Alibaba’s initial public offering is perhaps the most highly anticipated one expected this year. But what’s next for the company after it goes public? Bernstein analysts consider whether the Chinese online retailer will march across the Pacific Ocean and start taking share of the ecommerce market from the likes of Amazon.com, Inc. (NASDAQ:AMZN), eBay Inc (NASDAQ:EBAY) and other U.S. companies. They actually see a greater likelihood of Amazon taking China than of Alibaba taking the West.

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Alibaba the giant

In a report dated May 23, 2014 analyst Carlos Kirjner and his team say investors are wondering whether the upcoming IPO will awaken the giant that is Alibaba Group. They note that the Chinese retailer already is a giant, with a gross merchandise volume of about $250 billion in its Chinese ecommerce business alone. That represented a more than 50% year over year growth.

Compared to Amazon.com, Inc. (NASDAQ:AMZN) and eBay Inc (NASDAQ:EBAY), there’s no denying that Alibaba is a giant. Amazon’s gross merchandise volume was about $115 billion for its entire global operations, representing a 23% growth rate but being dwarfed by the massive Alibaba, which some see as China’s Amazon. Being in the world’s biggest nation by population certainly helps. Meanwhile eBay Inc (NASDAQ:EBAY) stands to fall even further behind if Alibaba does start to move into the U.S., as its gross merchandise volume was quite a bit smaller than that of Amazon and grew by a smaller percentage.

Alibaba shows tremendous growth potential

The Bernstein team values Alibaba Group at $230 billion. The analysts believe the online retailer’s gross merchandise volume for China alone to surpass $550 billion by 2017 and grow by 23% year over year. This would result in almost $19 billion in revenues, $8.1 billion in free cash flow and triple-digit return on invested capital.

They also note that currently, Alibaba Group has about an 80% share of China’s ecommerce market, which is the largest in the world. They see some benefits to the company’s marketplace business model, including “strong network effects and returns to scale.” They believe that these benefits mean that the company’s position is “quite defensible.”

Uncertainties remain in Alibaba’s future

In spite of their bright expectations for Alibaba Group, they note that there are a number of risks. For example, there are macro and regulatory risks associated with being in China. In addition, some have raised concerns about the sale of fake items through Alibaba’s Taobao marketplace. Others are worried about the transition to mobile on the company’s ad revenues. However, the Bernstein analysts do not believe these risks will be “fundamentally important” in the near term.

They think the biggest concern regarding Alibaba Group’s future is the fact that it’s very early in China’s ecommerce market. Last year, they estimate that the market’s gross merchandise volume in China was about $350 billion. However, they said it could surpass $1 trillion over the next decade, making China’s ecommerce market a whopping 50% to 60% bigger than the ecommerce market in the U.S.

The analysts note also that as the market in China changes, there could be changes that affect Alibaba, possibly the addition of “large and profitable first party e-commerce sites or mixed first- and third-party e-commerce sites.” They see the possibility of better supplier relationships developing within these sites, particularly in certain categories and subcategories of products. As a result, they say it’s possible that the “first party model may be inherently superior and hence will emerge over time, even in China.”

Nonetheless, they think Alibaba Group’s business is so strong that it will be many years before any impact from potential changes is noticed.

Will Alibaba aim at the West?

The Bernstein analysts say it’s unclear to them whether Alibaba Group will make a play for the West. They say the idea can’t be dismissed, as the company is certainly a giant. However, they don’t think there is any obvious way which Alibaba could use its Chinese assets and capabilities to successfully challenge Amazon.com, Inc. (NASDAQ:AMZN), eBay Inc (NASDAQ:EBAY) and other online retailers in the U.S. or in Western Europe.

They note that simply extending Alibaba’s operations internationally would likely result in pricing disadvantages. Also shoppers in the West may have trouble trusting the Chinese giant, particularly since they’ve probably never heard of many of the brands it sells. As a result, it would have to start from scratch in building trust in the Western world through customer reviews, warranties and other routes.

The Bernstein team dismisses the thought that Alibaba Group will march across the West through acquisitions or in an organic manner because it doesn’t “take advantage of its gigantic lead in Chinese e-commerce, or the fact that it is an e-commerce giant.”  They believe Amazon.com, Inc. (NASDAQ:AMZN) has a better chance of succeeding in China than Alibaba does in the West.