Alibaba’s Overseas Expansion Will be Driven by This Huge Emerging Trend


Alibaba Group Holding Ltd (NYSE: BABA) (SEHK: 9988) has a goal of serving two billion people by 2036 and creating 100 million jobs in the process.

To do so, Alibaba will need to expand internationally given that there are only around 1.4 billion people in China.

One way for companies like Alibaba to expand internationally is to buy either all or part of emerging companies in growth markets and to invest in them. Another way is for Alibaba to try to grow organically overseas. Given Alibaba’s resources, the company is doing both.

Alibaba has bought shares of leading emerging market e-commerce platforms, such as Lazada in Southeast Asia, and the company is also expanding internationally organically.

In terms of its organic international expansion, Alibaba is using one huge emerging trend – social commerce – to expand. Here’s what investors need to know about this massive new growth platform.

What is social commerce?

Loosely defined, social commerce is the use of social media to drive e-commerce sales.

Since celebrities and influencers are a big part of social media, many companies use influencers, or social media personalities with large followings, to help sell their products.

Those social media personalities typically create content that is broadcast via social media. This then drives users to purchase items via a link.

How it helps Alibaba expand overseas

Signing up social media influencers could help Alibaba with its international expansion.

In many overseas markets, Alibaba lacks both meaningful numbers of merchants and customers. Without enough customers, it is hard to get merchants to sign up. Equally so, without merchants, it is hard to get customers.

Without enough of either, it is hard to be profitable enough to add value. With social media influencers, however, Alibaba has a potential solution to the problem and a way to acquire customers fairly rapidly in markets where e-commerce has a relatively low penetration rate.

By recruiting social media influencers, Alibaba can recruit customers faster because many customers trust social media influencers and some will sign up/buy a product on a new platform due to the influencer.

Some of the people who purchase an item on an Alibaba platform for the first time due to a social influencer will stick around on the platform.

Once Alibaba has enough customers in a new market, it can recruit merchants much more easily. Once Alibaba has enough of both, it can have economies of scale and network effects. That makes it easier for Alibaba to create value for shareholders.

Because recruiting social media personalities and expanding overseas costs money, and is somewhat risky, Alibaba is one of the few companies that can do it at scale.

Because the overseas market in fairly undeveloped regions could be huge for Alibaba in the future, how Alibaba executes with social media and influencers internationally matters a lot.

AliExpress and social commerce

Alibaba is using social commerce to drive customers to its overseas business, AliExpress.

AliExpress’s strategy is to connect brands with social media personalities who then market the products to their audiences via social media content.

If successful, some of the audience will sign up/buy products on AliExpress and use the platform more often. More users could attract more merchants.

To get customers, AliExpress has a goal of signing up over one million social media influencers in three years.

If successful, Alibaba will in effect be using Facebook, TikTok, and other social media platforms to expand overseas.

Foolish conclusion

Although it isn’t a social media company, Alibaba is smartly using social media to grow internationally. This could be a key long-term growth driver for the company that results in shareholders realising more value.