After Alibaba Group Holding Ltd (阿里巴巴) raised a record US$25 billion last year, founder Jack Ma (馬雲) said the Chinese e-commerce company faced the danger of high expectations. He might be right.
About US$70 billion of market value has evaporated since Ma made that statement in November last year as investors worry about slowing growth.
Alibaba’s dominance at home as a marketplace for buyers and sellers of goods is being undermined by a Chinese economy projected to grow at the slowest pace since 1990 and a consumer shift to mobile shopping that crimps advertising revenue.
Photo: Bloomberg
Ma’s push outside China also has yet to gain traction — its presence in the US and much of Europe remains negligible. Results due today are expected to show that the pace of Alibaba’s revenue expansion fell below the average of the previous seven quarters.
Shares of Alibaba closed on Tuesday at US$79.54 in New York, 33 percent below their November peak and the lowest since the Hangzhou-based company sold stock at US$68 apiece in its initial public offering in September last year.
REPLICATING SUCCESS
Alibaba’s success in China made it the nation’s biggest e-commerce operator, with everything from clothes and food to jets and cars being sold across its platforms.
Ma wants to replicate that around the world, setting a goal of generating half of sales and servicing more than 10 million small businesses outside China. However, while the company has made inroads into Russia and Brazil, it gets less than 5 percent of its revenue from outside China, Ma said in March.
Alibaba’s sales probably rose 41 percent in the January-March quarter to 16.9 billion yuan (US$2.7 billion), according to the average of 23 estimates compiled by Bloomberg. That compares with an average of about 50 percent during the past seven quarters.
The company’s strategy of expanding in under-served regions of China and overseas is driving up marketing costs as more consumers shop on mobile devices, where ads typically generate less revenue than those on desktop computers. Operating income will probably shrink 18 percent to 4.5 billion yuan, according to the estimates.
“They have faced hurdles and difficulties that they need to overcome to reach the next level of growth,” said Matthew Kwok (郭家耀), chief strategist at China Yinsheng Asset Management Ltd (中國銀盛資產管理) in Hong Kong. “It has reached such success in China, it would make sense for them to replicate that business model overseas.”
Adding to concerns around Alibaba’s growth outlook is the resurfacing of allegations that the company’s platforms, including Taobao Marketplace (淘寶) and Tmall.com (天貓), are a haven for counterfeiters.
The Chinese government this year said Alibaba faces a “credibility crisis” for failing to crack down on shady merchants, fake goods and misleading promotions.
Separately, Alibaba will introduce a service on its wholesale Web site 1688.com that allows merchants in China to source global brand names.
1688.COM
The service, which will begin on May 18, will initially offer brands from Spain, according to an e-mailed statement from the company yesterday. The Web site will add products from Portugal, Italy and South Korea in the future as it seeks to build it into the largest sourcing platform for imports, the company said.
“As China’s middle class’ demand for high-quality foreign brand names increases, it would help Alibaba ride the next wave of growth,” Liu Li-gang (劉利剛), chief economist for Greater China at Australia & New Zealand Banking Group Ltd in Hong Kong, said by telephone.
“China has just started opening up more free trade zones” making it easier to import goods, he said.
Established in 1999, 1688.com is a Chinese Web site that has been helping small merchants to purchase goods from within the country. Its counterpart, Alibaba.com, helps global wholesale buyers source from sellers in China, India and Pakistan.
Among the rows of vibrators, rubber torsos and leather harnesses at a Chinese sex toys exhibition in Shanghai this weekend, the beginnings of an artificial intelligence (AI)-driven shift in the industry quietly pulsed. China manufactures about 70 percent of the world’s sex toys, most of it the “hardware” on display at the fair — whether that be technicolor tentacled dildos or hyper-realistic personalized silicone dolls. Yet smart toys have been rising in popularity for some time. Many major European and US brands already offer tech-enhanced products that can enable long-distance love, monitor well-being and even bring people one step closer to
Malaysia’s leader yesterday announced plans to build a massive semiconductor design park, aiming to boost the Southeast Asian nation’s role in the global chip industry. A prominent player in the semiconductor industry for decades, Malaysia accounts for an estimated 13 percent of global back-end manufacturing, according to German tech giant Bosch. Now it wants to go beyond production and emerge as a chip design powerhouse too, Malaysian Prime Minister Anwar Ibrahim said. “I am pleased to announce the largest IC (integrated circuit) Design Park in Southeast Asia, that will house world-class anchor tenants and collaborate with global companies such as Arm [Holdings PLC],”
Sales in the retail, and food and beverage sectors last month continued to rise, increasing 0.7 percent and 13.6 percent respectively from a year earlier, setting record highs for the month of March, the Ministry of Economic Affairs said yesterday. Sales in the wholesale sector also grew last month by 4.6 annually, mainly due to the business opportunities for emerging applications related to artificial intelligence (AI) and high-performance computing technologies, the ministry said in a report. The ministry forecast that retail, and food and beverage sales this month would retain their growth momentum as the former would benefit from Tomb Sweeping Day
TRANSFORMATION: Taiwan is now home to the largest Google hardware research and development center outside of the US, thanks to the nation’s economic policies President Tsai Ing-wen (蔡英文) yesterday attended an event marking the opening of Google’s second hardware research and development (R&D) office in Taiwan, which was held at New Taipei City’s Banciao District (板橋). This signals Taiwan’s transformation into the world’s largest Google hardware research and development center outside of the US, validating the nation’s economic policy in the past eight years, she said. The “five plus two” innovative industries policy, “six core strategic industries” initiative and infrastructure projects have grown the national industry and established resilient supply chains that withstood the COVID-19 pandemic, Tsai said. Taiwan has improved investment conditions of the domestic economy