China’s retail giants are under pressure: Alibaba experiences its worst quarter since 2014, Ochama parent JD.com sees growth slowing while losses mount. Beijing’s suspicious eyes and new coronavirus outbreaks are making life difficult for tech players.
Less consumption in China
In the past quarter, Alibaba booked 29% more turnover, worth about 200 billion yuan (28 billion euro). This is much less than analysts expected and is another disappointment after the limited sales growth of ‘only’ 8.5% on the important shopping festival Singles’ Day last week. Moreover, the profit figures are disappointing: profit fell by as much as 81%.
Online department store Tmall, which mainly sells Western brands, saw its turnover rise by barely 3%. A remarkable decline that can be explained by new competition. China also recently experienced new coronavirus outbreaks, resulting in lockdowns and falling consumption. Fortunately, there was still international growth: Alibaba gained 20 million new foreign users, bringing their total to 953 million out of 1.24 billion.
Eyes on foreign countries
Of course, the radical interventions by the Chinese government to curb the power of large technology players such as Alibaba did not help at all. For example, children are only allowed to play games during the weekend and taxi app DiDi and Ant Financial were fined and subjected to strict new rules. Both are sister companies of Alibaba.
JD.com, Alibaba’s rival and since last week active in the Netherlands with Ochama, also warns of weak Chinese consumption. Turnover rose by a quarter last quarter, but profits were 435 million dollars (385 million euros) in the red. The company nevertheless continues to grow: during the quarter, JD opened over 150 Asus electronics shops and launched its first logistics route between China and London.