The Chinese e-commerce giant is making U.S. investments in preparation for an expansion into western markets five years from now, an analyst says. Fred Katayama reports.
Alibaba went on a three-day buying binge. It spent $56 million bottom fishing for shares of Zulily last week. That raises the Chinese e-commerce giant's stake in the Seattle-based online retailer to more than 9 percent. Zulily, which went public two years ago, sells mostly to women. Its goods range from clothing to home decor. It frequently holds deeply discounted short term "flash sales." Alibaba buying its shares at a flash-like price, starting on Wednesday when the stock fell to an all-time low. Zulily's stock is down more than 80 percent from its peak 15 months ago after disappointing Wall Street with its earnings. Its shares rocketed higher at the open on news of Alibaba's investment. Wedbush analyst Gil Luria says the investment makes sense. "Alibaba has longer-term plans to expand into western markets and is planting some small flags to facilitate the longer-term move. I would expect Alibaba to first exhaust the hyper growth of the Chinese consumer, then other emerging markets ... then target the large western market, possibly 3-5 years down the road." Zulily is the latest in a series of investments Alibaba has made in the U.S. It has bought stakes in the members-only shipping service ShopRunner, photo messaging app, SnapChat, and mobile messaging app maker Tango, among other things. The Wall Street Journal reports that Alibaba doesn't plan to buy Zulily outright.