Alibaba spends five times as much on subsidies to export Singles’ Day

On September 24, 2020, people will wait in line in front of the AliExpress pop-up store in Paris.

Geoffroy van der Hasselt | AFP | Getty Images

Beijing — China’s e-commerce giant Alibaba is about to enter overseas markets as competition intensifies over the Singles’ Day shopping festival in China 12 years ago.

Similar to Black Friday and Cyber ​​Monday in the United States, the shopping event began on November 11th as a day of big discounts on Alibaba’s online shopping platform. Since then, the promotion period has expanded from at least November 1st to 11th. -There are a lot of trading companies such as

This year, JD reported a 32.8% increase in trading volume from 2019 to 271.5 billion yuan ($ 40.4 billion). This is faster than Alibaba’s 26% increase, but the total commodity volume is much higher at 498.2 billion ($ 74.1 billion) (GMV). GMV is the most commonly used metric in e-commerce and measures the total amount of goods sold during a particular time period.

In the case of Alibaba, the GMV number is the sum of orders and shipping charges settled through the digital payment system Alipay, including the company’s Chinese retail market and transactions on the international e-commerce platforms Lazada and AliExpress. It states.

AliExpress usually connects Chinese sellers with foreign buyers, allowing foreign companies and consumers to buy directly from factories in China. Eliminating brokers can significantly reduce product purchases, but long distances and underdeveloped logistics networks can take weeks to deliver.

AliExpress has increased subsidies for this single-day logistics business five-fold compared to last year to speed delivery and reduce customer costs, said Li Dawei, head of AliExpress supply chain, this week. I told CNBC in a telephone interview. This business unit works with Alibaba’s logistics division, Cainiao, and local shipping companies in other countries.

In addition, Lee said the company launched about 100 charter flights to Europe during the two-week Singles’ Day shopping period. This is about 7 flights a day, from 2 during off-peak hours.

Outside of shopping festivals, logistics investments have reduced delivery times for some cross-border products to Spain and France by about 30% to 10 business days, according to AliExpress. The company is also building a warehousing system in Europe. This allows merchants to pre-stock items and deliver selected items to Spain, France and Poland within 3 days and to other parts of Europe within 5-7 days.

Ken Chen, who runs a Shenzhen-based LED light business called Tranyton, has pre-stockpiled warehouses there in anticipation that Europe is his main market and sales of this Singles’ Day will double from last year. Said that. A typical monthly business revenue averages $ 500,000, according to Chen.

It’s not clear how much AliExpress contributed to Alibaba’s Singles’ Day sales this year. According to the business unit, sales of goods sold in overseas warehouses during the first minute of November 11 were the same as sales of the first 60 minutes last year.

International retail trade accounted for 5% of Alibaba’s revenues for the quarter ending September 30, recording 30% growth from a year ago. Total revenue for the period increased 30% from a year ago to $ 22.8 billion.

Curfew enacted in the wake of the coronavirus pandemic is accelerating the demand for online shopping around the world, increasing e-commerce opportunities and competition.

Amazon reported that third-quarter net sales, which ended September 30, increased 37% to $ 96.1 billion. The company is under close scrutiny by European regulators for data use that could give Amazon an unfair advantage over other sellers.

AliExpress said it was trying to get local sellers to join the platform, starting early last year in Russia, Spain, Italy and Turkey. The platform offers the same live streaming sales tools that have surged in popularity in China and have begun real-time translation of some languages.

It remains to be seen if these efforts to recreate success in the Chinese e-commerce market will work in Europe.

McKinsey partner Felix Poh said one of the overlooked factors in the rapid growth of the online shopping ecosystem in China is the development of digital infrastructure in China.

Intensifying competition in China

Huge grants are common in China’s bottom Internet industry, and their survival often depends on the ability of start-ups to quickly attract and retain large user groups. The strategy is to gain a large foundation that can be monetized.

Alibaba’s stock has fallen by more than 10% in the last five trading days, while JD’s stock has fallen by more than 7% after the National Market Regulatory Authority (SAMR) published a draft guideline on Internet industry practices that create monopoly. I am.

Analysts at Morgan Stanley said in a Wednesday report, “Although the draft is in the consumer’s favor, the use of subsidies, discounts and transportation assistance offered by the platform is fair among market participants. It could hinder competition, “he said. .. “This could affect Alibaba’s promotional activities, but it remains unclear to what extent such subsidies are considered antitrust violations.”

Overall, analysts expect regulatory scrutiny to be less effective than last year due to existing competition. Morgan Stanley predicts Alibaba’s GMV will drop to 59% of the Chinese market this year. This is down from 76%, or more than three-quarters, six years before Alibaba was first released.

In fact, according to the company’s latest quarterly report, mobile new monthly active users increased by 7 million from June to September, confirmed by CNBC, according to an analysis by Chinese tech news site 36kr.

A total of 881 million account for 90% of the 923 million mobile Internet users reported by the government agency China Internet Network Information Center in June.

In logistics, while Chinese players are growing significantly abroad, companies often lack staff with sufficient experience abroad and face many other challenges such as capital and regulation. That’s what Charles Guowen Wang, director of the Think Tank Institute for China Development, said. He said the opportunities in China are still quite large.

Alibaba is still a giant in China, but rival Tencent is growing steadily.

More and more people are using the popular messaging tool WeChat to shop with in-app mini-programs. The program has more than 400 million active users per day. The Tencent-owned app was released in September. From January to August, GMVs for physical products purchased through the mini-program more than doubled from a year ago.

“I think we’re also seeing a direct consumer program, which is also a WeChat mini-program,” Po said. “In terms of size and relevance, it has increased exponentially in the last 18 months.”

Alibaba spends five times as much on subsidies to export Singles’ Day

Source link Alibaba spends five times as much on subsidies to export Singles’ Day

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