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Alibaba bullish on consumption recovery

China Daily| Updated: February 27, 2023 L M S

Chinese tech giant Alibaba Group Holding Ltd released better-than-expected financial results in the October-December period on Thursday, saying it will continue to remain focused on three core strategies — consumption, cloud computing and globalization.

The company delivered a solid quarter despite softer demand, supply chain and logistics disruptions due to the impact of COVID-19, said Daniel Zhang, chairman and CEO of Alibaba.

The company has seen a strong recovery in the consumer market since February, especially in categories like apparel, sports and outdoors, as work and life returned to normal and merchants expressed their strong desire to get back to business, Zhang said in an earnings call with investors on Thursday night.

"Looking ahead, we expect a continued recovery in consumer sentiment and economic activity," Zhang added. The company's total revenue stood at 247.76 billion yuan ($35.9 billion) for the quarter ending Dec 31, up 2 percent year-on-year, beating analysts' expectations. Its net income came in at 45.75 billion yuan, up 138 percent on a yearly basis.

During this period, the gross merchandise volume from Alibaba's core e-commerce business, which refers to its Taobao and Tmall platforms, fell by mid-single digits from a year earlier mainly due to soft consumer demand, ongoing competition and a surge in COVID-19 cases in China that resulted in supply chain and logistics disruptions in December.

The competition in China's online retail segment is heating up as e-commerce platform JD is reportedly set to launch a subsidy campaign worth 10 billion yuan in early March to compete against online discounter Pinduoduo. The subsidies will apply to the products sold by both JD's self-operated stores and third-party merchants.

According to an internal email accessed by online news portal Sina Tech, JD has started internal testing of its multibillion-yuan subsidy program. JD did not immediately respond to a request for comment.

In addition, revenue in the cloud computing business, Alibaba's main growth driver besides e-commerce, amounted to 20.18 billion yuan during this period, an increase of 3 percent year-on-year, mainly driven by public cloud growth.

Zhang said cloud computing is one of the company's core strategies for the future and he strongly believes in the vast potential of industrial digitalization and the role of cloud computing as infrastructure to the digital economy.

Pan Helin, co-director of the Digital Economy and Financial Innovation Research Center at Zhejiang University's International Business School, said the cloud business, as a key enabler for industrial digitalization, is playing an increasingly important role in Alibaba's overall business landscape.

Pan called for more efforts to fully leverage tech companies' cutting-edge digital technologies to empower the digital transformation of micro, small and medium-sized enterprises and drive industrial upgrade.

Chinese online retailers are facing fierce competition from short-video and livestreaming platforms including Douyin and Kuaishou, and the growth in China's e-commerce market is slowing down, said Mo Daiqing, a senior analyst at the Internet Economy Institute.

Zhuang Shuai, founder of Bailian Consulting and an expert in e-commerce and retail, said what e-commerce platforms should do is to improve supply chains and optimize their businesses and operational models in accordance with shoppers' buying habits.