Alibaba to rely more on Chinese consumers

By Kirby Chien

BEIJING (Reuters) - China's top e-commerce firm Alibaba.com Ltd (1688.HK) expects half of its revenue will come from domestic trade within three years as the global financial crisis weighs on American and European consumers.

Alibaba, which operates an online site connecting buyers and suppliers looking to import and export Chinese goods, says domestic trade currently accounts for about 36 percent of its total revenues.

But, as the government takes steps to stimulate domestic consumption, Alibaba Group Chief Financial Officer Joseph Tsai says the current split of its revenue source will become more even.

"I think it will be at least 50-50 in three years," Tsai told Reuters in a telephone interview.

While the growth of exports is slowing, a growing number of government officials are calling for more steps to boost domestic demand.

Alibaba is still bullish on the long-term prospects for China's army of exporters, however, saying that China would continue to be the world's workshop.

"On the export side, we are still long-term bullish for China as the manufacturing center of the world," said Tsai, pointing to government measures to spur slowing export growth.

As the country's economic growth slowed sharply in the third quarter, Beijing has responded with a raft of policy measures, including three cuts in interest rates since mid-September and increases in tax rebates for exporters of labor-intensive goods.

As manufacturers need to cut costs, Alibaba is looking to attract new customers with sharply lower prices for its trading platform.

The company -- in which U.S.-based Yahoo (YHOO.O) is a key investor -- announced on Monday it would slash its annual membership fee for exporters by about 60 percent to 19,800 yuan ($2,899).

CANNIBALISATION

The firm expects the new pricing will help it at least double member numbers and is aiming for up to 80,000 in three years, from about 30,000 now.

However, the company was also bracing for a migration from the higher priced service to the new one, but said the effect on revenue was hard to quantify.

Included with the new pricing would be more add-on optional services that nine-year old company is hoping will enhance the basic membership fee, and eventually beef up revenues.

"Over a three year term we are targeting to get value added services to about 50 percent of average revenue per customer (ARPC)," he said. That percentage is now around 30 percent.