China-based Alibaba stakes claim as passing Wal-Mart to be the world’s largest retailer

Rising from the East, online marketplace retailer Alibaba said its fiscal 2016 sales surpassed that of Wal-Mart Stores making it the world’s largest retailer by sales volume of merchandise.

Alibaba Group Holding Limited made the announcement in a federal filing April 6, though it has not provided the exact sales detail, only saying it had sales of more than the $482 billion reported in the most recent fiscal year by Bentonville-based Wal-Mart Stores.

“Alibaba Group Holding Limited (NYSE: BABA) announced on April 5, 2016 that as of March 31, the end of its fiscal year 2016, it has become the largest retail economy in the world as measured by annual gross merchandise volume (GMV) on its China retail marketplaces. PricewaterhouseCoopers (PwC) has performed agreed upon procedures on data relevant to Alibaba Group’s GMV,” the company noted in a brief filing with the U.S. Securities and Exchange Commission.

Wal-Mart Stores became the largest retailer in the U.S. in 1990, surpassing Sears with sales of $32 billion. The milestone came just two years before the death of Wal-Mart Stores co-founder Sam Walton. By 1999 and with established operations in Mexico and Canada and entry into the United Kingdom with the $10.8 billion acquisition of ASDA, the retailer was considered the world’s largest. Wal-Mart first became the world’s largest corporation in fiscal 2003 with revenue of more than $244.5 billion.

VOW TO SURPASS WAL-MART
Alibaba founder Jack Ma vowed to Wall Street in September 2014 that Alibaba would overtake Walmart in sales, predicting it would happen by 2016.

PricewaterhouseCoopers confirmed the sales numbers for Alibaba, though they have not been publicly released. Alibaba is an e-commerce company that sells products through its online platform but it’s just one of the many segments this Chinese conglomerate operates.

“It’s not a surprise. Unfortunately some people do not really know what all Alibaba does,” said Annibal Sodero, supply chain expert and professor at the University of Arkansas.

He said Alibaba is located in China alongside the world’s biggest e-commerce marketplace, They compete with Yihaodian, now wholly owned by Walmart.com, though it’s only fractionally the size of Alibaba. Like Amazon, Sodero said Alibaba is a technology company and it has its own payment system with a specialty of selling to other businesses.

“Logistically, Alibaba has an advantage when it comes to supply chain given that it’s located near where much of the product is sourced. They know the Chinese culture better than anyone and this gives them a substantial advantage,” Sodero said.

He said Amazon probably loses more sleep over Alibaba than Walmart.

“But if Amazon feels threatened, then so should all other retailers in the U.S., because over time as Americans become more comfortable ordering from a Chinese retailer and Alibaba continues to study and learn what American consumers want, the dollars will follow,” Sodero said.

He said because Alibaba uses third-party marketers and does not hold inventory in stores like Walmart, it takes time to build trust with consumers.

“A few years ago Alibaba learned their lesson when they were nailed for selling counterfeit items on their site. Their stock price was hammered, but they have come back and know better now how to control this type of distraction,” he said. “They are a technology company, micropayment company, logistics company and supply chain expert in the largest country in the world.”

U.S. SUCCESS FOR ALIBABA WILL NOT BE EASY
Not everyone thinks it will be easy for Alibaba to take market share away from Walmart in the U.S.

“Walmart arguably has an advantage over Alibaba in that it is a true global multi-channel retailer that can leverage bricks and clicks to drive growth,” said Carol Spieckerman, CEO of Spieckerman Retail. “For the short term, however, Alibaba has an agility advantage as a single-channel player that runs multiple online marketplaces. It’s easier for Alibaba to cut ecommerce deals in emerging markets such as India than it is to build physical retail scale, for example now that India allows 100% foreign direct investment (FDI) for online marketplaces.”

She said Alibaba’s lack of name recognition and ongoing concerns about counterfeit goods play to Walmart’s advantage in the U.S. and other developed markets. Although, she noted, Amazon is always a looming presence.

“Achieving seamless, global e-commerce scale is the holy grail for all and, despite regional successes, no single player has hit that mark just yet,” Spieckerman added.