Alibaba posts 54 per cent quarterly revenue growth ahead of Singles’ Day shopping festival

  • New York-listed Alibaba saw net income increase 13 per cent to 20 billion yuan (US$2.9 billion) in the quarter ended September 30
PUBLISHED : Friday, 02 November, 2018, 7:05pm
UPDATED : Friday, 02 November, 2018, 11:19pm

Alibaba Group Holding said its fiscal second-quarter revenue surged 54 per cent, powered by its core commerce and cloud computing business, even as it decided to forgo monetising from new features to help its merchants amid “fluid macro-economic conditions”.

The New York-listed e-commerce giant’s revenue reached 85.1 billion yuan (US$12.4 billion) in the quarter ended September 30, up from 55.1 billion yuan in the same period last year, according to a statement. Net income increased 13 per cent to 20 billion yuan. A recent decision not to monetise new features to increase customer engagement and product discovery in the Taobao app meant the company lowered its full-year revenue guidance by 4 to 6 per cent to 375 billion yuan to 383 billion yuan.

Alibaba’s results are seen by many investors as a proxy for consumer spending in China and important indicator of its economic health. The company will hold its 10th annual Singles’ Day shopping promotion on November 11 and expects to achieve a record 1 billion orders in 24 hours, as this month’s festival will see the participation of more merchants and consumers outside China.

“Alibaba had another strong quarter of rapid growth. In particular, annual active consumers increased by 25 million to reach 601 million in the 12 months ended September 30, 2018,” Alibaba chief executive Daniel Zhang Yong said in a statement.

“We generated synergies across our businesses, demonstrating the power of the Alibaba digital economy, which will be further showcased during our upcoming 11.11 Global Shopping Festival. Under our New Retail strategy, we are realising our vision to enable renewed growth for traditional retailers through digitising their store-based operations, powered by Alibaba’s technology and consumer insights.”

The Singles’ Day activities this month will include food delivery service, food and lifestyle services arm Koubei, supermarket chain Hema, hypermart operator RT-Mart and the company’s other online and offline retail units.

The company tallied a record US$25.3 billion in gross merchandise volume during Singles’ Day last year, compared with US$7.8 million in total sales transacted on its e-commerce platform when the online shopping festival was first held in 2009.

Alibaba says New Retail strategy is paying off as Hema shopper data shows bigger average spending

Revenue from the firm’s core commerce operation rose 56 per cent to 72.5 billion yuan in the quarter ended September. Its cloud computing business saw a 90 per cent jump in revenue to 5.7 billion yuan. Mobile monthly active users in China, which has the world’s largest internet population and mobile market, reached 666 million in September, up 32 million over the total in June.

Alibaba is playing an active role in the digitisation of the retail industry, meaning that the total addressable market will be the entire US$5 trillion retail economy in China through the firm’s New Retail strategy, according to executive vice-chairman Joseph Tsai.

Hangzhou-based Alibaba, which started out as an online platform connecting buyers and suppliers, has since expanded to become an e-commerce empire, led by its Taobao Marketplace and Tmall operations in China. In recent years, the company has expanded its reach to digital entertainment, cloud computing and on-demand local services.

Alibaba pledges ‘largest ever’ Singles’ Day as shopping festival marks 10th anniversary, goes international

The company has boosted investments to support its New Retail strategy, which seeks to integrate the online and offline shopping experiences for consumers across a number of products and services. That initiative reflected the increased competition Alibaba faces on multiple fronts in China, where its ecosystem of services rival those of Tencent Holdings.

China’s hi-tech sector, like other industries in the world’s second largest economy, faces uncertainty amid the escalating trade conflict with the US.

The country’s ruling Communist Party sent a strong message on Wednesday that it will significantly alter its economic policy course to respond to growing economic headwinds resulting from the trade war with the United States.

The shift was signalled in a statement after a meeting of the Politburo, the party’s top policymaking body, which analysts agreed marked an important change in tone compared to three months ago.

The statement expressed concerns about “growing downward pressure” on the economy from a hostile international environment and noted “many difficulties with certain enterprises and the emergence of risks accumulated over long periods of time”.

The global macro-economic uncertainty is affecting demand for consumer durables and big-ticket items, which are not core for Alibaba, while demand for on-demand local services such as meal orders and restaurant spending is largely unaffected, said Tsai.

Alibaba does not see a huge economic impact coming from international markets like Southeast Asia and remains “cautiously optimistic”, he said.

Southeast Asian subsidiary Lazada Group will jointly hold for the first time Singles’ Day promotions across Singapore, Malaysia, Thailand, Indonesia, the Philippines and Vietnam.

Since June 14, when Alibaba’s share price closed at a record high of US$210.86, the company’s stock has declined 28 per cent to close at US$151.25 on Thursday amid investor concerns over the firm’s increased spending, the escalating US-China trade war and a global tech sell-off.

Alibaba is the parent company of the South China Morning Post.