Behind Alibaba’s slowest ever quarterly revenue growth: international commerce is gaining momentum

February 25, 2022 0 Comments

Alibaba, China’s largest e-commerce platform, on Thursday reported its Q4 earnings, the slowest growth since going public. Although domestic e-commerce has witnessed a plain growth, international e-commerce is picking up the steam, with Lazada, Alibaba’s Southeast Asian arm, and Trendyol, which serves Turkey, evolving into important units of the company.

Profit on an adjusted basis tumbled 27% from a year ago, while revenue hit $38.06 billion, below the estimate range, a year-on-year increase of 10%. It’s the first time Alibaba’s quarterly sales growth has fallen below 20%. EPS is $2.65 per share, beating the analyst consensus estimate of $2.55 per share.

Guotai Junan Securities analyst Danny Law told Barron’s that the lower profit was the result of slower revenue growth and accelerated spending on R&D, sales and marketing.

The resurgence of Covid-19, a slowing macroeconomy, and increasing competition from rivals like Pinduoduo,, as well as short video platforms Douyin and Kuaishou, all contributed to the slower revenue growth, Alibaba said in the earnings report.

In the latest quarterly earnings, Alibaba split up its China and international retail businesses into different reporting categories. According to the earnings report, the China commerce segment grew by 7% year-over-year to $27 billion, while the international commerce segment increased by 18% year-over-year to $2.5 billion.

Under its China commerce business, customer management revenue (CMR) was 100.09 billion yuan ($15.94 billion), down 1% year-on-year. CMR is the revenue that Alibaba gets from services such as marketing that the company sells to merchants on its Taobao and Tmall e-commerce platforms. It’s a key metric for analysts because it accounts for the majority of the giant’s revenue. 

Revenue of international commerce continued to show strong growth of 18%, fueled mostly by Lazada’s solid transaction growth. According to Bloomberg, Alibaba has a long-term goal of quintupling Lazada’s gross merchandise value, or the total of transactions across its platforms, to $100 billion.

During the quarter, annual active consumers outside of China increased from 285 million to 301 million, meanwhile, total orders increased by approximately 25% year over year, driven by substantial growth of 52% in Lazada, which serves Southeast Asia, and 49% in Trendyol, which focuses on Turkey. 

AliExpress was negatively impacted by changes in European VAT on cross-border parcels valued at less than 22 euros, the earnings report said.

Recently, Lazada’s pre-IPO fundraising is under spotlight. Bloomberg reported on Wednesday that Alibaba has called off discussions with potential investors for a $1 billion pre-IPO round for Lazada due to the disagreement over the valuation of the Singapore-based company.

On the earnings call, the CEO said that the market undervalued Alibaba’s entire business driven by a multi-engine strategy, which includes independently operated Lazada, Trendyol, and logistics unit Cainiao.

Lazada’s unacceptable valuation might be attributed to Alibaba’s huge drop in market value. Hit by Chinese regulators’ crackdown on the internet industry and a downturn in the economy, the NYSE-listed giant’s market capitalization fell from a peak of $864 billion in October 2020 to $295.3 billion today.

Trendyol, which is expected to achieve $10 billion GMV in 2021, is reportedly planning an IPO in 2024-2025. Founded in 2010, Trendyol is Turkey’s largest e-commerce marketplace platform with 34% of the market, according to Euromonitor data. The company just raised $1.5 billion in August at a valuation of $16.5 billion.

In Q4, The company’s cloud business grew 20% year over year to $3 billion, local consumer services, which includes food delivery platform and grocery chain Freshhema, by 27% year over year to $1.9 billion.

Leave a Reply

Your email address will not be published. Required fields are marked *