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Alibaba spends five times the subsidy to export on Double Eleven



People wait in line in front of the AliExpress pop-up store in Paris on September 24, 2020.

Geoffroy van der Hasselt | AFP | Getty Images

BEIJING-Chinese e-commerce giant Alibaba (Alibaba) is marching into overseas markets because of the increasing competition before and after the “Singles Day”

; shopping festival that the company launched in China 12 years ago.

Similar to Black Friday or Cyber ​​Monday in the United States, the shopping event started on November 11, a day for large-scale discounts on Alibaba’s online shopping platform. The promotion period has been extended to at least November 1-11, and other Chinese e-commerce companies such as JD.com have flooded in.

This year, JD’s announced transaction volume increased by 32.8% over 2019, reaching 271.5 billion yuan (approximately US$40.4 billion). This is faster than the 26% growth rate disclosed by Alibaba, although the increase in total merchandise trading volume is even greater, reaching 498.2 billion euros (74.1 billion US dollars) (GMV). GMV is the most commonly used metric in e-commerce to measure the total value of goods sold in a certain period of time.

For Alibaba, it said that GMV data is the total value of orders and shipping charges settled through the digital payment system Alipay. These payments are used to pay for the company’s transactions in the Chinese retail market and the international e-commerce platforms Lazada and AliExpress.

AliExpress usually connects Chinese sellers with overseas buyers, allowing foreign companies and consumers to purchase goods directly from Chinese factories. Although the elimination of middlemen can make the purchase price of products much cheaper, the long distance and underdeveloped logistics network may mean several weeks of delivery time.

In order to speed up delivery and reduce customer costs, AliExpress has increased its logistics business subsidies by five times during the Double Eleven compared with last year. This week, Li Dawei, the head of AliExpress supply chain, was interviewed by CNBC Said. This business unit cooperates with Alibaba’s logistics unit Cainiao and local express companies in other countries.

Li also said that during the “Double Eleven” shopping period of about two weeks, the company opened about 100 cargo charter flights to Europe. There are about seven flights a day, and two during non-peak hours.

According to AliExpress, outside the shopping festival, investment in logistics has reduced the delivery time of certain cross-border products to Spain and France by about 30% to 10 working days. The company has also established its warehouse system in Europe, through which merchants can pre-store goods and deliver selected products to Spain, France and Poland within 3 days, and 5 to 7 days in other parts of Europe.

Ken Chen, who runs Tranyton, a Shenzhen-based LED lighting company, said that Europe is his main market, and he has been pre-stocking warehouses there, hoping that sales for this Singles Day will double last year. Chen said that a typical monthly business income averages $500,000.

It is not clear how much AliExpress will contribute to Alibaba’s Double Eleven sales this year. The business unit said that in the first minute of November 11, the sales of goods sold in overseas warehouses were comparable to the 60 minutes in the same period last year.

In the quarter ended September 30, the international retail business accounted for 5% of Alibaba’s revenue, an increase of 30% from the same period last year. Total revenue for the quarter increased by 30% over the same period last year, reaching $22.8 billion.

As the “home policy” formulated after the coronavirus pandemic is accelerating the global demand for online shopping, opportunities and competition in e-commerce are intensifying.

Amazon reported that in the third quarter ended September 30, its net sales increased by 37% to $96.1 billion. The company has been subject to strict scrutiny of data usage by European regulators, which may give Amazon an unfair advantage over other sellers.

According to the company, AliExpress has been trying to get local sellers to join its platform, starting with Russia, Spain, Italy and Turkey since the beginning of last year. The platform provides the same functions as the increasingly popular real-time streaming sales tool in China, and enables real-time translation for certain languages.

Whether these efforts to replicate success in the Chinese e-commerce market will work in Europe remains to be seen.

Felix Poh, a partner at McKinsey, pointed out that an overlooked factor in the rapid growth of China’s online shopping ecosystem is the development of China’s digital infrastructure.

Increasing competition in China

In China’s Internet industry, subsidies are very common. In the Internet industry, survival often depends on whether a startup can quickly attract and retain a large number of users. This strategy is to obtain a huge foundation that can be monetized.

In the past five trading days, Alibaba’s stock price has fallen by more than 10%, while Jingdong (JD) has fallen by more than 7% after the State Administration for Market Regulation (SAMR) issued draft guidelines for the creation of monopolistic behavior in the Internet industry.

Morgan Stanley analysts said in a report on Wednesday: “The draft mentions that although the platform is favored by consumers, the use of subsidies, discounts and transportation support provided by the platform may prevent fair competition among market participants. (That is, by setting the price below the cost).”. “This may affect Alibaba’s promotional activities, although the extent to which this subsidy is considered a violation of antitrust rules is uncertain.”

In general, analysts predict that due to competition, the effectiveness of regulatory review will be less than in previous years. Morgan Stanley estimates that Alibaba’s GMV will fall to 59% of the Chinese market this year, down from 76% (or more than three-quarters) of the company’s initial public offering six years ago.

In fact, according to the analysis of the Chinese science and technology news website 36kr and confirmation by CNBC, the company’s latest quarterly report shows that from June to September, the monthly new active users of mobile users increased by 7 million, which is a record Minimal growth.

The government agency China Internet Network Information Center reported that the total number of mobile Internet users in June was 982 million, accounting for more than 90% of the total.

In terms of logistics, despite the significant growth of Chinese companies overseas, companies often lack employees with sufficient experience overseas and face many other challenges, such as capital and supervision, said Wang Guowen, director of the think tank China Development Research Institute. He pointed out that there are still great opportunities within China.

Alibaba is still a giant in China, but its rival Tencent is gradually gaining popularity.

Tencent-owned apps were revealed in September that more and more people are also using the popular messaging tool WeChat to shop through an in-app mini-program, which now has 400 million daily active users. From January to August, the GMV of physical goods purchased through mini programs more than doubled from a year ago.

Poh said: “I think we have also seen the rise of direct consumer programs, which are also WeChat mini programs.” “In terms of scale and relevance, it has grown exponentially in the past 18 months.”


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