China’s Alibaba is pledging to inject new energy into its e-commerce department as it tries to hold off new e-commerce entrants like Temu-owner PDD Holdings and TikTok-owner ByteDance. On Wednesday, Alibaba reported underwhelming results for the last quarter of 2023, sending its U.S.-listed shares down by 5.9% despite a $25 billion share buyback program.
Revenue at Alibaba’s Taobao and Tmall Group (TTG), the company’s core e-commerce group, grew just 2% year-on-year for the final quarter of 2023, reaching 29.07 billion yuan ($17.98 billion). Alibaba’s overall quarterly revenue rose by 5% to reach 260.35 billion yuan ($36.61 billion), below analyst estimates.
“Our top priority is to reignite the growth of our two core businesses: e-commerce and cloud computing,” Alibaba CEO Eddie Wu told analysts.
Wu contineud that Alibaba needed to make targeted investments in “price competitiveness, service and user experience,” in a statement published Wednesday. The company will increase the selection of branded and direct-from-manufacturer products on the TTG platform and focus on delivering “attractive prices for quality products.”
Alibaba is grappling with a tough market. Chinese consumers are growing more cautious about spending amid macroeconomic headwinds, turning to cheaper products and services.
But the company is also contending with increased competition from players like PDD Holdings, owner of Pinduoduo and Temu, and ByteDance, parent company of TikTok and its Chinese equivalent Douyin.
PDD Holdings reported 94% year-on-year growth for the quarter ending Sep. 30, 2023. By comparison, Alibaba reported 9% growth in that same quarter. (PDD has yet to report results for the final quarter of 2023).
In China, Pinduoduo has grown as a community-buying platform that allows consumers to make group orders in bulk to lower costs.
ByteDance is also encroaching on Alibaba’s turf, particularly by expanding into live-streaming e-commerce. Total sales from live-ecommerce is expected to surpass $800 billion by 2025, according to Insider Intelligence. ByteDance’s Douyin app is also expanding to food delivery and leisure travel.
The social media company’s full-year revenue surged to $110 billion in 2023, reported Bloomberg, which would move the company closer to Alibaba in total revenue. Alibaba’s sales over the 2023 calendar year reached $130.1 billion, according to Fortune calculations. (Alibaba’s fiscal year ends in March)
Alibaba reshuffled its senior management team and group businesses late last year to respond to rising competition.
In a statement on Wednesday, Wu recognized the growing competition in Alibaba’s home market, calling China “the world’s most competitive e-commerce market.”
A rocky restructuring
On Wednesday, Alibaba leadership also walked back its ambitious restructuring plans, announced early last year. In March, the e-commerce giant announced plans to transform itself into a holding company and pursue IPOs for its six divisions, like logistics service Cainiao.
But Alibaba chairman Joe Tsai said that the company is “not in a hurry” to proceed with IPOs for Cainiao and its Freshippo grocery chain. “Market conditions currently are just not in a state where we believe we can really truly reflect the true intrinsic value of these businesses,” Tsai told analysts.
Tsai continued that Alibaba would now seek to sell off some of its non-core assets. “We have a number of traditional physical retail businesses on our balance sheet, and these are not our core focus,” he said. “It makes sense for us to exit these businesses.”
Alibaba is looking for buyers for its InTime department store chain, Bloomberg reported last week.
“Alibaba intends to divest its non-core businesses like offline retail and narrow losses for the rest,” HSBC analysts wrote in a report released Wednesday.
Other parts of Alibaba’s restructuring plan have hit roadblocks. In November, the company abandoned plans to spin off its cloud-computing unit, blaming U.S. tech export controls that threaten to cut off the Chinese company’s access to advanced chips.
Quarterly revenue from Alibaba’s cloud computing division rose 3% year-on-year last quarter to reach 28.06 billion yuan ($3.95 billion).
Alibaba shares continued their decline in Hong Kong. Shares listed in the Chinese city are down 6.8% from the previous day’s close, as of 12:00pm Hong Kong time.
Source link
