Retail in Asia

In Trends

Alibaba Group announces financial results

Alibaba Logo

Alibaba Group Holding Limited announced its financial results for the quarter ended 30th September, 2020.

SEE ALSO : Farfetch, Alibaba Group and Richemont partner to develop “Luxury New Retail”

“Alibaba had another strong quarter. We continued to help businesses recover and find new opportunities for growth through digitalization in the post-pandemic landscape. The solid performance of our core commerce and robust growth of Alibaba Cloud are the direct results of our commitment to value creation for customers,” said Daniel Zhang, Chairman and Chief Executive Officer of Alibaba Group.

“Our domestic core commerce business continued to grow steadily during the post-COVID-19 environment in China through higher purchase frequency and consumer spending, while cloud computing revenue grew 60% year-over-year, driven by the acceleration in digitalization across all industries and businesses of all sizes in China. We are happy to see that our strategic investments are starting to see improving operational efficiencies and the effect of scale,” said Maggie Wu, Chief Financial Officer of Alibaba Group.

In September 2020, China retail marketplaces, the largest consumer platform in China, had 881 million mobile MAUs. Annual active consumers on China retail marketplaces was 757 million for the twelve months ended 30th September, 2020, representing a quarterly net increase of 15 million.

Alibaba Group is continuing to grow consumer mindshare and wallet share among users, as reflected in higher purchase frequency and growth in average annual spending from all city tiers. The group continues to increase penetration in less developed areas, reflecting its success in broadening product offerings to meet diverse demands.

One of the key drivers of its acquisition of new users and consumers in less developed areas is Taobao Deals, its marketplace for value-conscious consumers. Taobao Deals achieved strong growth since it launched a new version in March 2020, recording over 70 million MAUs in September 2020.

Tmall online physical goods GMV, excluding unpaid orders, grew 21% year-over-year during the September 2020 quarter. Fast-moving consumer goods (“FMCG”) continued to be the fastest growing Tmall category, primarily driven by the strength of food and beverage, healthcare, beauty and personal care. In addition, the growth rate of Tmall’s apparel category recovered to a level that exceeded pre-COVID-19 3 levels. The year-over-year growth rate of Taobao online physical goods GMV, excluding unpaid orders, was in the high-teens for the September 2020 quarter.

Quarterly growth of Taobao GMV continued to accelerate since the trough in the March 2020 quarter, during the peak of the COVID-19 pandemic in China. This accelerating growth is primarily driven by higher purchase frequency resulting from the success of its value-for-money offerings.

Tmall Global is the premier platform that international brands and merchants depend on to enter the China market online and build brand awareness. The number of brands and merchants on the platform as of 30th September, 2020 grew at a double-digit rate year-over-year. Tmall Global GMV, excluding unpaid orders, grew 37% year-over-year during the quarter.

GMV generated by Taobao Live, Alibaba’s live streaming portal, exceeded US$53.572 billion for the twelve months ended 30th September, 2020. Alibaba believes the entire e-commerce shopping experience will become increasingly entertaining and interactive.

In September 2020, Alibaba launched a new Taobao app interface to deliver a more immersive user experience, such as expanding the recommendation feed section on the landing page and making product displays more accessible. Alibaba continued to enhance its two paid membership programs. 88VIP gives consumers access to savings and loyalty rewards on various Alibaba platforms, including Taobao, Tmall, Youku and Ele.me. The combined number of paying members of 88VIP and Taobao Pass was 35 million as of 30th September, 2020.

On 21st October, 2020, Alibaba kicked off preparations for its 12th annual 11.11 Global Shopping Festival. Over 250,000 brands will participate and two million new products will debut in this year’s festival. Unlike in previous years, the sales extravaganza will span two sales periods, from 1st November to 3rd November and 11th November.

This year, Alibaba also focused on positioning the world’s largest shopping festival as a catalyst to help brands recover by leveraging Chinese consumers’ rising demand for overseas brands.

In October, Alibaba invested approximately US$3.6 billion to acquire a controlling stake in Sun Art Retail Group Limited (“Sun Art”). It continues to innovate New Retail formats and models by digitalizing its offline retail partners and enabling them to offer an integrated omni-channel experience for consumers. Through this deeper collaboration with Sun Art, Alibaba will be able to digitalize offline traffic, synchronize online and offline channel inventories, broaden its supply chain network and increase online purchases.

Alibaba’s self-operated grocery retail chain Freshippo achieved healthy same-store sales growth during the quarter. As of 30th September, 2020, Alibaba self-operated 222 Freshippo stores in China, primarily located in tier 1 and tier 2 cities. For the twelve months ended 30th September, 2020, annual active consumers for Freshippo reached over 26 million.

Demand for digitalization in the restaurant and service industry remains strong after the impact of the COVID-19 pandemic in China. Ele.me has captured this market opportunity. In July, Ele.me expanded its on-demand delivery services to cover a wide range of categories, such as fresh produce, grocery and flowers, and upgraded the benefits of its membership program, including launching a rewards system. As a result, Ele.me’s average daily number of paying members in the September quarter grew 45% year-over-year.

Cainiao Network continued to expand both its domestic services and global smart logistics infrastructure by deepening integration with logistics partners as well as offering more products and services.

In China, Cainiao expanded the coverage of Cainiao Post (neighborhood and campus stations and residential selfpick-up stations), and also expanded the services of Cainiao Guoguo (crowdsourced parcel pick-up and delivery service) and improved customer experiences on the app. Internationally, Cainiao broadened its export business by collaborating with more global partners and had established local logistics networks in 15 countries and regions. During the quarter, merchant adoption of “Fulfilled by Cainiao” services continued to improve, with almost four million daily cross-border packages delivered in September 2020.

Lazada, Alibaba’s Southeast Asian e-commerce platform, continued to achieve robust growth in buyers and sellers and to benefit from the acceleration of digitalization across industries in Southeast Asia. Despite new waves of COVID-19 in many markets, order volume grew 100% year-over-year for the September 2020 quarter.

In the September quarter, cloud computing revenue grew 60% year-over-year to US$2,194 million, primarily driven by growth in revenues from customers in the Internet, finance and retail industries. As of 30th September, 2020, approximately 60% of A-share listed companies are customers of Alibaba Cloud, and their average spending grew 45% year-over-year in September 2020.

During the September quarter, Youku’s average daily subscriber base increased 45% year-over-year, driven by its offering of appealing original content and also by contribution from the 88VIP membership program.

Alibaba continued to improve the operational efficiency of its digital media and entertainment businesses through disciplined investment in content and production capability, as well as optimization of subscriber membership programs. During the quarter, adjusted EBITA loss for the digital media and entertainment segment narrowed year-over-year.

Amap continued to be the largest provider in China of mobile digital maps, navigation and real-time traffic information by both monthly active users and daily active users, according to QuestMobile. During the quarter, Alibaba improved user experience by adding new functionality and services. On 1st October, 2020, the first day of the week-long National Day holiday in China, Amap achieved a record high of 150 million daily active devices.

In the September 2020 quarter, net cash provided by operating activities was US$7,997 million, an increase of 15% compared to US$7,243 million in the same quarter of 2019. Free cash flow, a non-GAAP measurement of liquidity, increased by 33% to US$5,971 million), from US$4,666 million in the same quarter of 2019, mainly due to its robust profit growth.

Revenue for the quarter ended 30th September, 2020 was US$22,838 million, an increase of 30% compared to US$18,217 million in the same quarter of 2019. The increase was mainly driven by the robust revenue growth of its China commerce retail, cloud computing and Cainiao logistics services businesses.

Revenue from Alibaba’s China commerce retail business in the quarter was US$14,061 million, an increase of 26% compared to US$11,600 million in the same quarter of 2019. Customer management revenue grew 20% year-over-year, primarily due to robust growth in revenue from new monetization formats, such as recommendation feeds, an increase in the volume of paid clicks in search monetization, as well as the 21% year-over-year growth of Tmall online physical goods GMV, excluding unpaid orders.

“Others” revenue under China commerce retail business was US$3,849 million, achieving year-over-year growth of 44% compared to US$2,787 million in the same quarter of 2019. The increase was primarily driven by contributions from its direct sales businesses, including Tmall Supermarket and Freshippo.

Revenue from Alibaba’s China commerce wholesale business in the quarter was US$536 million, an increase of 11% compared to US$502,510 million in the same quarter of 2019. The increase was primarily due to an increase in average revenue from paying members on 1688.com.

Revenue from Alibaba’s international commerce retail business in the quarter was US$1,147 million, an increase of 30% compared to US$919,457 million in the same quarter of 2019. The increase was primarily due to the growth in revenue generated by Lazada and Trendyol, which was partially offset by the decrease in revenue from AliExpress as a result of the deconsolidation of the AliExpress Russia business in October 2019.

Revenue from its international commerce wholesale business in the quarter was US$517 million, an increase of 44% compared to US$372,558 million in the same quarter of 2019. The increase was primarily due to an increase in the number of paying members on Alibaba.com, as well as an increase in revenue generated by cross-border related value added services.

Revenue from Cainiao Network’s logistics services was US$1,212 million in the quarter , an increase of 73% compared to US$728,433 million in the same quarter of 2019, primarily due to the increases in both average revenue per order and volume of orders fulfilled.

Revenue from local consumer services, which primarily represents platform commissions, fees from provision of delivery services and other services provided by on-demand delivery and local services platform Ele.me, was US$1,302 million in the quarter, an increase of 29% compared to US$1,046 million in the same quarter of 2019, primarily due to an increase in average revenue per order.

Revenue from cloud computing business in the quarter was US$2,194 million, an increase of 60% compared to US$1,422 million in the same quarter of 2019, primarily driven by growth in revenues from customers in the Internet, finance and retail industries.

Revenue from digital media and entertainment segment in the quarter was US$1,188 million, an increase of 8% compared to US$1,139 million in the same quarter of 2019. The increase was primarily due to the increase in revenue from online games, partly offset by the decrease in revenue from customer management.

Revenue from innovation initiatives and others in the quarter was US$173 million, an increase of 10% compared to US$162,860 million in the same quarter of 2019.

Cost of revenue in the quarter was US$13,250 million, or 58% of revenue, compared to US$10,032 million, or 55% of revenue, in the same quarter of 2019. Without the effect of share-based compensation expense, cost of revenue as a percentage of revenue would have increased from 53% in the quarter ended 30th September, 2019 to 54% in the quarter ended 30th September, 2020.

SEE ALSO : Pinduoduo announces financial results

The increase was primarily due to increased revenue contributions from direct sales businesses such as Tmall Supermarket and New Retail, which resulted in increased cost of inventory, partly offset by a decrease in delivery costs per order of local consumer services.