Alibaba sales up 59% despite Chinese economic slowdown

by Mariko Tai / Nikkei / August 12, 2016

BEIJING — Chinese e-commerce conglomerate Alibaba Group Holding surprised investors Thursday by reporting a 59% surge in quarterly revenue, the fastest growth since its initial public offering in 2014, defying a slowing economy.

Boosted by robust sales growth in the domestic market, April-June revenue reached 32.2 billion yuan ($4.8 billion), beating analysts’ expectations of 30 billion yuan. Revenue from its domestic retail marketplaces, including Taobao and TMall, increased 49% to 23.4 billion yuan.

Net profit declined 77% to 7.1 billion yuan in the absence of a one-time disposal gain for a movie business that had pushed up the result last year.

Alibaba enables transactions “to happen on our platform, through the entire e-commerce loop on the marketing tunnel to final purchase as well as related data are captured by Alibaba,” Executive Vice Chairman Joseph Tsai said in a conference call following the earnings release.

“In a nutshell, this is the value proposition that enables long-term sustainable revenue growth,” Tsai said.

As promised to investors in June, the company also started reporting results for four segments: core commerce, cloud computing, digital media and entertainment, and innovation initiatives and others.

Core commerce’s gross merchandise volume, which refers to the total value of merchandise sold via its domestic retail marketplaces, increased 24% to 837 billion yuan. The robust growth was boosted by mobile phone purchases, which now account for 75% of all domestic transactions by value.

The user base for the Taobao mobile app user is rapidly expanding, Alibaba sees the platform as more than just a shopping destination. It is “a very effective customer engagement platform,” CEO Daniel Zhang Yong said.

“More and more social features and services are added to our mobile app, which effectively extends visiting frequency,” said Zhang, noting that an average user visits Taobao seven times a day. Read more…

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