The giant's pace of progress grew heavier.
On the evening of February 24, Ali released the financial report of Q3 of fiscal 2022 (calculated as Q4 2021 according to the natural year, and this article will be described according to the caliber of the natural year). According to the financial report, Q4 revenue was 242.58 billion yuan, lower than the market estimate of 246.366 billion yuan, an increase of 10% year-on-year; net profit was 20.429 billion yuan, also lower than the market estimate of 31.54 billion yuan, down 75% year-on-year.
Alibaba's explanation of the decline in net profit was that due to the decrease in net income due to the impairment of goodwill of RMB25.141 billion and the fair price change of equity investments held, the non-public net profit excluding the second item was RMB44.624 billion, down 25% year-on-year.
The most interesting point of the financial report is that in China's retail business sector, the "customer management income", which accounts for more than 40% of the group's total revenue, that is, transaction commissions and advertising, showed negative growth for the first time in this quarter, down 1% year-on-year. That figure, which rose slightly by 3% in the previous quarter, also underperformed.
In the previous investor conference, Ali has said that it will disclose more detailed data in the subsequent financial report, in this quarterly financial report, Ali for the first time separately disclosed the profitability of the subdivided business that was originally merged in the Chinese business sector, including local life, cainiao, cloud business, digital media entertainment, innovative business, etc.
On the day of the earnings report, Ali's stock price opened and fell, as low as $100.2 (the lowest in 52 weeks), and as of yesterday's close, the stock price was $107.94, which was nearly 70% from the high of nearly two years ($319.32).
In a post-earnings conference call, An Ali spokesperson argued that Ali's current share price does not fairly reflect the company's value. As a result, in the nine months ending December 2021, Ali repurchased 42.2 million American Depositary Securities for approximately $77 and plans to repurchase 10.1 million shares for $1.4 billion this quarter.
Objectively speaking, including the slowdown in market growth and the regulatory system, the external macro business environment is one of the factors affecting Ali's business. However, compared with the performance growth rate of Pinduoduo and Jingdong in the first few quarters, which also did not meet expectations, whether it was a sinking market or a self-operated business, Ali should exist, but did not achieve corresponding growth.
The strategic adjustment of Ali's general direction still needs time to land. Taking "multi-engine growth" as the group's strategy, focusing on user value mining rather than quantitative growth, in the case of weak growth of the main business, the new business sector that needs long-term heavy investment will bring new vitality to Ali?
The core e-commerce battlefield is under pressure
2021 is undoubtedly a year of high pressure on Ali. As the main source of income, the growth of the domestic retail e-commerce business is weak, which is first reflected in the two indicators of GMV and the number of users.
In this quarter (referring to the natural year 2021Q4), Taobao Tmall's online physical goods GMV increased by single digits year-on-year, if divided by category, the transaction volume of clothing, accessories, and consumer electronics products was lower than the average, but the growth rate of FMCG and home furnishing categories was faster.
In terms of users, the number of Chinese e-commerce users is still not mentioned in the financial report, while the global annual active consumers of the Alibaba ecosystem are 1.280 billion, of which 979 million are from the Chinese market, a net increase of 26 million in a single quarter, an increase of less than 3% month-on-month. Among them, the local life business contributed 17 million active consumers. For reference, Pinduoduo's AAC in Q3 2021 was 867 million, a month-on-month increase of only about 2%.
With the platform as the positioning, Ali's e-commerce revenue mainly relies on transaction commissions and advertising placement, which is collectively referred to as "customer management income" in the financial report. But in the quarters of 2021, this revenue increase fell rapidly, at 40%, 14%, 3% and -1%, respectively.
Behind this is affected by the overall slowdown in the domestic e-commerce market, according to Dolphin News Agency data, in the first half of 2021, the number of online shopping users in China only increased by 3%; there is also a cannibalization from competitors, Douyin and Kuaishou, which once delivered traffic for Ali, are building their own e-commerce closed loops, and Kuaishou, which was once known for its open ecology, has also recently cut off third-party external links.
On the traffic side, Tao's e-commerce itself lacks "hematopoietic" capabilities. The content strategy has been implemented for a long time, and the only traffic engine Taobao Live has lost two super heads in succession last year, Sydney and Weiya; new projects such as grass planting community "shopping" are still very attractive to consumers.
To this end, Ali urgently needs to expand new traffic positions, and the Taote App highlighted in this financial report is one of them. Aiming at the sinking market, focusing on the supply of industrial belts and the M2C model, Taote has been re-revised and launched since the beginning of 2020. As of 2021, the number of annual active consumers has reached 280 million, an increase of 39 million in the quarter, which is considered to have contributed most of the user increment.
However, Taobao's user growth was exchanged for higher customer acquisition costs – for user acquisition and marketing promotion of mobile apps such as Taote and Taobao, sales and marketing expenses increased to 15% of revenue in this quarter (compared with 11% in the same period in previous years). It has undertaken some Tao te users and factory goods merchants, and its large market and Tao have a certain overlap.
From the perspective of revenue, Taote is mainly oriented to industrial belt merchants, whose advertising budget share is more likely than that of brand merchants, which in turn limits Taote's monetization ability - which is also one of the reasons why Pinduoduo has made efforts to introduce brand owners in recent years.
The domestic market increment is limited, and Ali will take the overseas market as the direction of breakthrough. In the international business sector, Alibaba's layout includes AliExpress, Lazada (Southeast Asia), Trendyol (Turkey), Daraz (South Asia) on the retail side, and Alibaba.com on the wholesale side. In the past two years, the export of cross-border e-commerce has been booming, and Ali has also launched an online Allylike for SheIn to test the waters of cross-border women's clothing independent stations.
During the quarter, international e-commerce retail sales increased 14% year-over-year, driven primarily by contributions from Lazada and Trendyol. However, if you look at the cycle of the whole year, the year-on-year growth rates in the first three quarters were 77%, 54%, and 33%, respectively, all the way down.
In December 2021, Alibaba announced the adjustment of its organizational structure and the establishment of new "China Digital Commerce" and "Overseas Digital Commerce" sections, which are responsible for Dai Shan and Jiang Fan respectively. Despite being caught up in the Zhang Dayi incident, Jiang Fan, who can fight and win battles, was transferred to overseas markets, which is still considered to be a sign of Ali's heavy injection into overseas markets.
In addition to the platform model, the proportion of direct business represented by hema and Tmall supermarkets in the financial report has already begun to increase.
Previously, Ali's internal exploration of the direct operation model was more decentralized, and in recent days, the mobile Tmall App launched the platform self-operated project "Cat Enjoyment", although it is said to be only one of the internal exploration projects, Ali is intending to use this IP to build consumers' cognition of the direct operation of the cat system, that is, to recreate a possibility of "buying JD.com self-operation".
"What's very important now is to tier these 1 billion users and provide different services and value to the needs of different circles." Daniel Zhang said on a conference call.
Fresh self-operated or into a breakthrough
In fact, it is not difficult to find that Ali is becoming more and more "heavy".
After the explosive growth of the Internet is no longer there, Ali's revenue growth rate of 10% is closer to the level of traditional industries. And Ali's business tendency in the retail business has also become more "heavy" like the traditional industry. For example, for the layout of offline stores, as well as the in-depth involvement in procurement and marketing, logistics, warehousing and other links.
The increased investment in self-operated business and offline layout is due to the change in Ali's focus on categories. At the conference call, Daniel Zhang said that in categories such as clothing and consumer electronics, e-commerce has reached a relatively high penetration rate of 30-40%, but for FMCG, food, especially fresh categories, the absolute market capacity is very large, which is both rigid demand and relatively low e-commerce penetration. There are good opportunities for digital penetration in the future.
The business segment of the fresh category is Alibaba's "self-operated and other", including Gaoxin Retail, Hema and Tmall Supermarket, which is also the only business that has maintained growth and accounted for more than 10% of revenue. For the three months ended December 31, 2021, "self-operated and other" revenue was 67.906 billion yuan, an increase of 21% over the same period in 2020, accounting for 28% of Alibaba's revenue.
It is worth mentioning that when Ali merged Gaoxin's retail statements in October 2020, the first year-on-year growth rate in this quarter (Q4 2021) was not significantly increased by the holding Gaoxin Retail, but a solid increase.
The fresh category valued by Ali has been regarded as a "blind box in the field of e-commerce" before, and the traditional e-commerce model has always been untouchable. The reason is that the high report loss rate brought about by the short-term insurance characteristics of the fresh category and the immediacy of its consumption scene require the layout of near-field sites.
Short-term insurance means that in the supply chain, warehousing and logistics, inventory management, etc., it is impossible to reuse the infrastructure of traditional e-commerce; and several days or even every other day can not meet the needs of consumers. Alibaba needs to diversify its models and achieve good integrated design in terms of far field, near field, and fulfillment system.
It can be seen that Ali's strength points in recent years have mostly focused on the online + offline, far + near multiple structures created around the fresh category, including Hema, Tmall supermarket, Taocai vegetables, Hungry and so on.
Among them, Taocai vegetables are the key channels for Ali to enter the agricultural market. Daniel Zhang specifically mentioned on the conference call that Taocai will play a role in establishing a supply chain and logistics fulfillment network to serve sinking consumers. According to media reports, Ali capital market sources revealed that Ali invested more than 20 billion yuan in Taocai vegetables last year.
Interestingly, not only is Ali increasing the more traditional layout planning such as infrastructure construction and physical layout, but also the Internet giants in our eyes are gradually moving away from the word "Internet". For example, JD.com, defined itself as a "new type of entity enterprise" last year, pinduoduo made efforts to help farmers, and called itself an "agricultural product company".
On the one hand, the management of the Internet industry by the regulatory authorities, the real industry has been continuously emphasized, on the other hand, the economic environment has changed, the original huge loss of money with the help of capital for scale of the Internet model has declined, the priority of the word "profit" has been greatly increased.
At the end of last year, Alibaba regarded "diversified governance" as a new organizational strategy, and each department needed to operate independently and be self-sufficient. For example, Hema was spun off from the business group within the Ali system and transformed into an independent company, and the goal became full profit, and there are rumors that Hema is looking for independent financing.
The sustained and explosive growth brought about by the Internet dividend may no longer exist in the future. E-commerce giants have entered a new dimension of war in the face of the "failure to meet expectations" of quarterly financial reports.