Alibaba sales soar 59pc as Chinese continue shopping online despite slowing economy

Investments by e-commerce giant in media, entertainment and cloud computing also added to revenue

PUBLISHED : Thursday, 11 August, 2016, 8:48pm
UPDATED : Thursday, 11 August, 2016, 11:07pm

Alibaba Group Holding’s first-quarter revenue jumped by a better-than-expected 59 per cent as more Chinese went online to buy everything from appliances to furniture, while new investments in media, entertainment and cloud computing paid off.

Sales soared to 32.15 billion yuan (HK$37.55 billion) for the three months to June, better than the 30 billion yuan estimated in a Reuters poll of analysts.

“When I look at each of our business segments across the board, we’ve established strong competitive positions and firm foundations for future growth,” said executive vice-chairman Joe Tsai on a conference call with analysts and journalists after the results were announced.

The company, based in eastern China’s Hangzhou city, operates the world’s largest online retail platforms, holding the record for selling US$14.32 billion of merchandise on the so-called “Singles Day” of November 11 last year. Gross merchandise volume, or the total value of transactions carried out by third-party sellers in its Taobao Marketplace and T-Mall.com, grew 24.4 per cent to 837 billion yuan in the quarter.

The surge in China’s online shopping “might have surprised many due to economic headwinds and reduced expectations from the industry”, Tsai said. “We never had any doubt that we would be able to deliver increasing monetisation for our users.”

Taobao looks to young creativity for growth

Online shopping sales done through mobile phones more than doubled to 17.51 billion yuan, while the number of monthly active users jumped 39 per cent during the period, said the company’s chief financial officer Maggie Wu. Mobile monetisation rate also surpassed that of personal computers for the first time.

“Taobao users open their apps seven times a day,” Alibaba’s chief executive Daniel Zhang said on the conference call. “We’ve added more social features into our mobile app, which effectively extends the visiting frequency, so Taobao is more like a social commerce app rather than a marketplace.”

Net income fell 77 per cent to 7.1 billion yuan because a one-time disposal gain from last year was not repeated this financial period.

We’ve added more social features into our mobile app ... so Taobao is more like a social commerce app rather than a marketplace
Daniel Zhang, Alibaba chief executive

Cloud computing was Alibaba’s fastest-growing business, with the unit reporting 577,000 paying customers, doubling the combined revenue contribution to the total. The cloud computing business had “shown strong growth, nearing a break-even point”, said BNP Paribas analyst Vey-sern Ling in a note before the results were released.

The company sold shares in a 2013 initial public offering in New York, raising a record US$25 billion. First-quarter sales as well as China-related revenue reported on Thursday “represent the highest growth rates we’ve achieved since our [listing]”, Wu said.

In addition to dominating China’s online shopping and e-commerce, Alibaba has investments in a variety of businesses including sports, media and entertainment, as well as car-hailing, to counter a slower growth pace in the world’s second-largest economy. Alibaba owns the South China Morning Post.

Alibaba shares have risen 12.9 per cent in the past year, climbing to a 12-month high of US$87.33 in New York trading before the results were announced.

The article has been amended to say mobile monetisation rate, not mobile usage, surpassed that of personal computers for the first time