Microsoft discovery of Tmall long overdue
Microsoft's new 'discovery' of Tmall means the popular online shopping platform is probably past its heyday, though it can still expect strong double-digit growth for the next few years
Conventional wisdom says that people who buy stocks after reading about a company in the newspapers have probably waited too late, since a company is probably past its peak by the time it gets "discovered" by major media. Today I'd like to make a modification to that rule by substituting the name "Microsoft" (Nasdaq: MSFT) for "major media".
My point is that Microsoft is notoriously slow in discovering new technologies and product areas, with the result that many of the new areas it enters are already either highly competitive or simply passe by the time they're "discovered" by the world's largest software maker. With that rule as a starting point, let's take a look at Microsoft's latest "discovery" in China, namely the hugely popular Tmall online shopping mall operated by e-commerce leader Alibaba.
It's been years since just about every other major western and Chinese retailer has discovered Tmall, and now Microsoft is adding its name to the list with its announcement that it is opening a store on the popular e-commerce platform. Tmall may be old news to most people, but you would never know that from reading Microsoft's announcement that gushes about the platform's huge popularity and potential.
Microsoft's latest announcement comes 10 months after it said it would set up its own e-commerce site in China. In that case, I congratulated the company for finally discovering e-commerce, but also added that its arrival to China's online space was quite late, especially for a company that's supposed to be a global tech leader.
This push into e-commerce partly reflects the fact that Microsoft is trying to follow Internet giant Google (Nasdaq: GOOG) into the high-tech gadget arena, as it diversifies beyond its traditional role as a software maker. Thus this kind of online store becomes a convenient channel for selling such gadgets, including the company's recently launched Surface brand of tablet PCs. Microsoft is also rumored to be considering development of smartphones using its Windows mobile OS, so this kind of e-commerce site would be a good platform to sell those products.
Still, Microsoft should be slightly ashamed that it has taken the company so long to discover e-commerce in China, and Tmall in particular. China's e-commerce market has seen explosive growth in the last few years, as many younger consumers skip over traditional shops to compare and buy items from the convenience of their homes.
Alibaba and a number of other players have all started letting third-party vendors sell goods on their sites, following a similar pattern seen in the US from big names like Amazon (Nasdaq: AMZN) and Yahoo (Nasdaq: YHOO). Just last month I wrote that even mid-tier global brands were discovering Tmall, after US-based clothing maker Cherokee (Nasdaq: CHKE) announced it was opening a shop on Tmall. So it should be obvious why I consider Microsoft's new announcement a bit behind the curve.
I'd like to close this commentary by returning to the question of whether Microsoft's newest China "discovery' means that Tmall may be past its peak and headed for a period of slower growth. I think the answer to the question is probably "yes", even though Alibaba would like the world to think there is plenty of big growth ahead as it heads towards plans for a blockbuster multibillion-dollar IPO perhaps later this year. That said, Tmall can probably still expect to see strong double-digit growth for at least the next 2-3 years, as more smaller retailers and some other big latecomers like Microsoft finally discover the platform.
Bottom line: Microsoft's new "discovery" of Tmall means the popular online shopping platform is probably past its heyday, though it can still expect strong double-digit growth for the next few years
To read more commentaries from Doug Young, visit youngchinabiz.com