Alibaba beats expectations, grows mobile users

Internet Retailing

4th Nov 2016

While China’s economy goes through a sluggish patch, internet shopping mall giant Alibaba Group has announced a sparkling quarter in which profit beat expectations, its fledgling cloud computing business more than doubled sales, and its entertainment income quadrupled.

“Our results reflect our increasing ability to monetise our 450 million mobile users through new and innovative social commerce experiences,” CEO Daniel Zhang said.

“Beyond the strong performance of our core commerce business, we are pleased with the continued rapid growth of our cloud computing business. We also see huge potential in our newly integrated digital media and entertainment unit. By combining engaging online experiences with highly relevant content, we delivered impressive financial and operational results for the quarter.”

CFO Maggie Wu said the group had robust revenue growth of 55 per cent for the quarter ended September 30.

“Our highly profitable and cashflow-generative core commerce business enables us to invest in our future growth areas of cloud computing, digital media, and entertainment and innovation initiatives. We expect each of these businesses to drive long-term value for both our customers and shareholders.”

At RMB34.292 billion (US$5.142 billion), revenue increased 55 per cent year-over-year, the star sector being digital media and entertainment, which ballooned 302 per cent to RMB3.608 billion. There was also an impressive 130 per cent growth in revenue from cloud computing to RMB1.493 billion, while revenue from innovation and other sources grew 78 per cent to RMB698 million, and revenue from core commerce rose 41 per cent to RMB28.493 billion.

Up 23 million

Mobile monthly active users (MAUs) on its China retail marketplaces reached 450 million in September, an increase of 23 million over June, while annual active buyers reached 439 million, an increase of 5 million from the 12-month period ended in June.

Customers for its cloud computing business grew to 651,000 from 577,000 in the previous quarter. The operating loss from cloud computing was RMB398 million for the quarter, and adjusted EBITA loss narrowed from RMB158 million in the previous quarter to RMB57 million.

Alibaba said its Taobao app continues to be the leading social-commerce platform, serving creative content, social-engagement opportunities and personalised shopping recommendations. Live-streamed demonstrations for fashion apparel, cosmetics, maternity/baby products, sports and activewear generated millions of daily views.

The company said it also achieved high social engagement on the mobile Taobao platform, citing more than 6 million app users sharing their shopping experience with friends each day.

“We continue to see strength in the consumer electronics category, with robust growth in smartphones and large appliances,” according to a statement made by Alibaba. “In September, Apple recognised our branding reach and distribution capability by appointing Tmall the third-party online platform for the simultaneous launch of the iPhone 7 with Apple in China.”

In the large appliance category, Alibaba is continuing to work with Haier’s logistics subsidiary RRS, with orders from its marketplaces handled by RRS growing by more than 82 per cent for the quarter.

Triple digits

Alibaba has also continued to make strong progress in the FMCG category, with personal care, food, and mother and baby being among the top growth categories. Its Tmall Supermarket has seen its volumes grow by triple digits year-on-year.

“Multinational FMCG brands are working with us as the partner of choice, not only to drive their transaction volume, but also in the areas of brand building, channel expansion and product launches to grow their presence in China.”

During the year Alibaba launched innovations around live-streaming, AR and VR to drive consumer engagement. Examples include a live-streamed “See now, buy now” fashion show watched by 7 million viewers on Taobao, Tmall and the Tudou and Youku apps. Alibaba also integrated the omni-channel shopping experience at more than 60,000 offline storefronts, including Gap, Uniqlo and Intime department store.

A pilot program has been introduced to help global merchants sell beyond China. Hong Kong and Taiwan are the first markets outside the mainland.

Alibaba Cloud hosts and provides security products and services for more than 35 per cent of China’s websites, says the company.

This story first appeared on our sister site, Inside Retail Asia.