On May 14, Alibaba released its financial results for the fourth quarter and full year of fiscal year 2024. In the first quarter of this year, Ali International's digital business and rookie grew brightly, while the Taotian market stabilized for the time being. Entering overseas inevitably involves fighting with opponents such as TEMU and paying a lot of real money. In order to revitalize the stock of domestic users internally, Ali also has to repeatedly adjust its business organizational structure and bear certain expenditure pressure. Some industry insiders believe that in addition to spending money for growth, Ali also needs to increase profit points from the dimensions of AI technology and management efficiency.
Strong overseas
According to the report card of the first quarter of 2024 released by Alibaba, the revenue growth of Alibaba International Digital Business Group and Cainiao Group still leads the group's businesses. According to the data, as of March 31, Ali International Digital Business Group's revenue was 27.448 billion yuan, an increase of 45% year-on-year compared with 18.915 billion yuan in the same period last year, and Cainiao also achieved a year-on-year increase of 30% with a revenue of 24.557 billion yuan.
In the financial report, Alibaba International Digital Business Group said that the overall orders of its retail platform increased by 20% year-on-year, and revealed that Lazada's loss per order narrowed year-on-year this quarter. Cainiao also said that the increase in revenue in this quarter was due to the revenue from cross-border logistics fulfillment services that supported AliExpress.
It is worth mentioning that Ali emphasized in the financial report that AliExpress's Choice business is the "hero" of the strong performance of cross-border business growth. At present, in Spain, the Netherlands, Belgium and other countries, AliExpress's Choice business has been able to achieve "global 5-day delivery".
It is understood that because Choice provides consumers with a more competitive delivery speed, in April this year, Choice accounted for about 70% of AliExpress's overall orders. With the collaboration of AliExpress and Cainiao, the delivery delivery rate of 5-day and 10-day delivery doubled year-on-year in this quarter.
Backed by the group's supply chain, Alibaba's overseas expansion has ushered in a new stage of development, and the pursuit of timeliness and service experience has become a new goal.
Margins are under pressure
Despite its rapid progress overseas, Alibaba's losses in expanding its overseas territory have not stopped, and it is showing a trend of expansion. In the first quarter of 2024, Alibaba International Digital Business Group's adjusted EBITA was a loss of 4.085 billion yuan, compared with a loss of 2.171 billion yuan in the same period last year, an increase of 88% year-on-year. Cainiao changed from a loss of 319 million yuan in the same period of the previous fiscal year to a loss of 1.342 billion yuan in the current quarter, an increase of 321% year-on-year.
Regarding the loss, Alibaba said that the increase in losses in the international digital business sector was mainly due to the increase in investment in the cross-border business of AliExpress Choice and Trendyol, which was partially offset by the increase in the realization rate, and the rookie was due to the withdrawal of its initial public offering and the retention incentive granted to rookie employees.
In the latest earnings call, Alibaba Group executives said that in addition to the increase in investment in emerging markets such as the Middle East in the last quarter, the switch of business models is also one of the reasons for the widening of losses.
Previously, in the fully managed service launched by AliExpress, the platform was responsible for warehousing, distribution, after-sales and other links, which also meant investing in a heavier overseas local business layout. Today, old competitors such as TEMU have switched their business models in major overseas markets such as the United States, gradually changing from full custody to semi-custody. A cross-border seller of daily chemical products in Shenzhen told a reporter from Beijing Business Daily that since the beginning of this year, TEMU and AliExpress have strengthened their service strength in the semi-custody model, "but there are still some differences in the division of pricing power between the two, and the suitable models for different categories are different, and merchants need to make judgments."
Alibaba's profit pressure is also reflected in the fact that in the first quarter, in addition to Alibaba Cloud's adjusted EBITA rose by 45% year-on-year, Taotian's adjusted EBITA fell slightly, and other businesses such as local life, big entertainment and other businesses adjusted EBITA are either in a state of narrowing losses, or the losses are continuing to expand.
Build growth points
Compared with Alibaba's overseas expansion, on the other hand, Alibaba's domestic retail performance can be regarded as stabilizing the market for the time being. Taotian's revenue in the first quarter was 93.22 billion yuan, a year-on-year increase of 4%. Among them, the domestic wholesale business dominated by 1688 contributed a higher growth rate, with a year-on-year increase of 20% to 4.95 billion yuan, and these growth was mainly due to the value-added service income brought by paid members. On the other hand, the revenue of domestic retail business and direct business increased by 3% year-on-year, while the revenue of direct sales, including Tmall Supermarket and Tmall Global, decreased by 2% year-on-year.
In order to gather Taobao traffic as much as possible to compete with competitors such as Jingdong and Douyin, since the beginning of this year, Ali has put the two major businesses of 1688 and Taote into Taobao one after another. The former is the top stream of Alibaba's B-side, while the latter has attracted more than 300 million annual active users two years ago. Not only that, Ali also managed to revitalize the 88VIP users with high loyalty and consumption power on the site, and stimulated members to increase the frequency of orders with unlimited return package shipping.
Since the end of December last year, Taobao has started a series of measures, including refund only policy, free shipping service in Xinjiang, use first and pay later, etc., which have indeed shown a certain effect in consumption conversion. For example, 88VIP exceeded 35 million in the first quarter, while the platform's GMV and order numbers increased by double digits year-on-year, and customer management fee revenue increased by 5% year-on-year. But it also hurt Taotian's profits, with its adjusted EBITA down 1% year-on-year to 38.5 billion yuan in the first quarter.
In terms of stimulating merchants and users to be active, Ali canceled the pre-sale, trying to preempt the "6.18" earlier, not only opening 6 days earlier than last year, but also 11 days earlier than this year's Jingdong time. For the sake of traffic, Ali even picked up the Taobao network and forum "Taojianghu" that had been dusty for many years.
Zhuang Shuai, an expert in the retail e-commerce industry and founder of Bailian Consulting, pointed out that from the comprehensive perspective of data such as user scale, GMV, and the number of merchants, Taotian is still in a leading position in the domestic market, and if it wants to improve its competitiveness and profit margins, Taotian also needs to consider product supply, user experience, AI technology upgrades, content management, management efficiency and other aspects.
"Today, when domestic traffic growth has entered a bottleneck period, Taotian's rapid growth is no longer realistic." Zhao Zhenying, a researcher at the National Engineering Laboratory of E-commerce Transaction Technology, pointed out that it is particularly important for Taotian to build and find its own profit growth point. Using its own user consumption data and AI technology to launch more business tools for small and medium-sized businesses, it can well boost the profit decline of Taotian Group.
He Qian, Qiao Xinyi/text
Part of the source: Screenshot of the financial report provided by the company