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Alibaba is facing increasing competition from Chinese rivals such as JD.com, Temu and Shein. The e-commerce giant’s profits are under pressure, due to investments in lower prices and shorter delivery times.
High investments
In its latest quarter (January to March), Alibaba’s sales grew by 7 %; while full financial year growth was 8 %. The – modest – sales growth contrasts with the net profit evolution, which fell 86 % in the fourth quarter. In its Chinese home market, growth remains limited: Taobao and Tmall grew 4 % year-on-year, while order volume increased by double digits. The international e-commerce business grew 45 %, though losses doubled.
This was partly due to investments in cloud infrastructure, in price cuts and in faster delivery. AliExpress now delivers 70 % of its orders within five days, thanks to improved synergy with its logistics division Cainiao. These investments are necessary to stay competitive against other fast-growing Chinese e-commerce players such as JD.com, Temu and Shein.
Alibaba has had a difficult transition year, with a major restructuring in which the group divided itself into six separate ‘business groups’. According to CEO Eddie Wu, revenue growth indicates that the revamped strategy is starting to bear fruit. In particular, he expects a lot from new AI-based services and products.
