Alibaba boost confidence for Singles day sales
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E-mail Xinhua, November 6, 2014
Alibaba has reported better than estimated results in its first quarterly financial report following a 25 billion dollar IPO in the United States.
On Tuesday night, the e-commerce giant reported a 54 percent revenue surge during the third quarter of this year. The company's profits, however, slid 39 percent from a year ago to 494 million dollars, or 20 percent per share, as it beefed up spending on its mobile platform and acquired internet assets.
The report boosted investors' confidence in the company, which operates China's largest consumer-to-consumer (C2C) and business-to-consumer (B2C) marketplaces Taobao and Tmall, prior to the upcoming Singles Day online shopping spree.
Shares of Alibaba spiked 4.19 percent on Tuesday trading to close at 106.07 U.S. dollars.
Goldman Sachs predicted in a report to clients the stock could be worth 133 dollars, or a market capitalization of 350 billion dollars, in 2017 if the company continues its current earning trend.
Transactions from the company could amount to 5 percent of China's economic output by 2016, the report said.
The earnings report came as Alibaba braces for the China's annual online shopping spree known as the Singles Day, which falls on Nov. 11. The event was initiated by the company in 2009 to spur online sales through massive promotions in its marketplaces. Sales on Singles Day snowballed from 50 million yuan in 2009 to 35 billion last year.
This day has evolved from a promotional gig for Taobao and Tmall to an online bonanza for a number of major online retailers.
JD.com, which operates a B2C marketplace in China and went public on the Nasdaq in May this year, has also marketed heavily for the day in the past years.
In addition to price cuts, JD's Singles Day campaign has utilized areas where Alibaba is vulnerable, touting speedy delivery and a guarantee of no counterfeits sold on its site.
This year's Singles day is poised for new record-breaking sales thanks in part to online retailers' effort to connect more overseas products to Chinese consumers.
U.S. wholesale retailer Costco has teamed up with Alibaba's Tmall to sell imported food to China while Amazon has allowed Chinese consumers to buy its products shipped from overseas.
Analysts say China's online retail scene will continue to experience years of rapid growth, creating great growth potential for major retailers such as Alibaba and JD.com.
According to China Internet Network Information Center (CNNIC), the country is already the world's largest online retail market, with a sales volume of 1.85 trillion yuan (302 billion U.S. dollars) in 2013, compared with 258.9 billion dollars in the United States.
KPMG estimates that by 2020, the size of China's e-commerce market may exceed that of the United States, United Kingdom, Japan, Germany, and France combined.
Meanwhile, private consumption in China has been outgrowing the economy, as retail sales have outpaced GDP growth by around three percentage points in the past two years, Goldman Sachs said.
However, consumption only contributed to 37 percent of China's GDP in 2013, compared to 67 percent in the United States.
Thanks to growing penetration of smartphones and tablet computers, Chinese are increasingly going online through mobile devices. CNNIC finds that of the 632 million Chinese internet users as of June this year, 527 million log online using a mobile device.
The trend has prompted Alibaba and JD to win customers on the mobile screens.
Alibaba said on Tuesday that its mobile revenue in the third quarter has soared 10 times from the same period last year. JD sold a 15 percent stake to Chinese internet juggernaut Tencent in March before its subsequent U.S. IPO to tap the 350 million monthly user base on Tencent's popular instant messaging app WeChat.
Consultancy iResearch predicts that the share of online shopping revenue in total social retail sales could almost double to 15.7 percent in 2017. Meanwhile, mobile shopping's share is likely to grow to 56.9 percent by then from 14.5 percent in 2013.
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