By and and
with contributions from Reuters
 on August 27, 2014

In what might be the final financial report before Alibaba Group Holding Ltd. goes public, the company on Wednesday said first-quarter net income nearly tripled as mobile revenues helped to fuel its e-commerce growth in China.

Alibaba’s first-quarter report came on the same day that Reuters reported China’s Dalian Wanda Group is set to launch an e-commerce venture with Tencent Holdings Ltd. and Baidu Inc.

For the three months ended June 30, net income was $2 billion, or 84 cents a share, compared with $709,331, or 31 cents, a year ago, according to a regulatory filing with the Securities and Exchange Commission updating Alibaba’s Registration Statement. The company is expected to have its road show with investors next month. In yuan, the company said net income was 12.34 billion yuan, or 5.20 yuan a diluted share, versus 4.38 billion yuan, or 1.93 yuan, a year ago. Year-ago figures were converted to U.S. dollars at a three-month average exchange rate. Total revenues rose 46 percent to $2.54 billion from $1.74 billion, or 15.77 billion yuan versus 10.78 billion yuan in the same 2013 period. Revenues from e-commerce in China gained 44.2 percent to $2.15 billion from $1.49 billion, or 13.35 billion yuan from 9.19 billion yuan a year ago. The company has some revenue from international commerce, as well as cloud computing and Internet infrastructure operations.

RELATED CONTENT: WWD Earnings Tracker >>

The company said it receives revenue from online marketing services, commissions based on transaction value from certain of its marketplaces and fees from the sale of memberships in its wholesale marketplaces. Its marketing customers are brand owners, distributors and merchants who sell on its marketplaces. For the quarter ended June 30, the company said it had 279 million active buyers on its China retail marketplaces, such as Taobao, Tmall and group buying site Juhuasuan.

Revenue growth has been impacted by the rising usage of mobile devices. Alibaba also has been promoting the usage of various mobile e-commerce apps such as its Mobile Taobao app. According to the regulatory filing, mobile represented 32.8 percent of gross merchandise volume, up from 12 percent a year ago, and up from 27.4 percent from the fourth quarter ended March 31. Mobile revenue, as a percentage of revenue in yuan, was 19.4 percent for the first quarter. Mobile revenue, as a percentage of revenue in yuan, was just 2.8 percent in the comparable 2013 quarter.

There appear to be two schools of thought surrounding the Reuters report of the new e-commerce venture between two of China’s largest Internet companies and one of the country’s biggest developers of commercial real estate, in particular shopping malls. Thibault Villet, cofounder and chief executive officer of Glamour Sales China, a luxury flash-sales site, believes the primary goal of the partnership is to target the online-to-offline sales opportunity in China. Dalian Wanda, which owns dozens of shopping malls in the country, can leverage Baidu’s search and map functions as well as Tencent’s virtually ubiquitous social media platforms, in particular WeChat, a mobile chat platform with hundreds of millions of users, to drive sales in its brick-and-mortar retail spaces. “Their primary goal is to target the online-to-offline opportunity,” Villet said.

“While now over 10 percent of Chinese total retail transactions are done online, the explosion of smartphones in China is creating the next frontier, the online-to-offline market,” Villet said.

Others think the partnership is meant to directly challenge Alibaba, which in the run-up to its IPO, has been investing in everything from entertainment groups to social media platforms to soccer teams.

“All players could be looking for ways to compete against Alibaba, which is really the big gorilla in the room,” said Torsten Stocker, a partner at consulting firm A.T. Kearney. “I feel there is an element of an anti-Alibaba coalition. They are obviously competing with Alibaba, but they are all quite strong in their own right and are bundling their forces to compete more effectively.”

Kelland Willis, associate analyst at Forrester Research, said the potential deal illustrates how “big players are building up their ecosystems in order to compete with each other” and diversify their businesses beyond their core competencies. It will take years for Tencent and Baidu to compete with the likes of Alibaba so “they realize they have to do something really different.” Dalian Wanda can leverage its relationships with landlords and competency in the real estate arena to help grow new brands in the physical retail space, she said, stressing the growing attention to omnichannel concepts in retail. Despite the fast growth of e-commerce, people in China — particularly in cities — love to shop so this deal could tap into that, she said. “I think that shopping is going to forever be a part of the retail experience in China.”

Click Here for the WWD Global Stock Tracker >>

To access this article, click here to subscribe or to log in.

To Read the Full Article

Tap into our Global Network

Of Industry Leaders and Designers

load comments
blog comments powered by Disqus