Earnings Analysis
Alibaba International Records Solid Growth Led By AliExpress
Feb. 12, 2024 6:00 AM ETAlibaba Group Holding Limited (BABA) Stock6 Comments
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Alibaba International recorded strong revenue growth in the three months to December, its sixth consecutive quarterly increase since Alibaba partner Jiang Fan took the helm in 2022.
The company will further invest in its AliExpress “Choice” program, which has shown strong results in boosting customer acquisition and retention.
BABA will continue to invest in Choice to differentiate itself from rivals and attract more customers to shop on AliExpress.
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China e-commerce giant Alibaba Group (NYSE:BABA; 9988.HK) eked out 5% revenue growth in its latest quarterly results announced last Wednesday. Despite that modest gain, a bright spot for the company came from Alibaba International Digital Commerce (Alibaba International), its international e-commerce arm, whose revenue jumped by a much larger 44% to $4.02 billion in the final three months of last year.
Revenue from its core retail e-commerce business grew by an even stronger 56% to $3.28 billion, accounting for more than 80% of the total. Its AliExpress B2C platform was a key contributor to the good results, recording 60% order growth. AliExpress is one of the leading global B2C marketplaces, operating in 17 languages and allowing consumers to buy directly from Chinese manufacturers.
Apart from AliExpress, Alibaba International operates Lazada, which covers six countries in Southeast Asia. Its other platforms include European flagship Trendyol, based in Turkey, along with Miravia, based in Spain. It also operates the Daraz platform covering South Asia. With the exception of AliExpress, the other platforms mostly work with local merchants and brands to serve local consumers. The unit also operates the Alibaba.com global B2B marketplace.
Those myriad retail platforms all contributed to Alibaba International's strong revenue growth, with total combined orders up 24% year-on-year. That suggests the company achieved greater customer "stickiness" through greater spending per order in the latest quarter. AliExpress' significantly higher order growth of 60% was driven by big gains for its popular year-old "Choice" program.
"Despite the uncertain global economic environment and intense market competition, growth in our cross-border business was especially significant," said Alibaba International CEO Jiang Fan during the parent company's earnings call. "Our business model with enhanced consumer experience and supply chain upgrade, product and technology innovation as well as targeted expansion in priority markets are fueling our dynamic growth in this quarter."
Alibaba International said Choice has been pivotal to the expansion of AliExpress' global footprint, making the platform a key driver of the company's growth. Launched a year ago, the program offers consumers around the world a curated selection of value-oriented products across different categories along with extras like free shipping, free returns and delivery guarantees in select countries.
According to Alibaba International, Choice works by offering AliExpress merchants the "Fulfilled by AliExpress" suite of one-stop services integrating sales operations, payment, logistics and warehousing. The service makes it easy for sellers to engage in cross-border business, ultimately bringing a wider array of products and better services and pricing that are key to attracting new customers and retaining existing ones.
As of January 2024, Choice already accounted for nearly half of AliExpress' total orders and is expected to continue driving the platform's growth. An important element of the service's success is its close partnership with Cainiao, Alibaba Group's logistics arm.
During the latest quarter, Cainiao expanded its global five-day express delivery services to 10 countries and regions, providing more expansion opportunities for Choice. AliExpress' order volume using the express delivery service experienced triple-digit growth from the previous quarter.
Fundraising ahead?
Both Alibaba International and Cainiao are among the parent company's major business units that are being spun off to operate separately under a breakup plan announced nearly a year ago. Other units being spun off include its cloud business and its digital media and entertainment unit. At the time of the breakup, the parent Alibaba said some or all of those units could eventually do their own fundraising or even make separate listings.
Outside AliExpress, Trendyol continued to report strong double-digit order growth and maintained a leading position in Turkey. It also further expanded into new markets in the Middle East with a wide range of merchandise backed by its strong logistics support. Its Lazada Southeast Asian flagship continued optimizing its operating efficiency to further narrow its loss per order compared with year-ago levels.
On the B2B side, the Alibaba.com marketplace completed its acquisition of European trading platform Visable in Europe first announced late last year, expanding its supplier base. The B2B business brought in $740 million revenue in the final three months of 2023, up 8% year-on-year.
Alibaba International said it increased its investment during the quarter to provide more differentiated services to its customers, with notable areas of higher spending to build up the Choice program and pay for Trendyol's international expansion. As a result of that additional spending, the company's adjusted EBITA loss widened to $443 million for the quarter from a $53 million loss in the last quarter.
The company has indicated that it will continue to invest in Choice to differentiate itself from rivals and attract more customers to shop on AliExpress.
"Going forward, we will continue to maintain our rapid growth momentum and provide consumers with improved differentiated services. To that end, we will continue to step up investment to enhance user experience and our competitiveness while expanding our business scale," said Jiang.
As an e-commerce veteran, Jiang has shown early strong results at the helm of Alibaba International, as he works to integrate and find more synergies for a series of organic and acquired assets that previously operated relatively independently. He appears to be heading in that direction, but must still prove he can continue to scale the business, maintain growth, and show an eventual path to profitability.
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