Deep-net | profit revenue have both suffered setbacks, ali still wants to play the dangerous game of burning money for scale?

Source: Visual China

Author 丨 Sun Yu

Edit | Kang Xiao

Produced | Shenzhen Network Tencent News Xiaoman Studio

Net profit fell 75% year-on-year, and revenue increased by only 10% year-on-year, which is the first answer sheet handed over after the personnel adjustment of China's e-commerce industry giant Alibaba. What is more noteworthy is that the worst financial report of Alibaba after its listing in the United States in 2014 covers the most important November of the e-commerce industry.

In the earnings report, Alibaba explained, "The year-on-year decrease in net profit was mainly due to our increased investment in growth businesses (such as Taote, Taocaicai, LAZADA and Ele.me), increased fees for user growth, and our initiatives to support merchants." ”

In fact, in recent years, the e-commerce industry has already gone through the start-up stage of burning money for scale, and the leader Alibaba still wants to restart this dangerous game?

In 2019, the sinking market of e-commerce awakened the second spring, but unlike the past by burning money, new technologies and new models emerged in an endless stream, and China's e-commerce came out of its own unique model for the second time. But with the sudden outbreak of the new crown epidemic in early 2020, the e-commerce industry has been immeasurablely affected: the sinking market has been exhausted; live broadcasting, cross-border, community group buying, almost all new models are being challenged; new technologies are still difficult to help platforms get returns in the near future.

Is the worst of e-commerce coming?

The money is gone

On the evening of February 24, Alibaba Group announced the results of the third quarter of fiscal 2022, as of December 31, 2021, Alibaba's revenue for the quarter was 242.58 billion yuan, an increase of 10% year-on-year, and net profit was 19.224 billion yuan, down 75% year-on-year.

The decline in net profit was due to financial issues, namely the impairment of goodwill of up to $25,141 million and the decrease in net income from fair price changes in equity investments held by him. But even after deducting that part of the loss, Alibaba's net profit still fell by as much as 27%.

The decline in net profit is so obvious, and the revenue is also in a weak state, with a year-on-year growth rate of 10% hitting a new low after going public in the United States in 2014. Alibaba said in its earnings report that "mainly due to slowing market conditions and competition, the GMV (excluding unpaid orders) of online physical goods on Taobao and Tmall recorded a year-on-year increase in the number of units." ”

These stories look like a repeat of last quarter, in last year's final financial report, excluding the impact of the merger gaoxin retail, revenue growth rate of 16%, the "lowest since the listing in 2014"; net profit fell more than "80%" year-on-year, adjusted net profit decreased by "40% year-on-year".

Even the explanations seem repetitive, "[margin decreases] as an increase in investment in key strategic areas that are demonstrating solid business growth, and initiatives to support merchants, increased year-over-year in key strategic areas within the commercial segment, such as Taote, Local Life Services, Community Business Platforms and Lazada." ”

Wu Wei, chief financial officer of Alibaba Group, said after the release of the earnings report: "Alibaba has always insisted on innovating and investing in the future. As disclosed in the new Business Segment, our continued investment in the growth business has yielded clear results. We are confident in the company's current and long-term prospects. ”

It is still difficult to make a profit for new business

For Alibaba, although the cost of e-commerce education user habits has decreased during the epidemic, the growth rate of users is slowing down as it reaches the population ceiling. At the same time, the high investment in various business lines outside e-commerce can currently bring about the growth of the number of users, but when the new format will end the loss of large-scale profit is still uncertain.

Even for mature e-commerce businesses, profit models are being challenged. According to the financial report data, Alibaba's china business reached 882 million annual active consumers, an increase of about 20 million in a single quarter. Alibaba said the digital growth was mainly due to the rapidly growing Taote business. According to the financial report, Taote currently has 280 million annual active consumers, an increase of 3 million over the previous quarter.

However, customer management revenue based on Amoy's advertising fee commission fell 1% year-on-year, and the year-on-year growth rate in the previous quarter was only 3%.

In the international business segment, the annual active consumers of the international retail business, including Lazada, AliExpress, Trendyol and Daraz, exceeded 300 million for the first time, and the revenue increased by 18% year-on-year to 16.449 billion yuan.

For the first time, life services were written into the financial report in a plate formation, and the overall annual active consumers of the "homecoming" and "destination" businesses centered on Ele.me reached about 372 million, with a net increase of 17 million in a single quarter, an increase of 22% year-on-year in order volume, and a revenue increase of 27% to 12.141 billion yuan.

Cainiao reported revenue for the first time before offsetting the impact of cross-segment transactions, up 23% year-over-year in the quarter. Overseas, Cainiao International Logistics handled an average of more than 5 million packages per day during the quarter.

Alibaba Cloud's total revenue increased by 20% year-on-year, and the growth rate slowed down. But the revenue mix is more diversified and turned into a profit, with customer revenue from non-Internet industries accounting for 52% of post-transaction revenue offsetting cross-segments.

Alibaba explained that it was affected by head customers and the slowdown in customer demand in Internet industries such as online education and interactive entertainment.

It is worth noting that before the Alibaba Investor Day, Wu Wei said that some businesses may obtain their own external financing opportunities.

The tide is overwhelming

Behind the decline in Alibaba's earnings report, the entire Chinese e-commerce industry is facing strong challenges.

In the past 2021, the e-commerce track has lost its magic, and almost all e-commerce companies and e-commerce industries are facing unprecedented difficulties. In this year, "Deep Net" has contacted hundreds of relevant practitioners in the e-commerce industry, from executives to employees, platforms to verticals, sinking to cross-border, community to live broadcasting... Every practitioner has a common word in his mouth, and that is "difficult".

The latest data show that in the first 11 months of last year, online retail sales of physical goods maintained a growth of 13.2%, but the total retail sales of social consumer goods accounted for only 24.5%, compared with 25% in the same period last year. This is the first time since 2015 that the market share of online channels has declined. This means that the phenomenon of online channels rapidly encroaching on the market share of offline channels no longer exists, and online and offline have entered a stage of stalemate.

In the end, the essence of e-commerce is still the cost reduction and efficiency increase in retail behavior. Although Alibaba has expanded its footprint in a number of businesses in recent years, the main profits and revenues still come from the Chinese retail business sector. According to the financial report, the revenue of China's retail sector, which is led by the new head Dai Shan after the change of coach, increased by only 7% year-on-year, and it still outperformed the Ali market.

The biggest challenge is that the once-hot sinking market is becoming dry, "it's hard to squeeze out the oil anymore." More than one e-commerce practitioner has said this to the Deep Web.

In 2015, pinyin goods and pinduoduo have been launched, and the Chinese e-commerce industry, which has slowed down consumption growth and faced bottlenecks in user growth, has found the last treasure. In the past four years, the financial reports of major e-commerce platforms have shown that the main user growth comes from the sinking market. But with Alibaba's annual active users approaching 1 billion, it is difficult for the sinking market to support the rapid growth of the past.

What's more, it can be seen from the financial reports released by many e-commerce platforms that the sinking market will be in the stage of burning money for a long time, with low unit prices and higher marginal costs.

Capital voting

After the release of the last bad earnings report, Alibaba's stock price fell 11% on the same day, compared with the previous high.

After the release of this earnings report, it seems that the story will be rewritten again, despite the recent Munger support for Alibaba, but the pre-market plunge again nearly 8%, some investors told the "Deep Web", "may fall below the bottom line of 100 US dollars." After the opening, Alibaba shares fell 8.67% to $100.20 at one point, the lowest intraday since February 6, 2017. However, the stock price eventually recovered, falling 0.72% to $108.93 by the close.

It is worth noting that Alibaba is still carrying out large-scale buybacks. For the quarter ended December 31, 2021, Alibaba repurchased approximately $10.1 million of American Depositary Shares (equivalent to approximately 80.7 million ordinary shares) for approximately $1.4 billion. In the nine months ended December 31, 2021, Alibaba spent about $7.7 billion to buy back shares. Next, the buyback program will continue until the end of December 2022, and Alibaba will also buy back $7.3 billion in shares.

After the release of the financial report, an important reason for the fluctuation of the stock price may be that the capital market has different standards for judging this answer sheet. A number of investors told The DeepNet, "Alibaba's stock price has been declining recently, although profits have dropped sharply and revenue growth has slowed down, but the profits are exhausted, which may be a good time to bottom out." However, some investors firmly believe that due to the impact of antitrust and international relations, "Alibaba's stock price is still high." ”

Investment institutions have also given very different answers, last year Goldman Sachs, Hillhouse, Temasek and others have sold or even liquidated Alibaba shares. Bridgewater, the world's largest hedge fund, chose to increase its holdings, reaching 29%.

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