Friday, November 16, 2007

Taking a leaf out of the Ali-play book

I like to race sailing boats and one of the key competitive tactics is called 'covering'; you try to keep your most important competitor beneath you and in your shadow so that they can never get better wind than you.

There seems to be a bit of covering going on over at Global Sources. I read this transcript of yesterday's analysts call with some interest. A key point in CEO Merle Hinrich's discussion was the launch of the new China Global Sources service at the end of this month. A few comments caught my eye:

Firstly: "this is a substantial medium terms opportunity for us". For which read, "no immediate comparisons with Alibaba please".

Secondly: "The addressable market in terms of number of suppliers is much larger than our international site, and the Online opportunity will grow significantly over the next few years as more and more of the 30 million or so SME suppliers in China get Internet enabled, and as Broadband penetration increases". For which note: here comes the covering. That's directly out of the Alibaba IPO script; much of that huge valuation has been justified on the basis of battalions of currently unwired SMEs signing up for their web based services. Alibaba has been using a number of over 40 million SMEs.

Thirdly: "As a reminder we will be offering this marketing service free of charge for a period of time, while we build the content and buyer and supplier community and establish leadership traction". For which: please forget previous acid comments about "free is not a business model".

Heh, all's fair in love and war. Why not play them at their own game in China while sticking to the different 80:20/full-service B2B model on the international side (you'll have to read the transcript if you're not clear what I mean about that)?

There are also some interesting comments about the possible impact of a US slowdown on their business. In response to a question from Henry Ai at BNP Paribas, Hinrichs commented:

We have, as of yet, not seen a slow down in the buying. We have a larger; a higher number of attendees, at our trade shows, here in October than we had the previous year. That's number one.

And number two, though the U.S. market in particular remains extremely important, there are many other markets that have developed very rapidly, which are of course the Middle East, and Russia's become a very exiting market for a number of suppliers. And certainly Brazil and South America as well.

So, there's an increasing of alternative markets, which are taking up some of that slack. I think it's needless to say that if there was a huge slow down, of course, it would impact the demand and it would impact our suppliers.

If that does happen, I know for a fact, as we've seen this same phenomena in years past, that buyer respond by trying to locate products which more closely favor a community who are looking for products, but at possibly a lower price or maybe in many cases simply a lower value.

So, merchandising does not just simply cease in a poor or a reduced market or slower market, but it does change. So yes, if it got very serious I'm sure that it will have some form of impact, but we haven't seen that yet, Henry.

Hinrichs also quoted a BSG report, for which thanks.

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