Alibaba shows a strong appetite for home improvement businesses
Alibaba (BABA) is on track to own a substantial stake in Chinese home improvement and furnishing company Red Star Macalline. Alibaba has bought ~$635 million worth of convertible bonds in Red Star Macalline, which will convert into a stake of ~10% in the home improvement company, according to TechCrunch. In addition to the bond investment, Alibaba also purchased a 3.7% stake in Red Star Macalline in the public market. The stock is listed on the Hong Kong stock market.
Red Star Macalline is the latest home improvement–focused business in which Alibaba has invested. Last year, Alibaba invested more than $860 million in the purchase of a 15% stake in Chinese home improvement chain Easyhome, Reuters reported. Also last year, Alibaba made an investment of ~$25 million in home improvement provider Shengong.
Alibaba pursues a $1.1 trillion opportunity
Why is Alibaba interested in home improvement businesses? The answer may lie in the numbers. The home improvement market is expanding, creating a lucrative business opportunity. The global home improvement market was valued at $800 million in 2018, according to Global Market Insights, which now projects that it will top $1.1 trillion by 2025. In countries such as China, where governments are keen to improve energy efficiency as a way to cut pollution and protect the environment, the home renovation market seems to have a bright future, and Alibaba has shown that it wants to be part of that future.
Alibaba generated revenue of $13.9 billion in the fourth quarter of fiscal 2019, an increase of 51% YoY (year-over-year). Revenues rose 20.9% YoY at JD.com (JD), 17% YoY at Amazon (AMZN), and 16% YoY at Tencent (TCEHY) in their comparable quarters. eBay (EBAY) recorded revenue growth of 2.0% YoY in the quarter.