Alibaba used to be the leader and representative of China's e-commerce industry, which created the era of China's e-commerce and stood at the top of the industry for a long time.
However, the recent financial results for the fourth quarter of 2022 and the first quarter of 2023 released by Alibaba show that Alibaba is in a difficult period, with its profits declining sharply and growth sluggish. This seems to herald the end of Alibaba's domination of Chinese e-commerce.
Today's Chinese e-commerce industry is experiencing the replacement of the old and the new, and Alibaba, a tall and lush tree in the past, has begun to weaken. It needs to undergo deep reflection and adjustment, otherwise it will inevitably be surpassed or even replaced by other e-commerce platforms.
Alibaba's plight is a wake-up call for the entire Chinese e-commerce industry, and traditional e-commerce companies can easily be eliminated by the times if they do not reform and innovate and do not conform to the trend of the times.
Alibaba's poor financial report indicates the change of the times
On November 17, 2022, Alibaba Group announced its financial results for the second quarter ended September 30, 2022. According to the report, Alibaba Group's total revenue was 247.6 billion yuan, a year-on-year increase of only 3%; net profit was 26.3 billion yuan, down 24% year-on-year. This was the slowest quarter in Alibaba's history.
What's even more shocking is that on February 23, 2023, Alibaba announced its financial results for the fourth quarter of 2022 and the first quarter of 2023. In the fourth quarter of 2022, Alibaba's revenue increased by 1% year-on-year to 242 billion yuan, and net profit plummeted by nearly 40% to 16.6 billion yuan.
Entering 2023, Alibaba's performance is still declining, with first-quarter revenue up 7% year-on-year to 197 billion yuan, but net profit plummeting 96% to only 919 million yuan.
This financial report is undoubtedly a slap in the face for Alibaba. Over the years, Alibaba has maintained a revenue growth rate of more than 20%, and its net profit is basically more than 10 billion yuan. Now the revenue growth rate has plummeted to single digits, and the net profit has plummeted, which can be said to be the worst in history. This is a clear indication that Ali is going through a difficult period and its e-commerce empire has begun to falter.
Analysis of the causes of the dilemma
Regarding the decline in performance, Daniel Zhang, chairman of the board of directors of Alibaba, said that there are mainly the following reasons: first, the company has increased investment in future commercial infrastructure; second, the increase in employee incentive expenses; Third, the equity investment of listed companies incurs losses. However, none of these factors seems to explain Ali's previous huge decline.
The author believes that the fundamental reason why Ali has fallen into the dilemma of declining performance and sluggish growth is that the e-commerce ecology and business strategy have been out of touch with the times. Specifically, the main points are as follows:
E-commerce has entered the stage of stock competition
With the penetration rate of online shopping in China exceeding 70%, the e-commerce market has moved from the incremental stage to the stock competition stage. User growth is slowing and competition between platforms is intensifying. This has brought huge pressure to traditional e-commerce, and Ali is suffering from a strong impact from emerging platforms.
The homogenization of products is serious
Over the years, Ali has been focusing on building a platform, and the quality of the goods itself is not enough. At present, the product homogeneity of major platforms is serious, and the user experience is limited, which also weakens Alibaba's core competitiveness.
Lack of innovation
Compared with emerging e-commerce platforms, Alibaba is not proactive enough in terms of technology, model, and content innovation. It relied too much on successful models in the past and failed to innovate its business model with the times.
Operational strategy mistakes
Alibaba's mistakes in many operational strategies have also accelerated its predicament. For example, there are repeated mistakes in consumer rights protection and other aspects, resulting in a decline in user experience.
The competitive landscape is changing
Another important reason for Alibaba's predicament is that the competitive landscape of China's e-commerce industry is undergoing profound changes. In the past, Alibaba's dominance in the e-commerce industry has become a thing of the past, and it has been replaced by a fierce competition pattern.
In the past few years, traditional e-commerce platforms such as PDD and JD.com have risen, and emerging platforms such as Kuaishou and Douyin have also joined the e-commerce competition. With technological innovation and operation model innovation, they have seized Alibaba's users and market share. In 2022 alone, the number of active buyers of PDD surpassed that of Taobao. Many data show that Alibaba's dominant position in China's e-commerce industry is gradually being stripped away.
In the past two years, live broadcast e-commerce has been a big dark horse for "kicking" traditional e-commerce. In 2021, the scale of live streaming e-commerce transactions in China reached nearly 1.2 trillion yuan, a year-on-year increase of more than 150%. With innovative models such as content e-commerce and social e-commerce, live broadcast e-commerce has attracted a large number of young users, which has had a major impact on Alibaba.
In the past, Ali used to occupy the leading position of e-commerce with its first-mover advantage, but now the competitive pressure brought by the latecomer has overwhelmed it. This also confirms from the side that China's e-commerce industry is entering a new era.
epilogue
Alibaba's predicament shows that its era of e-commerce hegemony is over. In the future, Alibaba will still be one of the e-commerce giants, but it will be difficult to dominate the entire industry. It must adjust its business strategy and innovate its technology and business model in order to re-emerge in the new era.
China's e-commerce market will be a battleground for you to compete for, and Alibaba needs to meet future challenges with a positive and enterprising attitude. The e-commerce industry will also change from a single dominance in the past to a pattern of coexistence of multiple strong competitors. This will be a kind of progress for the entire Chinese economy and the development of the Internet. Let's wait and see the arrival of this new era of Chinese e-commerce.