CompaniesAlibaba bucks China slowdown as sales surge - Financial Times
What China slowdown?
If the world’s second most important economy is slowing, e-commerce heavyweight Alibaba isn’t seeing it. The company, which dominates online retail in China with about 80 per cent of the market share, delivered a better-than-expected 32 per cent jump in revenues as an increasing number of Chinese do their shopping online.
While the growth rate is a leg down from the heady 79 per cent rate the company boasted just two years ago, it is still an enviable achievement for a group with so much exposure to China.
Gross merchandise value — the value of products sold on its retail platforms like Taobao and Tmall – jumped 23 per cent to Rmb964bn ($149bn) for the December quarter, as Alibaba’s push into rural China helped the company defy the slowing economy.
Revenue for the period jumped to Rmb34.5bn, compared to Rmb26.2bn a year ago, and ahead of the Rmb33.2bn the market was expecting. Net income more than doubled to Rmb12.4bn.
After raising $25bn in a record US initial public offering just 17 months ago, sentiment for Alibaba has soured in recent weeks amid concerns that China’s economic slowdown, stock market turmoil and weakening currency will have a knock-on effect on consumer spending. Alibaba shares have fallen nearly 14 per cent since the start of the year and closed on Wednesday at just $1.50 above its IPO price of $68 a share.
However, some analysts believe the sell-off off might be overdone and argue that moderation in growth is normal for a business that is as big and dominant as Alibaba.
eMarketer retail analyst, Yoram Wurmser, said:
Ecommerce in China continues to expand rapidly even as the Chinese economy slows, which should continue to help Alibaba grow for the foreseeable future. Its sales on Singles Day in November grew 60%, which indicates a successful adaptation to an increasingly mobile Chinese digital consumer.
Mobile sales accounted for 68 per cent of Alibaba’s GMV during the quarter, compared to 42 per cent the previous year. While some critics think the rise of shopping on mobile devices could hurt Alibaba because making money off smartphone users is harder than for PC users, the company has proved itself increasingly adept at monetising its users.
Monetisation, which measures the amount of revenue as a percentage of total GMV, rose to 2.98 per cent during the quarter, up from 1.7 per cent a year ago.
Still, Alibaba has been working to lessen its dependence on China by pursuing growth abroad. Jack Ma, Alibaba’s founder, has set a goal of raising the company’s revenue from outside China to 50 per cent from the current 4 percent. Shares in Alibaba jumped 6 per cent in pre-market trading.
