On the evening of May 14, 2024, Alibaba announced its fourth-quarter and full-year results for fiscal 2024. According to the financial results of this quarter, Alibaba's investment plan for its core business has begun to bear fruit, and the group as a whole has returned to a healthy growth track.
Among them, what attracts attention is not only the initial effect of "user first" and the significant boost of the e-commerce sector, but also the local life, which once lost tens of billions of dollars every year, has also embarked on a new level of operation this year.
Alibaba's FY24 earnings report, local life section data
• On the one hand, revenue growth exceeded expectations, and local life group's full-year revenue increased in FY2024 to 59.802 billion yuan, a year-on-year increase of 19%.
• At the same time, the loss of the local living segment business also narrowed to a historical low, and the FY24 financial report showed that the loss had narrowed to 9.812 billion yuan, a year-on-year decrease of more than 25% compared with the previous financial year (13.148 billion yuan).
In the local lifestyle business segment, Ele.me, which is responsible for the home delivery business, saw strong growth in order volume and continued to improve unit economics. AutoNavi Map, which is responsible for the business of "to destination + big travel scene", has also significantly increased the number of transaction users and purchase frequency, and the combination of the two has become a "dual motor" in the local life business segment.
Looking back at the plate transformation that began in 2021, after three fiscal years, Ali's local life has changed its organizational climate and will come to the next level in the next three years.
Spanning cycles in stride adjustments
Looking at the financial report data of the past three years, it is not difficult to find the business improvement path of local life.
Alibaba Group, local life FY22-FY24 data collation in the past three years
The first is revenue growth. Local living revenue increased from $10.999 billion in FY22Q1 to $15.16 billion in FY24Q4, with sustained and stable growth. It can be seen that especially after FY23Q1, the steady growth of revenue is behind the rapid rebound of local living demand after the epidemic, and Ele.me has also launched more personalized services and preferential activities to continue to meet user needs and stabilize the user base.
The second is the sector loss. As you can see, the EBITA of the local lifestyle sector has been improving over the years. From FY22Q1 to FY24Q4, Ele.me continued to improve its technical capabilities and optimize operational efficiency, which led to a significant reduction in the local living loss rate from a minimum of -60% to -13%.
Another core metric is UE. It can be seen that since FY22Q3, the unit economics has continued to improve, and has remained positive since entering FY23. Completely bid farewell to the era of "making one order, losing one order", and plugged the loophole in the reversal of the overall loss.
The cumulative result of the three years of stable operation and efficiency improvement is: in the 2022 financial year, the annual income of local life is more than 40 billion yuan, and it will have to lose more than 20 billion yuan; By the 2024 financial year, local life has achieved an income of 60 billion yuan and a loss of less than 10 billion.
At present, the orders and revenues of local life are both growing, and Ele.me UE is still continuously positive. As long as this trend can be maintained, there can be a relatively optimistic expectation that Ele.me will achieve the goal of "landing" profitability in the next 2 to 3 years.
The "right foot" stands firm, and the "left foot" counterattacks
Behind the improvement of business status is the rhythmic strategic adjustment of Ali's local life, especially Ele.me, in the past three years.
In its internal "black language", it is to first take the "right foot" to improve efficiency, then take the "left foot" to achieve scale growth, and then alternately move forward with the left and right feet.
The logic of local life business reform proposed by Yu Yongfu can be summarized as "two-wheel drive, four horizontal and four vertical". He emphasized that the core of the local lifestyle business lies in the two-wheel drive of "instant business flow" and "instant logistics", and improves the overall efficiency and user experience through an efficient business flow and logistics system.
The so-called "four horizontal" refers to the four core business assets: elm super APP, real-time business flow supercomputing platform, real-time logistics super-network and real-time logistics supercomputing platform. These assets provide strong support for user ordering, commodity circulation, distribution network and logistics management. The "four verticals" refer to operational capacity building, including the command and combat efficiency system, the testing efficiency system, the evaluation and incentive efficiency system, and the learning and precipitation efficiency system. In doing so, organizational processes are ensured to run smoothly and efficiently by improving the efficiency of scheduling, testing, evaluation, and learning.
This innovative route quickly reversed the inertia of Ele.me's extensive development in the early stage of market competition and rapid business expansion. Inventory of existing resources, accurate positioning of the platform, rapid improvement of the organization and integration of internal resources and the deployment of platform assets - Ele.me's innovation strategy in the past three years has not only greatly improved operational efficiency, but also made the business growth on this basis more solid and long-lasting, laying a solid foundation for the long-term development of the business and the continuous improvement of user experience.
Now after three years, Ele.me has a new business atmosphere. In the next three years, Ele.me's development route has also become clear.
In the opening speech of the FY25 100-member group meeting, Wu Zeming (Fan Yu), the new chairman of Ele.me, said at the meeting that the new management team and Alibaba Holding Group have reached several important consensus on the future development of Ele.me:
1-The consumption habits of users are accelerating towards the trend of instant home delivery in different categories;
2-Ele.me largely inherits these user trends;
3- Hummingbird instant logistics will be the infrastructure for this trend;
In addition, Wu Zeming also said that Ele.me's business scale, users, mobile sales merchants, active value, riders and other assets, as well as annual revenue and gross profit, are all very scalable. In other words, there is still enough room for further expansion of the company's assets and platform value.
Ele.me Spring Festival subway advertisement, source: Internet
In fact, in terms of specific business trends, in the past year, it is not difficult to find that Ele.me does "step on the left foot" frequently.
Whether it is increasing user subsidies in the past six months, continuing to launch marketing activities such as free order benefits and updating five-fold days, or expanding offline advertising promotion in first- and second-tier cities to open up a wider range of traffic for Ele.me, Ele.me's topicality and hot search physique have not stopped.
At the same time, under the surface, Ele.me is also constantly increasing its investment in technology and AI, and continues to improve the efficiency of the system through technical means.
For example, in March this year, Ele.me's SAAS platform "Aoxiang" launched an "AI business assistant". This business tool can provide small and medium-sized retailers with a full range of intelligent business services, including weekly report push, indicator change attribution, industry merchant comparison, market trend selection, etc. With this, merchants can quickly locate business problems and further improve their business capabilities.
For example, in this quarter, Ele.me's logistics supercomputing platform also continued to upgrade, through this intelligent central control brain, Ele.me can help riders reduce the uncertainty of delivery routes, improve the order completion rate and the follow-up rate of riders' orders, and further improve the hourly income of riders while reducing the difficulty of delivery for riders.
According to public data, Ele.me has applied for more than 800 logistics technology invention patents. It is foreseeable that in the future, these technological investments will enable Ele.me to continuously optimize operating costs and maintain an advantage in the fierce market competition while improving distribution efficiency.
The next three years are yet to be revealed
It is not difficult to see from the trend of financial report data that the current progress made by Ele.me and Local Life Group is only the beginning. In the next three years, Ele.me is expected to bring a new story to the market on a new business level.
The local living market has huge potential, and Ele.me's instant e-commerce business has also formed a relatively complete logistics and service infrastructure, and user demand is accelerating the release. Including the demand for online grocery shopping and online medical treatment and medicine during the epidemic, it has not fallen due to the end of the epidemic, but has become the new normal of consumption.
By 2026, more than 50% of Internet users in mainland China will use instant retail services, and the overall market size of China's instant retail will reach 1 trillion yuan. With its advanced business layout and ecological construction, Ele.me will become the core mainstay of this track, and various innovative businesses are also expected to become dark horses on the track.
At the FY25 annual management meeting, Han Liu, the current CEO of Ele.me, also pointed out in his speech that in the next three years, Ele.me's strategic track will be positioned as "1+2", that is, to first build a healthy growth and better understand consumers' home-based catering platform; Secondly, it is necessary to develop two new growth curves: instant retail that meets the characteristics of Ele.me and an instant logistics network that extends to market value.
Starting with takeaway, the gradually formed local life logistics network will continue to be turned into a company asset that can be called into more scenarios and businesses, and continue to exert greater value. This market extension and ecological extension space is considerable.
The new three years are ready to go. Three years later, how will the local life market change, has Ali's local life reached an annual revenue of 100 billion, and will Ele.me be landed or even listed? This series of puzzles is waiting to be solved one by one, and only time will know the answer.