While most national economies are suffering from COVID-19, China will most likely be one of the only countries recoding positive real GDP growth in 2020. The e-commerce market is one of the key factors of this success, but is there an alternative to Alibaba when it comes to invest into this segment in China?
Baozun is a Shanghai-based e-commerce company which provides creation tools and online retail support services for companies wanting to launch their operations on the Chinese market. They offer a wide range of services, such as website creation, marketing, warehousing, order fulfilment and customer management solutions.
They also have strong connections with Alibaba, Tencent and JD.com, which gives them the possibility to list their client’s products on China’s biggest e-commerce hubs. Believe me, in China, that's where you want your products at.
Baozun is often compared to Shopify – another e-commerce tools and solutions company which had astonishing returns in the past few years. However, Shopify mainly focuses on small and medium companies – often as small as one person – while Baozun takes care of bigger players. The company’s target customers are large western brands that want to develop their presence on the Chinese market. Want to get to know its customers? How about names like Microsoft, Nike, Zara, Calvin Klein, Panasonic or Go Pro? By bigger companies, I meant bigger companies. And there are many more.
Their mission statement is the following: "Driven by technological innovation and customer needs, we strive to become the leading global brand e-commerce business partner."
China’s booming economy
China’s economy is bouncing back from Covid-19 in a far more spectacular manner than that of other developed countries. The International Monetary Fund estimates its GDP to grow 1.9% this year, while most other national economies will diminish by 5.5%. 2021 will be even more interesting, as the IMF estimates a 8.2% GDP growth for China.
It seems likely that the e-commerce branch tag along this booming economy. Chinese e-commerce was already on point but will be even more so fueled by this increasing “stay home and order” trend. According to eMarketer, China’s e-commerce in 2019 was already estimated at $1.935 trillion and accounted for over 55% of global spending. By 2023, they estimated this number to grow to $4.1 trillion: more than double!
About the stock
Baozun trades as an ADR on the NYSE with the ticker BZUN. The company’s market capitalization currently stands at $3.3 billion. The stock trades at around 30 times next year’s expected earnings.
The stock rose by 16% in October, which already completely erased the downturn it took in September, following the returning confidence in China’s e-commerce sector. The stock surged another 15% in November, in only 5 trading sessions. If we take a look at the past 5 years, the company was able to generate a 471% ROI to its investors, according to Simply Wall Street.
Baozun stock over the last month (Source: Investing.com)
To conclude, Baozun might be an interesting investment vehicle for investors who wish to be exposed to the fast growing Chinese e-commerce market. The company is much less diversified than Alibaba but is also at an earlier development stage which means that the upside potential could be significative. Stay tuned!
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