Alibaba shines under dark clouds

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Following Amazon, Alibaba has also announced record sales: in the past quarter, e-commerce sales grew by 38 per cent, thanks to the Singles Day shopping frenzy. However, the Chinese government casts a dark shadow.

 

779 million customers

In the last three months of 2020, AliExpress and Tmall, Alibaba's subsidiary, recorded sales of 221.1 billion yuan (28.4 billion euros), up 37 per cent and more than analysts expected. The turnover came primarily from the main e-commerce sites, especially in China itself, which grew by 38 per cent to a new record of 195.5 billion yuan (25.15 billion euros).

 

Alibaba reached 779 million active customers in the quarter, partly thanks to its famous Singles Day shopping festival: the world's largest shopping event generated 75 billion dollars in orders, outstripping Black Friday by far. For the first time, promotions were spread over several weekends, and Alibaba also offered new services.

 

Meanwhile, the Chinese Amazon rival is becoming increasingly profitable: total net profit amounted to 10.2 billion euros, but more importantly, the cloud division achieved a positive EBITA for the first time. Logistics branch Cainiao also ended the quarter with a positive operating cash flow

 

Chinese government intervenes

However, enthusiasm is tempered by ongoing concerns about the Chinese government intervening in the country's major technology players. Alibaba and, in particular, its founder Jack Ma had a run-in with the Chinese authorities this autumn, after Ma, an eager media figure, criticised regulatory tightening. Subsequently, financial subsidiary Ant suddenly had to cancel its IPO, and Jack Ma disappeared from the scene for months.

 

Although CEO Daniel Zhang soothingly states that the tightened supervision is primarily an opportunity to re-evaluate and improve its operations, according to Reuters, the company still risks fines of up to 10 per cent of turnover if found guilty of having committed violations. Zhang also admits that he cannot yet fully assess the impact of Ant's failed IPO. Alibaba is nevertheless issuing 5 billion dollars in new bonds.