Alibaba is in no rush to pursue IPO and promises to “reignite” e-commerce unit

China’s Alibaba is vowing to inject new energy into its e-commerce department in a bid to keep new competitors such as Temu owner PDD Holdings and TikTok owner ByteDance at bay. Alibaba reported disappointing results for the final quarter of 2023 on Wednesday, sending its U.S.-listed shares tumbling 5.9% despite a $25 billion share buyback program.

Revenue at Alibaba’s Taobao and Tmall Group (TTG), the company’s main e-commerce group, grew just 2% year-on-year in the final quarter of 2023, reaching 29.07 billion yuan (17, 98 billion dollars). Alibaba’s overall quarterly revenue rose 5% to 260.35 billion yuan ($36.61 billion), below analysts’ estimates.

“Our top priority is to revive the growth of our two core businesses: e-commerce and cloud computing,” Alibaba CEO Eddie Wu told analysts.

Wu continued that Alibaba needed to make targeted investments in “price competitiveness, service and user experience,” in a statement published on Wednesday. The company will increase the selection of branded and direct-from-the-manufacturer products on the TTG platform and focus on providing “attractive prices for quality products.”

Alibaba is grappling with a difficult market. Chinese consumers are becoming more cautious about spending amid macroeconomic challenges, turning to cheaper products and services.

But the company also faces growing competition from players such as PDD Holdings, owner of Pinduoduo and Temu, and ByteDance, parent company of TikTok and its Chinese equivalent Douyin.

PDD Holdings reported year-over-year growth of 94% for the quarter ended September 30, 2023. In comparison, Alibaba posted 9% growth in the same quarter. (PDD has yet to report results for the final quarter of 2023).

In China, Pinduoduo has grown as a community shopping platform that allows consumers to place group orders in bulk to reduce costs.

ByteDance is also encroaching on Alibaba’s turf, notably expanding into live streaming e-commerce. According to Insider Intelligence, total sales from live e-commerce are expected to exceed $800 billion by 2025. ByteDance’s Douyin app is also expanding into food delivery and leisure travel.

The social media company’s full-year revenue rose to $110 billion in 2023, Bloomberg reported, which would bring the company closer to Alibaba in terms of total revenue. According to data, Alibaba’s sales in calendar year 2023 reached $130.1 billion Fortune calculations. (Alibaba’s fiscal year ends in March)

Alibaba reorganized its senior management team and group operations late last year to respond to growing competition.

In a statement on Wednesday, Wu acknowledged the growing competition in Alibaba’s home market, calling China “the most competitive e-commerce market in the world.”

A rocky renovation

On Wednesday, Alibaba’s leadership also rolled back its ambitious restructuring plans, announced early last year. In March, the e-commerce giant announced plans to transform into a holding company and pursue IPOs for its six divisions, such as logistics service Cainiao.

But Alibaba President Joe Tsai said the company is “in no rush” to proceed with IPOs for Cainiao and its Freshippo grocery chain. “Market conditions are currently not in a state where we believe we can truly reflect the true intrinsic value of these assets,” Tsai told analysts.

Tsai went on to say that Alibaba will now look to sell some of its non-core assets. “We have a number of traditional physical retail businesses on our balance sheet, and those are not our primary focus,” she 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, such as offline retail, and limit losses otherwise,” HSBC analysts wrote in a report published Wednesday.

Other parts of Alibaba’s restructuring plan have hit obstacles. In November, the company abandoned plans to spin off its cloud computing unit, blaming U.S. controls on technology exports 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 in the latest quarter, reaching 28.06 billion yuan ($3.95 billion).

Alibaba shares continued to fall in Hong Kong. Shares listed in the Chinese city fell 6.8% from the previous day’s close at 12pm Hong Kong time.

Source link

Leave a Reply

Your email address will not be published. Required fields are marked *