Alibaba (BABA) is launching a Chinese competitor to the Amazon (AMZN) Echo three years after Amazon first introduced its pioneering product, but it's still likely to win in the China market because of its home field advantage in a strictly regulated country.
The $73 "Genie X1" device launching on August 8 will also compete with the Google Home from Alphabet's (GOOGL) Google, as well as four other devices from competing companies. But these well-established players will have little effect on the success of Alibaba's Genie XI in China, CFRA Research analyst Scott Kessler said.
"Alphabet and Amazon are really not market leaders in China so this solidifies Alibaba's efforts as a multi-faceted tech player that is largely focused on the Chinese market," Kessler said. Alibaba's stock was trading up 2.8% to $144.93 by Wednesday's close after the company announced the Genie X1 at a press conference in Beijing earlier in the day.
Alibaba and other big Chinese tech players have developed a strategy where they copy what U.S. tech leaders are doing because those U.S. tech players are often excluded from the Chinese market, he explained. "They may introduce the product after the U.S. player, but they're still getting to introduce the product to the Chinese market," he added.
The search engine market in China is a good example of this. Beijing-based Baidu (BIDU) was launched about a year after Google in 2000, but it's the number-one search engine in China, helped out by the difficult time Google has had entering and staying in the Chinese market. Google offered a Chinese-language version of its search engine in 2000 but it was made unavailable in China the next year. Since then, Google has been blocked several times by China. Most recently, Google was forced to pull its services out of China in 2010 due to a disagreement with Beijing over censorship rules.
This strategy also played out in favor of Chinese-based ride-hailing app Didi Chuxing, which took over Uber's business in China in August after a bruising competition. It also worked in favor of Alibaba once again in 2005 when Yahoo! (YHOO) sold its China businesses to the company because the tough regulatory environment made the fight to break into the market a costly and time-consuming battle.
Kessler said he's tempted to "scoff" at the idea of Amazon or Google eventually having an impact on Alibaba's Genie X1 sales because they can't provide the same range of services and products in China that Alibaba can simply because of regulations. If consumers can't connect their smart home device to ones that are already available in China, then they won't want it.