E-commerce drives massive quarterly profit for Alibaba

Chinese e-Commerce giant Alibaba reported fiscal third-quarter net income up 38% to US$2.47 billion. Total revenue for the quarter (ended 31 December 2016) was up 54% to $7.67 billion, while operating income rose 66% to $2.98 billion. Operating margin was up 4 percentage points to 39%.

The chart at right shows the financial performance of Alibaba’s four business segments. What jumps out after a close look is that the overall Group profit of 2.47 billion – as massive as it is – actually understates the performance of Alibaba’s core e-commerce business. That is, the Cloud Computing, Digital Media & Entertainment, and Innovation Initiatives & Other segments all reported operating losses, dragging down the Group’s overall financial performance. Alibaba no doubt expects these segments to become profitable in the future, but for now they are a financial drag, and it is e-commerce that is driving profitability…

…and, of more interest to Cargo Facts readers, driving demand for express delivery.

Commenting on the results, Group CEO Daniel Zhang said: “Our robust December quarter demonstrates the strength of the Chinese consumer and Alibaba’s ability to create value across our vast ecosystem. The 11.11 Shopping Festival featured Alibaba at its best, integrating commerce, entertainment and social engagement, all happening globally at record scale.” Summing things up, he added: “We are driving the age of ‘New Retail,’ which leverages big data and innovation to provide a seamless online and offline experience for nearly half a billion mobile monthly active users. This retail transformation will make it even easier and more efficient for brands and retailers to engage with these consumers anywhere, anytime.”

Regarding Mr Zhang’s “New Retail” concept, Alibaba describes it this way: “New Retail leverages our substantial consumer reach and our capabilities in big data technology to transform traditional retail by addressing the increasingly sophisticated needs of consumers and improving efficiency across the entire value chain of brands and retailers. Our New Retail strategy will enable us to tap into the entire US$4.8 trillion retail sector in China by eliminating the distinction between online and offline commerce, as Chinese consumers today engage in commerce anywhere, any time with the help of mobile phones. To this end, we are partnering with brick-and-mortar retailers in different verticals through equity investments and deeper operational integration, which will allow us to deploy our proprietary omni-channel solutions to create a seamless shopping experience for consumers.”

Finally, here are a few random facts from Alibaba’s third-quarter report:

• Mobile monthly active users (MAUs) on Alibaba’s China retail marketplaces reached 493 million in December (the last month of the quarter), an increase of 43 million over September.

• Annual active buyers on Alibaba’s China retail marketplaces reached 443 million, an increase of 4 million from the 12-month period ended in September.

• Alibaba’s cross-border and international consumer businesses saw robust growth during the quarter. These businesses comprise Tmall Global for cross-border imports, AliExpress for cross-border exports, and Lazada for the Southeast Asia market. “We continue to see opportunities in overseas markets where we bring a unique value proposition to merchants and consumers. For instance, Tmall Global provides global brands, retailers, small businesses and farmers from economies around the world access to over 440 million Chinese consumers on our platform.

Those interested in learning more about the impact of e-commerce on demand for air freight in 2017, should join us at Cargo Facts Asia in Shanghai, 25 – 26 April, where we will present to full sessions devoted to that subject.  To register, or for more information, go to CargoFactsAsia.com.