Alibaba’s quarterly revenue grew by 61%; New retail and international expansions to drive bold forecast for 2019

Alibaba powers on via new retail and international expansions.

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Alibaba’s quarterly revenue grew by 61%; New retail and international expansions to drive bold forecast for 2019

Chinese e-commerce conglomerate Alibaba recently released its latest financial results for the fourth quarter of FY 2018 and according to which, the company, also known as the ‘Amazon of the East’, recorded a stellar 61% revenue growth as a result of its strong core ecommerce.

Despite the common view that huge sales growth cannot continue infinitely, Alibaba is still making inroads to secure greater market share with the ‘New Retail’ initiative, strategic acquisition of Ele.me and Easyhome alongside its active international expansion.

A 28% year-on-year gross merchandise value (GMV) growth rate hitting a value of RMB 4,820 billion is a strong value proposition to get brands and merchants on board to leverage on marketing and consumer insight tools to expand their reach via Tmall’s distribution platform.

A key ingredient for this strong result – robust content ecosystem of Taobao app. The performance is backed by Monthly Active Users (MAU) increasing at an increasing rate over the last 9 quarters from 4.15% in 2016 to 6.38% this quarter.

Mobile Monthly Active Users (MAU) over 9 quarters from https://www.alibabagroup.com/en/ir/earnings

Cainiao Network also took a step further towards building network infrastructure for a holistic ecosystem for greater customer-focused app services. Expected growth prospects to bring technology further in the supply chain will be a key area to watch in the coming fiscal year 2019.

New Retail Experiment

 The rise of ecommerce giants such as Amazon, JD and Alibaba has long redefined what shopping means. It’s about time for a redo, with the new retail concept which was coined by Alibaba’s Jack Ma but later on percolated the whole China TMT industry.

Alibaba’s core commerce segment just delivered a 60% year-on-year growth – highest since IPO. The next step in this space, is to create an omni-channel system linking the offline and online ecosystem.

Hema – a unique proprietary grocery retail format, is an example of how ‘’new retail’’ can revolutionize the supply chain allowing for a 24-hour 30 minutes guaranteed delivery services in cities it launched, including Beijing and Shanghai.

New retail will have broader data on consumption patterns which will can be used to propel further stickiness and revenue per customer in the long run. According to mobile business intelligence service Kumulos, it would cost 700% more to acquire new mobile users than to retain users.

International Expansions

Breakdown of Revenue Segments (2016-2018), from https://www.alibabagroup.com/en/ir/earnings

Looking at the outstanding performance across 4 main operations of Alibaba, the company is poised to launch aggressively internationally. Approximate 60% growth for Core Commerce, 101% for cloud computing, 33% increase for digital media and 10% for innovation initiatives indicate sound business model and a firmer ecosystem for tech giant.

Identifying low penetrated Southeast Asian markets, Alibaba’s platform integrated with Lazada and invested US$2billion into Lazada to propel aggressive growth and reach in the competitive region.

Alibaba Cloud, already a leader infrastructure-as-a-service player in China, also went global, setting up data centre in Indonesia and offering City Brain platform for the Malaysian Government.

 Weak Performing Operations

 Although the overall good performance, Alibaba’s innovation initiative posted operational losses against marginal increase in revenues.

As a technology giant, the need for continued innovation and disruption should continue. Alibaba Cloud developed 316 new products and features based on artificial intelligence, data management and security.

In the fiscal year of 2018, many innovation initiatives experienced significant increase in user scales. However, the level of operational losses should be controlled given the  increasing loss and that these incubation projects might not yield future profits.

Innovation Initiative & Others Performance from https://www.alibabagroup.com/en/ir/earnings

Digital Media and Entertainment, the other weaker segment managed to draw synergies from data to develop original content driving a 160% growth rate of daily average subscribers.

To conclude, the tech giant’s overall outstanding financial performance bodes well for continued growth internationally. Alibaba cloud and international expansion will probably be the drivers of the highlights of the coming fiscal year.

Editor: Ben Jiang