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Alibaba
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Alibaba’s era of exceptional growth is over as Chinese consumer spending power weakens, say analysts

  • The Chinese e-commerce giant’s adjusted profit fell 39 per cent in the September quarter, marking the first such decline in 22 quarters
  • Competition from rivals Pinduoduo and JD.com, as well as online sales by live-streaming platforms like Douyin, have squeezed profit margins

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Visitors pass by the Alibaba booth during the China International Fair for Trade in Services in Beijing, Sept. 7, 2021. Photo: AP
Tracy Qu

Alibaba Group Holding is bidding farewell to its golden era of exceptional revenue and profit growth amid a broad weakening in consumer spending in the world’s second largest economy, analysts said.

The Chinese e-commerce giant, owner of the South China Morning Post, reported an 87 per cent year-on-year decline in net income for the September quarter while its adjusted profit fell 39 per cent, marking the company’s first fall in adjusted profit in 22 quarters. The news triggered investor’s to dump its New York and Hong Kong-listed shares, which slumped 11 per cent.

The key factor behind Alibaba’s weaker-than-expected performance was sluggish consumer sentiment and spending in China, where third-quarter GDP growth decelerated to 4.9 per cent year on year while retail sales, a broad gauge of consumer spending, rose only 4.9 per cent last month compared to the same period last year.

“The time when Alibaba grew rapidly has passed,” said Chen Tao, a senior e-commerce analyst at consultancy Analysys. “Alibaba has a very high consumer penetration rate in the domestic market, which means little room to grow potential users.”

Chen said there was still potential for Alibaba to achieve higher growth in overseas markets and the non-retail market, but not in its domestic retail business.

“I think it may keep a certain growth speed, but it’s impossible for them to grow rapidly,” Chen said, adding that China’s changing macro environment stymies prospects for continued rapid growth.

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