SHANGHAI -- Investors are champing at the bit over Alibaba's planned initial public offering, slavering over a company that seized roughly 80% of China's burgeoning e-commerce market by becoming the first to offer consumers a safe way to buy goods online.
Alibaba's online shopping site is a platform for businesses and individuals looking to sell and buy goods. Its costs are low since it does not procure or ship products to customers. An analyst at Hong Kong investment bank Bocom International says Alibaba has a business model that allows it to keep expanding.
The company does not simply provide a place for sellers and buyers to make contact. In 2004, it launched the online payment service Alipay. With the government's approval, Alipay temporarily holds payments made by buyers and hands over the money to vendors after the merchandise is delivered.
This service was introduced at a time when many people did not buy goods online. The e-commerce market got a boost because Alibaba gave consumers a platform for carefree Internet shopping. China's e-commerce market grew to 1.85 trillion yuan ($297 billion) in 2013, accounting for 7.8% of total retail sales in the country.
However, the growth of China's online shopping market slowed to just over 40% last year, down from 70% or more in previous years. Alibaba has been aggressively investing in such areas as finance and entertainment to cultivate new growth fields, and investors are anxiously awaiting what the company intends to do after it goes public.