Alibaba reports slowest quarterly growth since 2014

Alibaba reports slowest quarterly growth since 2014

Shanghai, 2/26/2022

Alibaba Group Holding Ltd. reported its slowest quarterly revenue growth since its initial public offering in 2014, due to regulatory controls, a challenging macroeconomic environment and fierce competition.

The e-commerce giant’s total revenue rose only 10 percent to 243 billion yuan ($38.49 billion) in the quarter ended in December because of lower growth in its core e-commerce business.

„Alibaba made steady progress this quarter as we continued to execute our multi-engine growth strategy in a complex and volatile market environment,“ CEO and Chairman Daniel Zhang said in a statement. „We achieved positive momentum in key strategic business areas through a disciplined focus on building capacity and creating value to drive our future growth.“

Danny Law, an analyst at Guotai Junan Securities, said ahead of the results release that the figures were „the result of slower revenue growth and accelerated spending.“ Competition has intensified as e-commerce rival Pinduoduo has led the way by effectively mobilizing contacts on social networks, and upstarts such as short-video app Douyin have gained popularity by helping influencers sell goods through short videos and livestreaming sessions.

„The e-commerce-derived growth of other platforms is outpacing that of Alibaba, which means they are eating into Alibaba’s market share,“ said Lu Zhenwang, CEO of Shanghai Wanqing Consultancy. „Douyin and Kuaishou are undoubtedly the pioneers of livestreaming-based commerce.“

Users spent an average of 1,871 minutes on Douyin in October, compared to just 350 minutes on Alibaba’s Taobao, according to consultancy QuestMobile.

Macroeconomic conditions and sporadic cases of COVID-19 weighed on consumer spending through the end of last year, dampening the growth of e-commerce businesses.

In a departure from its previous practice, Alibaba began splitting its Chinese and international retail businesses into different reporting categories in the December quarter. The company also broke down figures for its logistics arm Cainiao and its local consumer service.

The China commerce business, which accounts for the largest share of the company’s sales, totaled 100.09 billion yuan, down 1 percent year-on-year. On a positive note, the cloud segment grew 20 percent year-on-year and international commerce rose 18 percent in the December quarter.

Cainiao’s revenue, before inter-segment offsets, increased 23 percent year-on-year to 19.6 billion yuan, driven by growth in fulfillment solutions and value-added services for Chinese retailers as well as increases in cross-border and international trade.

Fintech division Ant Group generated 5.8 billion yuan in the quarter. Alibaba said the year-on-year increase in Ant’s profit share was mainly due to an increase in net profits from investments held by Ant.

To spur growth, the company is looking at new avenues, such as entering smaller Chinese cities with a product called Taobao Deals. It reported that paid orders on Taobao Deals doubled in the December quarter compared with a year earlier.

The company is also trying to invest in some of its newer businesses, such as food delivery, which is part of its local consumer services division, and other products such as travel app Fliggy. The segment posted 27 percent growth thanks to improved „economics per order“ and „improved gross margin through enhanced supply chain capabilities.“

„We believe it is appropriate for China’s tech sector to increase spending on research and development, sales and marketing, and administrative costs to build on its competitive advantages,“ Law said.

In November, Alibaba had cut its revenue growth forecast to between 20 percent and 23 percent year-on-year, down from nearly 30 percent in May. The latest results did not bring an updated forecast.