Alibaba revenue beats estimates: "Good news in a competitive environment"

CGTN Europe interviewed Jacques Roizen, Managing Director, China Consulting at Digital Luxury Group.

Transcript

00:00 Alibaba has posted an 86% drop in fourth quarter profits. This is despite a 7%

00:08 increase in revenue. The Chinese e-commerce giant is facing rising

00:13 competition from low-cost rivals like PDD. Jacques Roizen, the managing director

00:20 of China Consulting at Digital Luxury Group, takes a closer look at what the

00:25 results mean for Alibaba. It is good news in a very competitive e-commerce

00:31 environment in China for Alibaba to be posting a 7% increase in revenue. The

00:37 challenge is on their profitability. The earnings came out at 140, analysts were

00:46 expecting 142 and last year they had a profitability of 152 per share. And

00:52 that's you know unfortunately not that surprising because what we're seeing in

00:58 the Chinese e-commerce landscape is that Alibaba is being squeezed by the

01:03 emergence of Pinduoduo and Douyin and the strength of JD.com. If we also look

01:11 at the success of companies like Xian, Temo, you mentioned Pinduoduo, they have

01:17 really gone after the consumer offering enticing bargains. Is Alibaba on the same

01:25 page or do they have catch-up? I think you're absolutely right. The trend of

01:30 Chinese consumers going after discount and seeking promotion has always been at

01:38 the center of the Chinese e-commerce. When you think of the Douyin and Pinduoduo

01:43 you're having the biggest discount and a great consumer experience. And then the

01:50 other big competitor of Alibaba of course is JD.com. JD has invested amazing

01:58 amounts in providing exceptional logistics and exceptional service. And so

02:04 if you will you have Alibaba being squeezed on two sides, needing to improve

02:09 the customer experience and needing to invest in promotions, it was expected

02:15 from our perspective that their earnings would be challenged. Talk to me about the

02:20 way forward for Alibaba. Is it on the right track given the challenges and the

02:26 very competitive environment that you've just detailed or does it need to course

02:29 correct? I think first of all we need to step back and realize that Alibaba was

02:38 the dominating force and with nobody coming anywhere close. Alibaba had 70

02:45 sometimes 80 percent market share across many categories for a long time and it's

02:51 just no longer the case. Alibaba doesn't have a serious chance at defending those

02:56 market shares and keeping them at that level. And so they have to accept the

03:02 fact that eventually their competitors are going to grow faster than they are

03:07 growing. The challenge is how do they position themselves? I don't know that it

03:13 makes sense to continue investing in discount, continue to funding discount, to

03:19 at the end of the day try to hold on to customers that are always going to go

03:23 wherever the discount is the deepest. I think they should focus on the customers

03:30 that are looking for a you know better quality experience, better quality

03:37 brand experience and an opportunity to buy goods that they know to be authentic

03:43 which is one of Tmall's key points in the value proposition.