Alibaba chairman Joe Tsai voices confidence in Chinese consumer spending as e-commerce, cloud business units get back on growth track
- Sales of some discretionary items like apparel and electronics were growing, Tsai said on a conference call with analysts after Alibaba released its earnings
- Taobao and Tmall Group achieved double-digit year-on-year growth in GMV in the March quarter, according to Alibaba
Confidence among Chinese consumers was showing “early signs of growth”, according to Alibaba Group Holding co-founder and chairman Joe Tsai, as the e-commerce giant expects its core businesses to be back on the growth path in the current financial year.
“We’ve all seen some of the growth in the services sector during the May 1 holidays. And within our platform, [sales of] some discretionary items like apparel and electronics are also actually growing,” Tsai said on a conference call with analysts on Tuesday after Alibaba released its earnings for the March quarter and the financial year ended in March.
“The growth is pretty good. Consumers are starting to reflect that willingness to spend,” Tsai said.
“So we’re seeing some positive signals, but it is probably still too early to tell because the macro environment is broadly affected by the property sector downturn,” he added.
Alibaba owns the South China Morning Post.
Eddie Wu Yongming, who took over as chief executive of the domestic e-commerce unit last December, expects Taobao and Tmall Group’s general merchandise value (GMV) will “gradually return to healthy growth” in the financial year.
Taobao and Tmall Group achieved double-digit year-on-year growth in GMV in the March quarter, according to Alibaba.
“In the second half of the financial year, we will gradually introduce a new monetisation mechanism aligned with new platform algorithms and product features that will further enhance revenue … We are very confident that we will win more consumer trust and maintain our market share leadership,” said Wu.
On the rising competition in China’s e-commerce sector, Wu said the company has made “very clear strategic choices on Taobao as to how to address competition when going forward”.
In cloud computing, one of Alibaba’s key growth engines, Wu said the company was confident that cloud revenue, excluding internal customers, would return to double-digit growth in the second half of current financial year, based on the unit’s “leading product portfolio, substantial infrastructure investments, and proactive industry partner strategy”.
The group has improved the cloud unit’s competitiveness through price reductions across a range of service offerings, in addition to doubling down on the integration of its cloud service offerings with generative artificial intelligence (AI) technology.
“We’ve seen a rapid increase in customer demand for AI,” Wu said. “It also has stimulated growth in demand for traditional cloud computing needs, including general computing, storage and big data.”
The group also touted the synergy between its Tongyi Qianwen large language models and its cloud computing product portfolio.
“There is a natural fit between our Tongyi LLM and our cloud business,” Wu said, referring to the technology behind ChatGPT and other generative AI services.
Jiang Fan, head of Alibaba’s international digital commerce group, said the rapid growth in its business was the result of “aggressive investments in the new markets”, although that led to the unit’s loss in the last quarter.
The company also announced on Tuesday its plan for a primary listing in Hong Kong, which is currently expected to be completed by the end of August.
A “dual primary listing” is expected to help better unlock values. The move reduces a company’s reliance on one single stock market and serves as a hedge against geopolitical or economic issues in one particular market.
A primary listing in Hong Kong would allow China-domiciled investors to buy Alibaba shares directly, and could qualify the company for inclusion in Hong Kong’s Stock Connect scheme with the Shanghai and Shenzhen exchanges.
The latest announcement followed Alibaba’s previous attempt in 2022, when it sought to complete the process to upgrade its Hong Kong stock exchange presence from a secondary listing to a primary listing.
Three months after the announcement, Alibaba said the conversion could not be completed as planned, due to “changing market and other external conditions”.
