Jack Ma’s Alibaba Group kept up a blistering growth rate in the second quarter as the Chinese web giant continued to build connective tissue between the country’s clicks and bricks.
The firm’s net profits jumped 146 percent to $2.6 billion as net sales increased 61 percent to $8.3 billion, for the three months ended Sept. 30. Adjusted earnings per share totaled $1.29, well ahead of the $1.03 Wall Street analysts were looking for on average.
Daniel Zhang, chief executive officer, indulged in a bit of corporate bravado and said: “We had an outstanding quarter. Our consumer insights and technology innovation were the key drivers behind our customer value proposition across the Alibaba economy. We are seeing the early results from our efforts to integrate online and off-line with our New Retail strategy, and consumers have benefited from access to high-quality products, improved customer experience and the tremendous convenience of shopping anytime, anywhere.”
The web giant counts 488 million annual active customers on its marketplace, a gain of 22 million from three months earlier.
Helping drive that growth was Tmall, which is in the midst of a push to bring in new customers though coordinated marketing and promotional campaigns.
Tmall launched its Luxury Pavilion during the quarter, helping premium brands such as Loewe, Burberry and Maserati connect with customers with new product campaigns and an omnichannel approach.
But that’s just a part of Alibaba’s major push to bring together the digital and the physical. The company took control of department store Intime earlier this year and has been using it to further its “New Retail” philosophy.
“We have made great efforts to upgrading the Intime model and we are making very good progress,” Zhang told analysts on a conference call to go over quarterly results. “And in Intime today, we already accomplished the integration of the customer profile.”
Now the company is working on integrating Intime’s online and off-line merchandising system so the goods available in store are available online at the same time.
“This will totally change today’s department store model in China and we are very confident that we will make this happen,” the ceo said.
Alibaba’s shopping phenomenon, Singles Day on Nov. 11, will also push farther into the physical world with more than 1,000 brands converting almost 100,000 locations in a “smart store.”
The company said its “New Retail” drive has moved from “proof of concept to rapid expansion.” To get a full picture of a consumer’s shopping habits online and off, the company is expanding its Hema grocery concept, which has 20 stores. And Tmall has opened a franchised convenience store through its own Lingshoutong Retail Sourcing Platform, a new company it’s been incubating for a few years.
Executive vice chairman Joseph Tsai argued there’s plenty more growth ahead in the massive Chinese consumer market.
“While economically China is still a developing country, it has some of the world’s most modern infrastructure and it is the most advanced mobile economy in the world,” Tsai said. “The Internet has helped China to leapfrog ahead of the more developed countries. The Internet turned the lack of legacy infrastructure in the areas of retail, telecoms and banking into an advantage.
“Today, China’s per-capita GDP [gross domestic product] is still only one-seventh of the per capita GDP of the United States,” he said. “Based on the track record of sustained income growth over the past years as well as on the backbone of a modern Internet infrastructure and productivity gains from technology, I’m very optimistic that China will continue to experience real income growth for years to come.”