China’s Alibaba is pledging to inject new energy into its e-commerce arm as it seeks to block new entrants into e-commerce such as Temu owner PDD Holdings and TikTok owner ByteDance. On Wednesday, Alibaba announced disappointing results for the final quarter of 2023, with its U.S.-listed shares falling 5.9% despite a $25 billion share buyback program.
Alibaba’s core e-commerce group, Taobao Tmall Group (TTG), posted sales of 29.07 billion yuan ($17.98 billion) in the final quarter of 2023, an increase of only 2% year-on-year. Alibaba’s overall quarterly revenue rose 5% to 260.35 billion yuan ($36.61 billion), below analysts’ expectations.
“Our top priority is to reignite growth in our two core businesses: e-commerce and cloud computing,” Alibaba CEO Eddie Wu told analysts.
In a statement released Wednesday, Wu continued that Alibaba needs to make targeted investments in “price competitiveness, service, and user experience.” The company will increase its selection of branded and direct-to-manufacturer products on the TTG platform and focus on providing “high-quality products at attractive prices.”
Alibaba faces a tough market. Macroeconomic headwinds have made Chinese consumers more cautious with their spending and turning to cheaper products and services.
But the company is also battling increasing competition from players like PDD Holdings, owner of Pinduoduo and Temu, and ByteDance, the parent company of TikTok and its Chinese counterpart Douyin.
PDD Holdings reported 94% year-over-year growth for the quarter ended September 30, 2023. In comparison, Alibaba reported 9% growth in the same quarter. (PDD has not yet reported results for the final quarter of 2023).
In China, Pinduoduo has grown as a community buying platform where consumers can order in bulk to reduce costs.
ByteDance is also encroaching on Alibaba’s turf, particularly by expanding into live streaming e-commerce. According to Insider Intelligence, total live e-commerce sales are expected to exceed $800 billion by 2025. ByteDance’s Douyin app is expanding into food delivery and leisure travel.
According to Bloomberg, the social media company’s full-year revenue will soar to $110 billion in 2023, putting it closer to Alibaba in total revenue. According to the report, Alibaba’s revenue for the 2023 calendar year reached $130.1 billion. luck Calculation. (Alibaba’s fiscal year ends in March)
Alibaba reorganized its senior management team and group businesses late last year in response to increasing competition.
In a statement Wednesday, Wu acknowledged the growing competition in Alibaba’s domestic market, calling China “the world’s most competitive e-commerce market.”
Difficult restructuring
Alibaba’s leadership also on Wednesday backed away from an ambitious restructuring plan it announced early last year. In March, the e-commerce giant announced plans to become a holding company and pursue IPOs for six divisions, including logistics service Cainiao.
However, Alibaba Chairman Joe Tsai said the company is “in no hurry” to IPO Cainiao and its grocery chain Freshippo. “Current market conditions are not in a position that we believe can truly reflect the true intrinsic value of these businesses,” Tsai told analysts.
Tsai continued that Alibaba is looking to sell some of its non-core assets. “While we have a number of traditional brick-and-mortar retail businesses on our balance sheet, these are not our core focus,” he said. “It makes sense to exit these businesses.”
Bloomberg reported last week that Alibaba is looking for a buyer for its Intime department store chain.
“Alibaba intends to sell non-core businesses such as offline retail and reduce losses in its remaining businesses,” HSBC analysts said in a report released Wednesday.
Other parts of Alibaba’s turnaround plan are also hitting roadblocks. In November, the company abandoned plans to spin off its cloud computing division, citing concerns that U.S. technology export restrictions would cut off Chinese companies’ access to advanced chips.
Alibaba’s cloud computing division’s quarterly revenue reached 28.06 billion yuan ($3.95 billion) last quarter, an increase of 3% year-on-year.
Alibaba stocks continued to fall in Hong Kong. As of 12pm Hong Kong time, stocks listed in Chinese cities were down 6.8% from the previous day’s closing price.