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Alibaba to Boost Digital Transformation With A100 Program

Zacks

Alibaba Group Holding Limited BABA recently unveiled A100 business partnership program, in a bid to boost digital transformation in a large number of companies. Per the partnership, the company will provide an array of enterprise services to its members on a single unified platform.

The program will run on Alibaba’s operating system. The company will provide its members an access to its operating system through the program, which will aid them in expanding and efficiently regulating their business operations. The program will initially be extended to Alibaba’s existing partners and gradually be available to companies of all sizes that are searching for digitized solutions.

The operating system is expected to benefit Alibaba in shifting from a platform facilitating e-commerce to a cohesive global technology company. Notably, it is trying to build its business as an ecosystem of retail, cloud and artificial intelligence. Moreover, Alibaba has been processing massive data that is instrumental in improving customer experience and feeding its AI initiatives.

Coming to price performance, Alibaba’s shares have lost 19.6% over a year compared with the industry’s decline of 5.5%.

New Retail Strategy

Alibaba announced that the interested companies can get access to its operating system through New Retail strategy.

The company continues to ramp up its efforts to develop “New Retail” strategy, in order to bridge the gap between online and offline shopping using its big data capacity. Alibaba expects that the system will give brick-and-mortar retailers new opportunities to evolve across marketing, inventory, as well as distribution networks.

Notably, in second-quarter fiscal 2019, the company witnessed 37% year-over-year growth in the retail business in China, driven by driven by robust improvement in its New Retail strategy. Per reports, Alibaba’s New Retail strategy has gained significant traction with 200,000 offline stores transforming into “smart stores” and more than 1200 brands getting digitalized.

The broader goal is to tap China’s massive retail space, which is expected to reach $5.63 trillion in 2019, that offers a combination of both online and offline options. Notably, retail e-commerce sales are expected to grow 30.3% to reach $1.989 trillion by 2019.

We believe that Alibaba’s new retail strategy will help it to gain a competitive edge over peers like eBay EBAY, Amazon AMZN and JD.com JD in China.


Alibaba Group Holding Limited Price and Consensus

Alibaba Group Holding Limited Price and Consensus | Alibaba Group Holding Limited Quote

Bottom Line

Alibaba is benefiting from its New Retail strategy, which is gaining momentum in the market. This is aiding in the growth of the company’s Tmall Import, Hema fresh food grocery business and Intime Department Stores.

China is in a digital transformation era, per its 2016-2020 five-year economic plan. Companies in China are adopting digitalization to enhance efficiency and reduce costs. Per All China Review, digital transformation in China is expected to contribute between 7% and 22% of the increase in China’s gross domestic product (GDP) from 2013 to 2025.

Per reports, 4 billion people are expected to be connected digitally by 2020. The number of digitally connected devices is expected to reach 25 billion within the same time period.

We believe that Alibaba’s A100 strategic partnership program is expected to contribute significantly to China’s digital transformation era and is anticipated to fuel the company’s top-line growth in the near term.

Currently, Alibaba carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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