As the company’s home e-commerce sales were under pressure from optimistic spending by Taiwanese consumers in a sluggish market, Alphababa Group Holding missed business expectations for first-quarter income on Thursday.
A slowing Chinese economic recovery, coupled with a consistently weak home market, higher levels of job insecurity, and consumer confidence in the world’s No 2 economy, has sapped consumer confidence and spending power, causing international businesses to suffer across the board.
Alibaba is also facing fierce competition from rivals like JD.com and discount-focused retail platforms like PDD Holdings ‘ Pinduoduo and ByteDance-owned Douyin, both of which are owned by PDD Holdings.
Alibaba reported revenue of 243.24 billion yuan ( US$ 33.98 billion ) for the quarter ended Jun 30, compared with analysts ‘ average estimate of 249.05 billion yuan, according to LSEG data.
The private e-commerce arm of the company saw a 1 percent decline in revenue despite the increase in order growth by double digits in the number of customers and their purchase frequency.
Foreign e-commerce giants have had to rely on hefty discounts and promotions to entice customers, which has increased margins in the financial industry.
” China is experiencing a real saving collapse. Consumers are reducing their investing, lowering their spending, and becoming more rational, according to M Science researcher Vinci Zhang. ” But going into the second half of the month, Alibaba and JD.com will probably continue to face challenges”.
Despite significant platforms ‘ attempts to offer provides for an extended period, selling at China’s wildly popular mid-year e-commerce revenue festival in June decreased for the first time ever, according to third-party estimates.
US-listed shares of Alibaba, which topped industry estimates for quarterly earnings, reversed earlier loss to climb about 2 per cent in early deal on Thursday.
According to Alibaba executives, increased buying and the development of new tools for retailers will raise the platform’s revenue in the future.
Executives reiterated their expectations for new crowdfunding tools on a phone with analysts on Thursday to boost profits development in the second half of the fiscal year.
Eddie Wu, the head of Alibaba Group’s domestic e-commerce division, stated that improving the user experience to increase gross merchandise value ( GMV), a measure of sales, is the top priority for Taobao and Tmall Group.
” As market share stabilises, we can turn our focus to monetisation”, he said.
Alibaba announced the biggest shake-up in the company’s story in March 2023, cutting into six modules and sharpening its emphasis on its main businesses, including home e-commerce.
Profit at Alibaba’s global e-commerce product increased by 32 percent to 29.3 billion yuan, helped by opportunities to expand its international reputation and growing need around the world for lower-priced goods from China.
For Alibaba’s sky section, revenue grew 6 per cent to 26.55 billion renminbi, accelerating from the 3 per cent growth seen in the previous quarter, thanks to an uptick in people cloud adoption and robust demand for AI-related products.
The business has begun to cut back on low-margin project-based contracts, and it claims that a price reduction has been achieved because of a scaling-up of its cloud infrastructure.
Compared to 34.33 billion yuan a year earlier, net income for ordinary shareholders in the quarter was 24.27 billion yuan.