Global Sources takes on Alibaba on home ground

PUBLISHED : Tuesday, 21 August, 2007, 12:00am
UPDATED : Tuesday, 21 August, 2007, 12:00am

As Alibaba, operator of the mainland's largest business-to-business website, prepares to list in Hong Kong, key rival Hong Kong-based Global Sources has announced plans to increase its share of the market with a Chinese-language site serving domestic mainland trade.

Global Sources' English site, which serves international trade between Greater China and the rest of the world, will also launch a search engine that will deliver a wider range of results. The company has only an English site, while Alibaba has sites in both languages.

The new initiative will intensify head-on competition.

'We believe the upcoming Alibaba [initial public offering] is a key catalyst that will draw attention to the Chinese business-to-business sector in general and other players such as Global Sources,' said James Lee, an analyst at US-based WR Hambrecht.

Global Sources last year planned to compete with Alibaba on the domestic front by acquiring smaller HC International, which operates a domestic businesses-to-business site in the mainland. The deal collapsed as HC failed to deliver a satisfactory financial performance.

Earlier, Global Sources refused to exercise its options on a 35 per cent stake in HC that would have made it the mainland company's largest shareholder. Last week, Global Sources took a US$1.8 million impairment charge on its 12 per cent holding in HC.

The impairment charge took the shine out of Global Sources' second-quarter results. Profit rose 4 per cent to US$4.2 million, after sales grew 17 per cent from a year earlier to US$44.8 million. Excluding the impairment charge, profit would have jumped 50 per cent to US$6 million.

The proposed new 'vertical' search engine for international trade will deliver results from across the web, rather than limit them to those listed in Global Sources' database.

Many traders, besides using dedicated business-to-business websites such as Alibaba or Global Sources, also turn to general search engines such as Google to find products and suppliers. The move will allow Global Sources to capture part of that traffic.

'We believe these exciting new services and programs will be catalysts for amplifying long-term growth and profitability for the online segment of our business - and also for developing new print and trade-show opportunities, both in China and overseas,' said Global Sources chairman and chief executive Merle Hinrichs.

The company's second-quarter revenue from the mainland soared 37 per cent to US$23.8 million from a year earlier.

The results were 'largely driven by online services and export-focused China Sourcing Fairs', Mr Hinrichs said.

Revenue from the online business rose 17 per cent to US$18.5 million, while sales from exhibitions grew 27.5 per cent to US$20.8 million. Print media turnover shrank 3 per cent to US$12 million.

The company's shares, which have gained 13 per cent this year, closed up 1.05 per at US$18.25 on the Nasdaq on Friday.

Turf war

Global Sources to launch a Chinese-language website in the mainland

The company increased its revenue from the mainland in the second quarter by 37%