At present, the book is under pressure, how can Ali defend the position of "shelf e-commerce first"?
Author: Lv Xinyi Editor: He Xiang
出品：零售商业财经 ID：Retail-Finance
On the one hand, the growth of overall performance, and on the other hand, the paper pressure hidden under the growth, Ali handed over a report card with stable fundamentals but not enough surprises during the "transition period" of the transformation stage.
On May 14, Alibaba Group released its financial results for the fourth quarter of fiscal year 2024 (the first quarter of 2024) and full-year results. According to the financial report, Alibaba Group's total revenue in Q4 was 221.874 billion yuan, a year-on-year increase of 7%, exceeding market expectations; In fiscal 2024, Alibaba Group's revenue reached RMB941.168 billion, and its adjusted EBITA increased 12% year-over-year to RMB165.028 billion.
Source: Alibaba's financial report
From the perspective of the core business "Taotian Group", Taotian GMV, 88VIP members, and orders all maintained double-digit growth year-on-year, and Taobao topped the e-commerce APP list with 928 million monthly active users, significantly ahead of the second place with 677 million and the third place with 507 million. In addition, Alibaba Cloud's core public cloud product revenue and international digital business revenue both achieved double-digit growth.
On the evening of the 14th, Alibaba's official public account used three "growth! To promote the highlights of the latest financial report, unlike the previous financial report headlines with conservative postures such as "steady growth, rapid growth", this time, Ali tried to use "growth" to sweep away the pessimistic expectations of the capital market discounted in advance.
Source: Alibaba official account
This context is indeed not in line with a giant enterprise that has grown into a "behemoth", and behind it is the growth anxiety of Ali after "returning to the main business of e-commerce".
In order to return to the growth track, on the business side, Ali has carried out multiple rounds of adjustments, and many key figures have also stood up: Ma Yun shouted "return to Taobao", firmly believing that "Ali will change, Ali will change"; Tsai Chongxin, chairman of the group, publicly reflected and admitted that he had forgotten his real customers; The new CEO, Wu Yongming, focuses on the core business and promotes the "user-first, AI-driven strategy".
It is true that judging from the financial performance of this quarter's basic market exceeding market expectations, Ali's reform has begun to bear fruit, and the 25-year-old Ali has regained his high-spirited fighting state.
However, the change is bound to be accompanied by uneasy factors, the financial report shows that the adjusted net profit fell by 11%, and the operating cost increased by 1% to 67% year-on-year.
Looking back at Ali itself, the key battle in the first ten years was to reach the top of shelf e-commerce; In the face of the next decade, the key battle is to defend the first position of shelf e-commerce.
Adjusted from "fighting the world" to "guarding the world", Ali's competitors are their past selves.
Now, Ali has changed the radical way of treating the market in the past, and has turned to an attitude of intensive cultivation to walk out of the steady and steady upward route. It is not difficult to get a glimpse from the positioning of Taotian Group's management for the future of Taobao that Ali hopes to "become a better version of itself".
01 Exchange subsidies for experience, and use experience to leverage growth
The value of any company is ultimately determined by fundamentals, and that fundamental is the business itself.
Focusing on Alibaba's core business, Taotian Group, compared with the double-digit growth in GMV and orders, the growth of revenue and customer management fees (advertising, commissions) seems to be a bit out of pace, increasing by 4% and 5% respectively.
Source: Alibaba's financial report
Combining this set of data with business-side adjustments, Taotian's new context is becoming clearer: exchanging subsidies for the "loyalty" of users and merchants, and improving the shopping experience to drive the growth curve.
As Wu Yongming said: "Taotian Group adheres to the positioning of 'almighty Taobao', and under the consumption grading system, it will be able to gain the trust of users and return to the growth track by providing shopping experience with good goods, good prices and good services for different consumer groups." ”
From the perspective of the business side, Taobao has successively launched the functions of use first and pay later, refund only, and some products have also been connected to the jump entrance of WeChat payment; The "Store Label System" is added, which is divided into tags such as "Refund Rejection Rate", "Platform Help Rate", and "Return Shipping Insurance". Through the "label system" to reward and restrain merchants' sales behavior, merchants with good service labels will get the platform's traffic tilt, and on the contrary, merchants will be forced to end extensive operation and provide more refined operation services, so as to improve the user's shopping experience.
On the logistics side, Taobao launched the Xinjiang free shipping channel, which delivers goods to Xinjiang consumers to the village through the efficiency upgrade of the transfer warehouse. On the membership side, Taobao has upgraded 88VIP rights, and the number of cooperative brands has increased from 4,000 to 10,000. According to the financial report, the number of Taobao 88VIP members has exceeded 35 million in the first quarter, maintaining double-digit growth.
Source: Screenshot of Taobao APP
The most recent move was on the eve of "618", when Taobao gave up a 12-year-old pre-sale to give users a simpler and more worry-free way to play. In addition, Taobao found that nearly 10 million users still use the PC side every day, so the team intensively launched more than 60 functions to solve the stubborn problems of the PC version for many years. After the upgrade, Taobao also publicly reflected that it had ignored the needs of this part of the user in the past period.
For the repositioning of the strategic direction, internal sorting and adjustment are inevitable, which is also the main reason why some of the financial report data are not eye-catching after Ali's frequent moves. Taotian's adjusted RBITA decreased by 1.3% in the quarter, due to higher cost items due to the platform adding more programs to improve user experience during the quarter.
Although the book data is under pressure in the short term, Taobao is gradually building a universal platform that "takes care of almost all the needs of all users". In the long run, Taobao may reflect the commercial value brought by the improvement of shopping experience in the financial report data in the second half of the year.
In fact, putting user experience in the first place is the first step in reshaping Taobao after Wu Yongming took over, which is in the same vein as Ma Yun's shouting of "return to Taobao, return to users, and return to the Internet" in May last year.
20 years ago, Jack Ma posted on the "Taojianghu" forum, "I firmly believe that the biggest beneficiary of a real, great, and outstanding e-commerce website should be users, and the biggest builder should also be users!! ”
In addition to strengthening the user experience, Taobao, which has always adhered to the principle of "making it easy to do business in the world", has also begun to work hard around the merchant side to defend the first position of "universal Taobao" shelf e-commerce by consolidating the scale of merchants.
At the beginning of this year, the business of Tao Factory was comprehensively upgraded, and a new product commission incentive plan for manufacturers in the industrial belt was launched, and a preferential commission policy was launched, with a maximum discount of up to 95%. In addition to subsidies, in the business dimension, Taobao has successively released 10 AI business tools, and announced that important business services such as business staff, store Xiaomi, customer service robots, and picture space are fully provided free of charge, and during the "618" period, Alimama also took out unprecedented subsidies to reduce the operating costs of merchants.
According to the store opening data released by Tmall in the first quarter of 2024, the number of new merchants increased by 60% year-on-year.
It is not difficult to see that Taotian is sacrificing the profitability of the platform in the short term in exchange for the loyalty and dependence of merchants and users on the platform, which ultimately points to the growth effect of "supply and demand".
However, growth cannot rely on blindly "making profits" subsidy play, which is essentially not much different from a blind price war. Once the subsidy is stopped, there is still a question mark over whether the subsequent market share can be maintained and continue to grow steadily.
"Retail Business Finance" believes that in addition to subsidies, the plan that Taotian should give is how to strengthen the irreplaceability of the platform itself, find the rhythm in the fierce platform competition, and stabilize the irreplaceability of "shelf e-commerce first".
02 Cainiao went public and turned to embrace the overseas business
When Alibaba went public in 2014, Jack Ma said, "Half of the revenue will come from overseas customers within 10 years." "The ten-year period has arrived, and from the current revenue situation, the international business income is 27.448 billion yuan, accounting for about 10%.
Source: Alibaba's financial report
Although the proportion did not meet expectations, since entering 2023, Alibaba's international business has always maintained a steep growth trend, with year-on-year growth rates of 41%, 60%, 73%, and 44% in a single quarter of 2023, respectively. The quarter also achieved a year-on-year growth rate of 45%, becoming the highest growth business.
Alibaba's international business is divided into wholesale business and retail business, with the former represented by Alibaba.com; The latter are Lazada, AliExpress, Trendyol, Daraz, and Miravia. During the quarter, international retail sales increased by 60% year-on-year.
The achievements of overseas business today are not only the credit of a single business group, but also the contribution of Cainiao Group, which stepped on the brake of going public, to provide differentiated and high-quality services through logistics construction, and to improve logistics efficiency and user experience.
Combining the financial report data of the two major businesses, we can more clearly see the business value released by Cainiao and international business synergy.
First of all, the core factor of Alibaba International's revenue growth is the order volume, Trendyol achieved double-digit order growth in the quarter, and became one of the most downloaded e-commerce apps in the Gulf region. Lazada, operational efficiency improved, and the loss per order narrowed year-on-year.
The growth of order volume and the narrowing of the loss per order are inseparable from the deepening of the back-end supply chain. During the quarter, Cainiao International's fulfillment capabilities continued to improve, adding 4 new countries to the coverage of high-quality logistics services from 5 to 10 days, covering a total of 14 countries. Taking AliExpress as an example, with the collaboration of AliExpress and Cainiao, the delivery delivery rate of 5-day delivery and 10-day delivery doubled year-on-year in this quarter.
Secondly, driven by the continuous deepening of the logistics supply chain and the growth of orders in the front-end retail business, Cainiao also delivered a brilliant report card, with revenue in the quarter increasing by 30% year-on-year to 24.557 billion yuan, and the revenue growth rate is inseparable from the revenue brought by Cainiao's support for the cross-border logistics performance of AliExpress, a subsidiary of Ali International.
Compared with the domestic Taotian basic market that has stabilized for the time being, the overseas growth rate can be described as strong. However, overseas is not completely smooth sailing, and it is facing losses that have not stopped and are showing a trend of expansion.
According to the financial report, the adjusted EBITA of Alibaba International Digital Business Group was a loss of 4.085 billion yuan in the quarter, 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.
The loss was due to increased investment in businesses such as AliExpress Choice and Trendyol's cross-border business, partially offset by an increase in the realisation rate, and Cainiao's withdrawal of the listing to grant Cainiao employees retention incentives. In addition, Alibaba also 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 expansion of losses.
In general, the overseas business is facing the same dilemma as Taotian, and is still in the reform investment period of "cutting off the carrion to grow muscle", which leads to the current pressure on the book.
However, compared with Taotian's position in China, Ali's overseas market share is not a "king". The basic scale of its own business is not large enough, and multiple differences in culture and region are superimposed, as well as the disruption of latecomers Pinduoduo, Tik Tok, and SHEIN, which have led to difficulties in the continued development of Alibaba's overseas business.
Source: Internet
How much growth space can be leveraged by subsidies for overseas business in the future still needs to wait for Ali's follow-up moves.
Overall, whether it is Taotian or overseas business, Ali is in a "transition period" in the stage of change. Relying on subsidies in exchange for revenue growth has not yet waited for the growth story of overall profitability. It may take two to three quarters to see what the specific trend will be.
03 Conclusion
Judging from the current overall growth, since Wu Yongming ascended to the "No. 1 position", Ali is concentrating on its advantages to attack its core business. In the practice of the "user-first, AI-driven" strategy, some "certainty" has been captured.
In addition to the domestic and foreign e-commerce sectors, Alibaba has grown in different dimensions in cloud services, local life and other businesses.
Thanks to the growth of orders from Ele.me and AutoNavi, the quarterly revenue of the local life business increased by 19% year-on-year to 14.628 billion yuan. At the same time, the operating efficiency of the local living business improved, and the loss of the home delivery business narrowed, which led to the reduction of the overall business loss. According to the financial report, the loss of Local Life Group in this quarter decreased by 21.3% year-on-year to 3.198 billion yuan.
When the new forces of all parties are eyeing and attacking local life, Ali's local life not only resists the fierce competition, but also shows an enterprising attitude.
On the other hand, the new retail (Sun Art Retail, Yintai and Freshippo) divested by Alibaba was unified into all other business segments, alongside Lingxi Entertainment, Fliggy, Quark, etc., accounting for 23.19% of the revenue in the quarter, ranking second. Although the revenue growth rate decreased by 3% year-on-year, showing a negative growth trend, the removal of these revenues is beneficial to the improvement of gross profit and net profit.
It is self-evident that it is difficult for an elephant to turn around, and Ali is still a fierce general who can complete the initiative change in just one year and achieve certain results.