Alibaba’s sales have surged as Chinese statistics show consumers in the country continue to do more and more of their shopping online. In that sense, Alibaba’s growth is tracking China’s efforts to transform its economy to rely more on American-style consumption and less on government spending.
That does not make it infallible. Alibaba’s results rely on its online marketplaces, which face growing competition and could someday be hit by a slowdown in growth either from the Chinese economy or from internet adoption in a still-developing country. To diversify, Alibaba has been expanding into entertainment and cloud computing and looking for new opportunities overseas, where it faces competition from its American peers.
The strong growth also cloaks a more complicated picture. Over the past year, Alibaba’s increase in revenue has outstripped the actual value of the goods being sold on its e-commerce websites. That means that the company has been able to earn more off the vendors who sell everything from name brands to knickknacks on its sites.
Alibaba makes money from vendors by charging them for advertising on its platforms, among other services. New technology and some of its corporate deals have given it access to new and better data that give it more power to target those vendors.
That approach has kept Alibaba’s results strong despite a slowdown in growth of the total value of goods being sold on its platform. But it is not clear how long it can keep that phenomenon going, fueling its effort to find new consumers and expand into new businesses.
Jack Ma Goes to Washington
As part of that push, Jack Ma, Alibaba’s charismatic founder, has been barnstorming across the American political landscape over the past year. A sort of ambassador for the company, Mr. Ma met with President Trump and held a conference in Detroit. His goal has been to persuade more American vendors to get on Alibaba and sell to a Chinese middle class that craves foreign goods.
By attracting more vendors from overseas, Alibaba is able to bring in more big advertising spenders, and support its revenue growth.
Helping his cause was a settlement announced this month between Alibaba and Kering, the luxury goods giant that owns the Gucci brand and had filed a lawsuit in 2015 charging counterfeit goods had been sold from Alibaba’s e-commerce websites.
The Amazon Aspect
As Alibaba looks abroad, it may finally directly compete with that other e-commerce giant, Amazon. In Southeast Asia, where Alibaba owns an online commerce platform called Lazada, it will probably face a new Amazon initiative in the region.
Some have wondered whether Mr. Ma is simply following Amazon’s game plan. Just as Amazon has done, Alibaba has started a cloud computing business, bought into a high-profile newspaper, worked to begin creating its own entertainment content, and more recently made bold predictions about unmanned retail stores that will use smartphones to automatically charge customers.
Still, there are some ways in which Alibaba is different. The biggest one is its financial affiliate, Ant Financial, which is responsible for trillions of dollars in money transfers each year. As it looks to expand the business overseas, it has bid for MoneyGram, a remittance company that would give it new exposure to America. As American regulators review that deal, much will depend on Mr. Ma’s political maneuverings.
Continue reading the main story