared to RMB285 million in the same quarter of 2014. Revenue from the international commerce wholesale business in the quarter ended March 31, 2015, was RMB1,200 million (US$194 million), an increase of 19% compared to RMB1,009 million in the same quarter of 2014.
Active customers grew to 5.0 million by the end of first-quarter 2015, an increase of 35% year over year.
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According to Alibaba:
The percentage of orders placed on mobile platforms reached an all-time high in Q1, order to ship times decreased, and gross margins hit our long-term financial target of 30% less than two years after our IPO.
In the first quarter, roughly 55% of orders were placed from a mobile device, an increase of about 50% from the fourth quarter of 2014.
On Monday, Zulily shares closed up 5.2% at $13.98. The stock has a consensus analyst price target of $16.20 and a 52-week trading range of $9.09 to $42.56.
Shares of Alibaba closed down 0.4%, at $107.72 in a post-IPO trading range of $77.77 to $120.00. The consensus analyst price target is $107.72.
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