Alibaba Sees Green Shoots of Recovery In China Discretionary Consumer Spending

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Alibaba Sees Green Shoots of Recovery In China Discretionary Consumer Spending

Alibaba Group’s Robert Lin told investors on Wednesday that the company had spotted signs of recovery in Chinese consumers’ discretionary spending.

The Hangzhou-based company has recently wrapped up the world’s largest retail event, the 11.11 Global Shopping Festival. The campaign allowed it to gauge Chinese consumer sentiment at scale.

“We’re seeing signs of recovery,” Lin, Alibaba Group, Head of Investor Relations and Member of the company’s Sustainability Steering Committee told an investment conference.

During the 11.11 campaign, “we saw a decent recovery in the discretionary category: apparel, consumer electronics are starting to improve,” he told the audience of KraneShares’ Annual Investor Conference.

Lin also told the gathering in New York and virtually that Alibaba had noted secular growth in the outdoor sports, pet care and health & wellness categories.

Investors broadly view Alibaba as a proxy for consumer spending in the world’s most populous country.

“Alibaba is the transmission engine for domestic consumption as it occurs online in China today,” said KraneShares’ Chief Investment Officer Brendan Ahern during the conference.

KraneShares is an asset management firm known for its global exchange-traded funds (ETFs) and its flagship product KraneShares CSI China Internet ETF (ticker KWEB) has an 8.72% stake in Alibaba.

Over a billion consumers in China interact with the internet platform company in one way or another.

“We’re about 17% to 18% of overall China consumption…We are considered a China consumption proxy,” said Lin.

Watch to learn more about growth of niche sports in China

To be sure, economic data coming out of China continues to be weaker than usual given the impact of the coronavirus pandemic.

The Caixin/S&P Global manufacturing purchasing managers’ index (PMI) came in at 49.4 in November, marking the fourth consecutive monthly contraction. China’s official manufacturing PMI fell to 48 in November from 49.2 in October.

Still, Lin noted that Alibaba has been attracting a growing number of wealthier customers who are less impacted by fluctuating macroeconomic conditions.

Alibaba’s Taobao and Tmall continued to attract and retain a cohort of big spenders. For the twelve months ending Sept. 30, 124 million consumers each spent over RMB10,000 on the two digital marketplaces.

Rob Lin talking about China Discretionary spending
Alibaba’s Rob Lin (L) speaking remotely with KraneShares’ Ahern (R). Photo credit: Alibaba Group

Lin also said there was pent-up demand among consumers in China.

Due to pandemic-related restrictions, instead of hanging out in physical shopping malls, young people are spending more time outdoors playing no-contact sports like frisbee.

During 11.11, sports & outdoors categories recorded strong growth in gross merchandise value (GMV) on Alibaba’s cross-border consumer-facing marketplace Tmall Global. GMV of surfskate boards increased more than 30-fold year-on-year, golf equipment more than 11-fold, and cycling gear over 450% year-on-year.

“If the COVID reopening starts to materialize, that is the pent-up demand that you could potentially have…People diverted spending into other areas that could have gone to discretionary purchases,” said Lin.

Chinese ConsumersChinese E-CommerceConsumer TrendsHealth and WellnessTaobaoTmall
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