Bottom line: Reports of the insolvency of online grocer Yummy77 are probably correct, but the company could still engineer an emergency rescue that would see it emerge as a wholly owned subsidiary of a big backer like Amazon.
Yummy77 reportedly insolvent
Just a week after 2 major new fundings highlighted the big potential for online grocers, a new headline is shining a spotlight on the darker side of a market that has rapidly overheated as new companies rush to cash in on the trend. That headline has media reporting that 2-year-old online grocer Yummy77, which is backed by global e-commerce giant Amazon (Nasdaq: AMZN), has run out of cash and become insolvent, making it the first major casualty in the space.
Before we go any further, I should note that the news on Yummy77 is all coming from media reports that haven’t been confirmed by the company. But at least one of those reports comes from the highly reputable China Business Network (CBN), which cites a number of sources that seem to indicate the news is true. My own visit to Yummy77’s site, www.yummy77.com, showed no signs of anything unusual, and I was able to select items for sale and put them into my shopping cart as normal. Read Full Post…
Bottom line: Fresh food sellers Yiguo and FruitDay could see strong growth and go public in the next 2-3 years, banking on strong partnerships with Alibaba and JD.com and growing consumer willingness to buy groceries online.
Yiguo in big new funding
Fresh fruit and other grocery items are the latest hot ticket in China e-commerce, with 2 up-and-coming players receiving big new fundings of $100 million or more. The larger of the pair has e-commerce leader Alibaba (NYSE: BABA) and global private equity giant KKR helping online fresh food seller Yiguo raise about $260 million in new money. The other has an online fruit specialist called FruitDay, whose backers include Alibaba arch-rival JD.com (Nasdaq: JD), raising its own $100 million.
This particular trend is really a sub-trend of a broader movement by China’s e-commerce giants into the grocery business over the last few years, encroaching on traditional supermarkets and also Wal-Mart’s (NYSE: WMT) Yihaodian that found early success in the space. Even Amazon (Nasdaq: AMZN) China has gotten into the business, though many of these companies specialize in more traditional packaged foods rather than fresh products. Read Full Post…
Bottom line: Saohuo’s new angel fund-raising shows that Internet companies with innovative concepts can still attract growth capital, while Great Wall’s scrapping of its new share issue shows China’s new energy car program is sputtering.
Saohuo cashes in on near-expired food
A couple of fund-raising stories are in the headlines as the new week begins, showing that Internet plays continue to be hot while older industries like cars lose their appeal. The first story brought a smile to my face because of its “only in China” nature, and has seen some significant early fund-raising by an e-commerce company that specializes in imported foods that are near their expiration date. The second story has car maker Great Wall Motor (HKEx: 2333; Shanghai: 601633) scrapping its own fund-raising plan due to lack of investor interest in China’s sputtering effort to boost new energy cars.
China’s economic slowdown is putting a definite damper on older industries like steel and autos, where rapid build-ups over the last few years have led to overcapacity and plunging profits. But there’s still plenty of room for growth in the Internet space, as online companies and app makers use innovative concepts and business models to steal business from more traditional players like banks and brick-and-mortar retailers. Read Full Post…
Bottom line: Alibaba will come close to meeting the top end of its target of raising $3-$4 billion with a new bank loan, and chances are as much as 50-50 that it will use the funds to make bids for Groupon or the stake of itself held by Yahoo.
Alibaba turns to banks for new mega-loan
After first splashing into the headlines with rumors 2 weeks ago, e-commerce giant Alibaba (NYSE: BABA) has finally announced its latest cash-raising exercise in the form of a syndicated loan worth at least $3 billion. Following that official confirmation, all eyes will now be looking to see if Alibaba can find more demand to boost the loan amount even higher, and for any indication of what exactly it has planned for the new funds.
Let’s begin by looking at the latest reports, which have Alibaba announcing the loan in a regulatory filing. It’s somewhat noteworthy that the high-profile Alibaba hasn’t issued a formal press release about the loan, perhaps because it’s waiting to see where the final amount will top out. But perhaps Alibaba has also finally realized it’s better not to raise expectations too high with a hype-filled announcement, which can ultimately backfire if interest from smaller banks in joining the new lending syndicate is poor. Read Full Post…
Bottom line: Toys “R” Us’ big China expansion plan contrasts with pull-backs and departures for many major western retailers in the tough market, and could be aimed at generating buzz in the run-up to a potential IPO.
Toys “R” Us steps up China expansion
China’s economy may be headed for a rapid slowdown that casts a chill on the retail sector, but don’t tell that to US veteran Toys “R” Us. The retailer whose name is synonymous with children and fun has disclosed it’s planning an ambitious China build-up that will see it increase its local store count by 30 percent this year, even as other major western retailers are closing shops and even leaving the difficult market.
All that leads to the question of whether Toys “R” Us really intends to open so many new stores at a time of uncertainty, or whether this China toy story is part hype with other motivations. If the latter is the case, this particular story could be designed at least partly to generate some excitement around an otherwise boring traditional retailer, as it gets set to potentially re-list in New York more than a decade after being privatized. Read Full Post…
Bottom line: Vipshop shop shares could see some upside if the company improves its public relations and its revenue and profit growth stabilize at current levels.
Vipshop dogged by fake liquor scandal
A scandal involving pirated liquor is cooling down former e-commerce high-flyer Vipshop (NYSE: VIPS), in an episode reminiscent of a much larger brouhaha that devoured sector leader Alibaba (NYSE: BABA) almost exactly a year ago. In this case, the scandal involving fake Moutai liquor has been dragging on for more than 2 weeks now, and the latest development has Vipshop apologizing for its lack of transparency in handling the incident.
Some are saying this particular scandal could just be the tip of the iceberg, and that numerous other fake products could be lurking on Vipshop’s website that specializes in bargains for lesser-known brands. But in my view, slowing growth is the real cause for concern among Vipshop investors, many of whom are taking advantage of this news as an excuse to sell their stock. Read Full Post…
Bottom line: Baidu’s disposal of its problematic music division looks like a smart move that was long overdue, while its new tie-up with Amazon looks minor but could get much bigger if it expands into the e-commerce sector.
Baidu in Christmas time tie-ups with Amazon, music company
Leading search engine Baidu(Nasdaq: BIDU) is in the headlines with a couple of big strategic moves, led by an intriguing new tie-up with Amazon (Nasdaq: AMZN) that could have broader implications in the e-commerce space. The other news has Baidu merging its problematic music division, which was historically plagued by piracy issues, into a new company headed by an entertainment firm called Taihe Music Culture Development.
Both moves represent incremental strategic tweaks for Baidu, as it tries to expand beyond its core online search business into other areas of the Internet. The Amazon alliance looks relatively superficial, but could hint at a broader future tie-up that might see the companies work together in China’s lucrative but highly competitive e-commerce space dominated by Alibaba (NYSE: BABA) and JD.com (Nasdaq: JD). Read Full Post…
Bottom line: Vipshop’s third-quarter revenue shortfall is the latest signal that China’s e-commmerce sales are set to slow after a period of rapid growth, and could pressure the company’s stock over the next few months.
Warm autumn chills Vipshop sales
Discount e-commerce superstar Vipshop (NYSE: VIPS) has suddenly lost some of its luster, after announcing a revenue shortfall that sparked a 27 percent plunge in its stock. The unusual revenue miss looks even more unusual in China’s broader booming e-commerce sector, where leaders Alibaba(NYSE: BABA) and JD.com (Nasdaq: JD) are still basking in the glow of a record-breaking Singles Day online shopping blitz last week. (previous post)
The bigger question that many will be asking this week is whether there’s any broader significance to Vipshop’s new announcement that it missed its previous third-quarter revenue forecast by 6 percent. (company announcement; Chinese article) Some others have warned of a similar slowdown, and I previously said the big Singles Day sales totals were at least partly manipulated by online merchants trying to meet tough targets set by online mall operators. (previous post) Read Full Post…
Bottom line: China’s commerce regulator is putting growing pressure on Alibaba to play by its rules governing piracy and fair competition, but is likely to keep dialogue private to avoid public spats like one early this year.
SAIC accepts JD’s Alibaba complaint
E-commerce juggernaut Alibaba (NYSE: BABA) is coming uncomfortably under the microscope just days before its important Singles Day shopping extravaganza, with 2 new developments reflecting growing scrutiny from the nation’s top commerce regulator. The first has the powerful State Administration for Industry and Commerce (SAIC) formally accepting a complaint from rival JD.com (Nasdaq: JD), which accuses Alibaba of strong-arm tactics aimed at stifling competition during Singles Day promotions set for November 11.
The second headline looks a bit more benign, and simply says that SAIC Minister Zhang Mao visited Alibaba’s headquarters in the city of Hangzhou in coastal Zhejiang province this week. Headlines from that meeting look designed to show a facade of harmony, with Zhang praising Alibaba for its innovation in e-commerce. But I do suspect that Zhang is strongly pushing Alibaba behind the scenes to clean up its sites of traffic in pirated and substandard products, and also to avoid abusing its market dominance that led to the JD.com complaint. Read Full Post…
Bottom line: Baidu’s new upscale online shopping mall looks more focused and well designed than its earlier e-commerce initiatives, but could have a difficult time finding an audience due to stiff competition.
Baidu tries e-commerce again with upscale mall
Online search leader Baidu(Nasdaq: BIDU) is hoping the third time is the charm for its drive into e-commerce, with the formal launch of its new online mall with a distinctly foreign flavor targeting high-end shoppers. I’ve followed Baidu for a long time now, and the company certainly has a poor track record in e-commerce and more broadly for homegrown initiatives like this latest one called Baidu Mall.
But that said, the company has found more success recently by buying assets outside its core online search area, and then giving them access to its own vast cash and other resources to help them quickly gain market share. Perhaps it’s hoping to use that strategy as well for the newly launched Baidu Mall, even though the platform itself seems to be Baidu’s own creation rather than an acquisition. Read Full Post…
Bottom line: Jiuxian’s decision to list in China and Dangdang’s continued effort to de-list from New York show that low-quality Chinese firms will have difficulty getting attention from US investors and are probably better listing in their home market.
Jiuxian wine cellar to list on China’s OTC
Two news items continue to show a growing distaste for New York by Chinese web firms, led by word that veteran online wine seller Jiuxian has just received approval for an IPO on China’s over-the-counter (OTC) board. The second items comes from veteran e-commerce site Dangdang (NYSE: DANG), whose outspoken CEO is quoted complaining about his company’s low valuation and saying his plans are moving forward to de-list from New York and re-list in China.
The most commonly heard theme to these stories is that Chinese firms can get better valuations in their home market than New York, because their names are more recognized in China. But another theme that gets far less attention is that many of these complaining companies are simply low-quality products whose only real attraction is their “made in China” label. Read Full Post…
