AliViews: Eddie Wu on Alibaba’s Q3 Earnings

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AliViews: Eddie Wu on Alibaba’s Q3 Earnings

  • The priority is reigniting growth in Alibaba’s core businesses: e-commerce and cloud computing
  • 2024 will be a year of capability upgrades for Tmall and Taobao Group and significant investment

Alibaba Group on Wednesday reported earnings for the quarter ending Dec. 31. Shortly afterward, Alibaba Group’s CEO and Director Eddie Wu addressed investors and analysts on an earnings call. 

Hello everyone.

This past quarter, we delivered steady growth while making organizational adjustments that align with our strategic focus. At the same time, we took a deep look at our core business operations and the competitive landscape.

We concluded that to maintain our competitive edge, we must increase our investment in core capabilities and adopt a more aggressive approach towards competition in order to win growth. Our top priority is to reignite the growth of our two core businesses, e-commerce and cloud computing.

During the quarter, the execution of our user-first and competitive pricing strategies in Taobao and Tmall Group (TTG) was effective, which resulted in healthy year-over-year GMV growth as the number of active buyers and order volume showed robust increase. The number of merchants continued to grow at a double-digit rate. I will elaborate on the outlook and plans for 2024 later on.

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Business Growth

In cloud computing, we are committed to our strategy of prioritizing public cloud. We have proactively optimized our business structure, reduced revenue from project-based contracts, and increased investment in public cloud products. These structural adjustments are showing initial results and Alibaba Cloud’s overall profitability capability continues to improve.

We have also upgraded Alibaba Cloud’s sales operations, establishing different sales and service systems to serve different types and sizes of customers. By improving our customer coverage and service capabilities, we will enhance our growth rate.

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In the international commerce business, we focused on expanding cross-border offerings and enhancing shopping experience. This quarter, all of AIDC’s retail platforms achieved growth, which resulted in international digital commerce overall revenues growing at a rapid rate of 44% year-over-year.

Cainiao continued to develop its global smart logistics network, with cross-border logistics fulfillment solutions contributing to 24% year-over-year revenue growth, as well as realizing strong synergies with our cross-border e-commerce business.

Capturing Opportunities

Now, I want to share the strategic priorities of TTG in investing and capturing growth opportunities.

TTG operates in the world’s most competitive e-commerce market, which is China. As we carefully evaluate TTG’s competitive position within the China e-commerce market, we note that TTG continues to be number 1 in GMV share and is the leading platform for consumer shopping. Merchants operate on the platform as their primary place of e-commerce business, and TTG has the deepest and most comprehensive selection of products amongst its peers.

However, we must still make targeted investments and improvements in price competitiveness, service, and user experience.

We must increase our investment in core capabilities and adopt a more aggressive approach towards competition in order to win growth.
– Eddie Wu  Alibaba Group CEO and Director

Given that consumers use multiple platforms, returning to a user-centric approach is at the heart of our strategy. We will increase investment in core user experiences to enhance the customer shopping experience.

I am confident that if we focus on delivering “The Incredible Taobao” experience by offering quality products at attractive prices with great service that meets the different needs of different consumer segments, TTG will earn users’ trust and return to growth.

Year Ahead

Thus, 2024 will be a year of comprehensive capability upgrades for TTG and also a year of significant investment. Specifically, we will prioritize investment in the following areas:

We will increase our investments in growing the selection of branded products and direct-from-manufacturer products on TTG platforms. This will further strengthen our product supply advantages to better address new consumption trends and demands.

We will increase investment into product sourcing capabilities and optimizing business model relationships between merchants and our platform. For different types of suppliers, we will offer flexible business models that are best suited to improve their operational efficiency and thereby enhance Taobao’s value proposition.

The “competitive pricing” we are focused on delivering is attractive prices for quality products; this is a demand that consumers have across cycles, and is fundamental to doing business.

We will work with our merchants and logistics partners to invest in improving the entire consumer service experience, including pre-sale, in-sale, post-sale, and logistics. For different customer segments on the platform, we will build a customer service system that accurately identifies and meets the various needs of the different groups.

Through the above investments, we will enhance Taobao and Tmall’s comprehensive capabilities to offer quality products at attractive prices with great service. We believe that improving the platform’s overall shopping experience and service quality will lead to increased purchase frequency and materially improve the efficiency of user growth.

Today, Taobao and Tmall remain the most valuable shopping platforms and the main place for merchants to do business. With the comprehensive capability building planned for 2024, we are confident that TTG will return to growth.

Dig deeper into Alibaba’s third-quarter earnings results here

Alibaba Group Quarterly EarningsAliViewsEddie Wu
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