Alibaba quarterly profit drops, but revenue rises

alibabaChinese e-commerce giant Alibaba Group’s net profit fell 45 per cent in the quarter ended June 30 to US$1.156 billion, compared to US$2 billion in FY17.

The decrease was attributed to a one-time share-based compensation expense in its Alipay business, Ant Financial. Excluding this, net profit would have risen 33 per cent.

Group revenue, however, rose by 61 per cent year over year to approximately US$12 billion, with a 93 per cent increase in revenue attributed to the group’s cloud computing arm.

“Alibaba had another excellent quarter, with significant user expansion and even more robust engagement across our growing ecosystem,” Alibaba Group chief executive Daniel Zhang said.

“Our China retail marketplace business continue to gain share, with New Retail initiatives driving further revenue growth and enabling our retail partners to seamlessly serve customers.”

Alibaba said its New Retail strategy is transforming the traditional retail industry by digitising store-based operations, with a strong focus on in-store technology, on-demand delivery, inventory tracking, supply chain management, customer insights and mobile payments.

Alibaba’s Hema supermarket business introduced new initiatives to enable its retail partners to accelerate their digital transformations. By the end of the quarter, there were 45 self-operated Hema stores in 13 cities in China.

Alibaba recently announced a partnership with Starbucks, where its Hema supermarkets will assist in filling coffee orders, with goods delivered by Alibaba’s food delivery unit Ele.me.

“The strategic partnership with Starbucks is proof of our New Retail model at scale and showcases how Alibaba can help our brand partners more deeply and innovatively engage with their customers in China,” the company said in a statement.

The group pointed to promising growth in its cross-border and international retail businesses, with revenue from international commerce reaching US$652 million for the quarter, representing a 64 per cent increase on the period last year.

Lazada, an online marketplace in Southeast Asia, has rolled out a three-pronged strategy, including a consumer-to-consumer marketplace, branded flagship store mall called LazMall, and cross-border e-commerce presence known as LazGlobal.

According to global research firm eMarketer, Alibaba is expected to capture 58 per cent of the retail e-commerce market in China, with JD trailing behind at 16 per cent.

“It’s all about data – and Alibaba has a wealth of consumer data,” eMarketer’s forecasting analyst Cindy Liu commented.

“We are seeing increased engagement across all of their platforms, which not only enriches the customer experience but also empowers its ad technologies in personalisation.”

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