BEIJING (TheStreet) -- I've spent the last two weeks in China. Most of the time has been devoted to going around and talking to e-commerce and other Internet companies. The sector is hot despite the pullback in stocks in recent weeks. The mood is very positive about the growth ahead.
Most CEOs and CFOs I spoke to in the sector believe the macro growth fundamentals point to very strong growth for them in the coming quarters. You start to hear the same points repeated: only 30% of Chinese are connected to the Internet, people's incomes are moving up slightly, and people are becoming more and more interested in doing business over the Web.
In virtually every major city right now, you are bombarded with outdoor advertising for major public and private e-commerce companies including Tmall (which is part ofAlibaba Group, partly owned byYahoo!(YHOO_)),Grouponcompetitors,360BuyandVancl. The latter two both plan IPOs at the end of this year.
CFOs also discuss how Web companies likeBaidu(BIDU_)and the major portals likeSina(SINA_)andSohu(SOHU_)keep being able to raise their advertising rates because so many e-commerce Web sites are clamoring to get their ads on the front page.
But what most in the States fail to understand is how challenging logistics is in China. We take it for granted back home howeasyit is to getFedex(FDX_)orUPS(UPS_)to fulfill an e-commerce order.
Back in the early days of the Web 10 years ago, companies likeAmazon(AMZN_)had to spend a lot of time getting people over the hump of trying to make an online purchase. They then had to spend some time thinking through building up their logistics infrastructure to support their growth. To Amazon'scredit, they've done a fantastic job at the latter with world-class distribution centers and fulfillment process.
In China at the moment, it's really the Wild West for most e-commerce when it comes to fulfilling orders. They are still at the stage where they need to get Chinese consumers to buy. Most Chinese think ofTaobaowhen they think of e-commerce. They know they can usually get something online from there if they want to and they've had a good experience. (It was estimated that last year within China, 50% of deliveries made were for Taobao purchases.) However, they know far less about other vertical e-commerce plays.
The information on Breakout Performance reflects opinions by the authors and nothing contained in this publication should be interpreted as or deemed to be a recommendation to any investor to purchase, sell or hold any security. Any investment decisions must in all cases be made by the reader or by their investment adviser. Nothing contained here is intended as a solicitation.
The views expressed on Breakout Performance are solely those of the author or writers on this site.