Why Alibaba doesn’t really have a reason to worry

by bold-lichterman

Would the road to becoming “a Microsoft or a WalMart”, as historical founder Jack Ma dreamed it, become longer than expected? The e-commerce giant has suffered heavy losses on the stock market, of $ 14 billion on its capitalization this summer. Less than a year after its IPO in September 2014, the stock hit its lowest level, just $ 3 above its introductory level. In question, disappointing results. The Chinese recorded its weakest growth (+ 28%) in its turnover in the second half of 2015, to 3.27 billion euros. Growth remains significant, but it is weaker than expected.

As a result, concerns are mounting among investors and shareholders (Yahoo, Softbank) in a particularly volatile context on the Chinese market. Alibaba had only accustomed them so far to knowing other kinds of records: a first stock market fundraising (21.8 billion from the first day), a record of online sales at 9.3 billion dollars in one day for Chinese Valentine’s Day in 2014, colossal investments in new industries …

Where do the doubts and this slowdown come from? The expected turnover for the semester was 3.39 billion, with an expected increase of 33%. In question, the closing of its lottery activity at the start of 2015, the transfer of its small business credit activity to the Ant Financial entity. For several months, Alibaba has also had to deal with the Chinese authorities who pinned it on cases of counterfeiting and abusive discount pricing on its products.

Exponential growth

Alibaba has no serious reason to be concerned, however. The group can count on its sales in China, its most dynamic market, to support its growth. Sales there grew 34% to $ 109 billion between 2014 and 2015, presented the group this summer. It is also difficult to doubt in view of the explosion of mobile purchasing in China, mainly, and in the world. For the first time, revenues from mobile sales in China are higher than those made on desktop. Their growth shows + 125% year on year, to $ 60 billion. They represent 55% of its annual sales volume.

The Chinese can also count on its cloud activity and its subsidiary Aliyun, through which it wants to conquer the international market. It earned him $ 78 million, up 106% over the year.

Finally, Alibaba has positioned itself upstream of innovation in e-commerce after investing in logistics through Cainiao. With its partnership with Suning Commerce Group Limited, of which it has already acquired 20%, the group will eventually be able to deliver to 1,600 Chinese cities.

The giant will also continue to go beyond its borders and enter new markets. This year it materialized a promising partnership with the American retail giant Macy’s.

Read also: Faced with Amazon and Microsoft, Alibaba wants to become a cloud giant