On April 10, China’s General Administration of Market Supervision imposed administrative penalties on Alibaba for its monopoly in the domestic online retail platform service market, mainly focused on forcing merchants to choose one of two platforms.
It ordered Alibaba Group to stop its illegal activities and imposed a fine of RMB 18.228 billion (about US$2.78 billion) on 4% of its domestic e-commerce sales RMB 455.712 billion in China in 2019.
Alibaba has also announced a simplified requirement on setting up online stores on its B2C e-commerce platform Tmall.
Tmall lowered the requirements of opening stores and will pilot the “trial operation period of Tmall” for the first time in some industries from April 19. That is to say, when a business applies to open a store on Tmall, the qualification screening will be simplified.
After passing the seven-month trial operation ability assessment, it can officially become a Tmall store.
The trial operation period will start with 4 industries, including beauty, skin care, home cleaning, and maternal and child industries, covering beauty, skin care, essential oils, cosmetics, perfume, beauty tools, pet food and supplies, toys, children’s wear, baby wear, stationery, and audio-visual education.
With the entry requirement lowered, the assessment requirements for business operation ability on Tmall remain the same.
In order to verify the comprehensive serviceability of the store to consumers, new businesses need to be assessed at the four test nodes of 30 days, 90 days, 150 days and 210 days after the store goes online.
The assessment content includes six dimensions: store business turnover, commodity experience, logistics experience, after-sales experience, consulting experience, and dispute complaint experience, five of which are directly related to the consumer experience.
Alibaba to launch WeChat Mini Program for Taobao on Tencent
The General Administration of market supervision ordered Alibaba group to stop its illegal activities and imposed a fine of RMB 18.228 billion on 4% of its sales in China in 2019. Subsequently, Alibaba issued an open letter to customers and the public.
Alibaba plans to launch a WeChat Mini Program for Taobao Special Offer, a shopping platform dedicated to reaching consumers in lower-tier Chinese cities and will soon launch enable WeChat Pay.
Alibaba affiliated Alipay (owned by Ant Group) and Tencent’s WeChat Pay are the top two payment platforms in China. Each payment gateway is blocked from the other’s ecosystem.
Taobao Special Offer mini-program is still in the internal testing phase and is not open to members at present. The customer service said that the mini program is being tested and optimized before launch.
Its launch could seriously challenge Pinduoduo’s market share whose total annual active buyers exceeded Alibaba as of Q4 2020.
Alibaba steps up for community group buying market in China
Alibaba highlights for Q4; live streaming contributed RMB 400 billion GMV in 2020
In December 2020, Alibaba’s China retail marketplaces had 902 million mobile MAUs, according to its announced financial results.
Annual active consumers on Alibaba’s China retail marketplaces was 779 million for the twelve months ended December 31, 2020, representing a quarterly net increase of 22 million.
Annual active consumers of Taobao Deals, a product designed to reach less developed cities in China, reached over 100 million for the twelve months period ended December 31, 2020 and mobile MAUs of Taobao Deals also reached over 100 million in December 2020.
Statistics: total annual customers – Alibaba vs JD vs Pinduoduo
During the December quarter, Alibaba introduced the Follow and Entertain features on the front-page of the Taobao app, which further improved user engagement with brands, merchants, key opinion leaders (KOLs), bloggers, and content creators.
On the Follow landing page, consumers can view new products and promotions offered by the stores they follow or in which they have memberships. This feature is an effective method to enhance consumer loyalty with quality merchants and brands.
By browsing the Entertain channel, consumers can learn about the latest consumption and lifestyle trends as well as follow their favorite KOLs, vloggers and content creators. During the quarter, page views enabled through Taobao front page recommendations grew strongly by over 90% year-over-year.
Taobao Live is an indispensable branding, marketing and distribution tool that allows consumers to directly interact with brands, merchants and KOLs through livestreaming sessions.
Alibaba’s own businesses, such as Juhuasuan, Ele.me and Fliggy, are also increasingly leveraging Taobao Live to attract and engage with consumers. Taobao Live generated over RMB400 billion in GMV for the twelve months ended December 31, 2020.
Tmall online physical goods GMV, excluding unpaid orders, grew 19% year-over-year during the December 2020 quarter, supported primarily by the rapid growth of the fast-moving consumer goods (FMCG) and home furnishing categories, while the growth of the consumer electronics category accelerated year-over-year.
The year-over-year growth rate of Taobao online physical goods GMV, excluding unpaid orders, was robust for the December 2020 quarter, primarily driven by solid growth of the apparel and accessories, home furnishing and consumer electronics categories.
Tmall Hey Box: Alibaba’s best seller incubator for top brands
Alibaba Group celebrated the twelfth annual Double 11 Global Shopping Festival in the quarter, featuring a number of key changes in order to better serve brands and enhance the consumer experience.
Alibaba saw a total of over 250,000 brands and 5 million merchants and generating RMB498.2 billion (US$74.1 billion) in GMV, excluding unpaid orders, during the 11-day campaign, an increase of 26% compared to the same timeframe in 2019.
Over 470 brands achieved more than RMB100 million in sales, showcasing the virtuous cycle effects of digital transformation across Alibaba’s ecosystem.
The shopping festival was also an opportunity for brands to launch new products and build brand awareness. During the festival this year, there were approximately 30 million new product launches and GMV, excluding unpaid orders, for new products grew strongly by 35% year-over-year.
New Retail
In October 2020, Alibaba completed Alibaba’s acquisition of a controlling stake in Sun Art Retail Group Limited (“Sun Art”), a leading hypermarket operator in China, and started consolidating Sun Art’s results in Alibaba’s financial statements.
The increased investment in Sun Art will allow us to digitalize its offline traffic, synchronize online and offline channel inventory, broaden supply chain network and increase online purchases.
In the quarter ended December 31, 2020, online purchases, a majority of which was driven by Alibaba’s digital technology, representing 24% of Sun Art’s sales of goods.
Its self-operated grocery retail chain Freshippo (known as “Hema” in Chinese) achieved healthy double-digit same-store sales growth during the quarter as Alibaba continued to optimize its product supply and improve customer experience.
As of December 31, 2020, Alibaba self-operated 246 Freshippo stores in China. Freshippo will continue to adopt a multi-format and multi-banner expansion strategy by developing new shopping formats and scenarios for the consumption of food and beverage and general merchandise.
During the quarter, Freshippo opened its first “X Membership” warehouse store in Shanghai, which features high-quality products at competitive prices that can be purchased only by store members.
Hema penetrating low-tier cities with Hema Mini supermarket
Local Consumer Services
Demand for digitalization in the restaurant and service industry remains strong after the impact of the COVID-19 pandemic in China. Ele.me has continued to capture this market opportunity, attracting high-quality merchants by providing digital technology solutions and other value-added services.
The number of registered merchants grew by over 30% year-over-year as of December 31, 2020.
Ele.me’s average daily number of paying members in the December quarter grew about 30% year-over-year given the successful upgrade of Alibaba’s membership program and continued onboarding of high-quality merchants.
As part of Alibaba’s New Retail strategy, Ele.me continues to expand its on-demand delivery services to cover a wider range of products in categories such as fresh produce and grocery.
As of December 31, 2020, the number of non-restaurant registered merchants enabled by Ele.me increased by over 80% year-over-year.
Cainiao Network
In the December quarter, Cainiao Network revenue grew 51% year-over-year to RMB11,360 million (US$1,741 million), primarily due to the increase in the volume of orders fulfilled from Alibaba’s fast-growing cross-border and international commerce retail businesses.
Cainiao had positive operating cash flow during the quarter.
Cainiao Network continued to expand both its domestic services and global smart logistics infrastructure by deepening integration with logistics partners as well as offering more products and services.
In China, Cainiao and its partners processed over 2.3 billion orders during the Double 11 Global Shopping Festival while continuing to improve delivery time to enhance the consumer experience.
Internationally, Cainiao and its partners continued to invest in smart logistics infrastructure to serve Alibaba’s global merchants and to help alleviate logistics capacity constraints caused by the COVID-19 pandemic.
In December 2020, Cainiao deployed more than 200 international chartered cargo flights for Alibaba’s AliExpress business, which resulted in improved fulfillment efficiency for AliExpress orders and a reduction of average delivery time by 3.5 days for order deliveries from China to international markets.
International
Alibaba’s Southeast Asian e-commerce platform Lazada continued to achieve robust growth in both buyers and sellers, benefiting from acceleration of digitalization across industries in Southeast Asia.
Lazada recorded another quarter of triple-digit year-over-year order growth despite new waves of the COVID-19 pandemic in many markets where it operates.
Cloud Computing
In the December quarter, cloud computing revenue grew 50% year-over-year to RMB16,115 million (US$2,470 million), primarily driven by robust growth in revenue from customers in the Internet and retail industries and the public sector.
For the first time, Alibaba Cloud achieved positive adjusted EBITA during the quarter due to the realization of economies of scale.
For example, according to Gartner’s November 2020 report, among the large-scale global cloud providers, Alibaba Cloud is the only Chinese company with the Leader ranking for database management system under Gartner’s Magic Quadrant measurement.
Top 10 forecasts for China cloud computing market 2021-2024
Digital Media and Entertainment
During the quarter, a leading online video platform Youku’s average daily subscriber base increased around 30% year-over-year, driven by the appeal of its original content and continued contribution from the 88VIP membership program.
Alibaba Pictures continued its solid track record in content investment and distribution. For example, Alibaba Pictures invested in and distributed the top three grossing films during the three-day New Year holiday in China, which accounted for over 80% of China box office sales during the period according to Beacon Box Office data.
Financial Highlights for Q4 2020
Revenue was RMB221,084 million (US$33,883 million), an increase of 37% year-over-year
Income from operations was RMB49,002 million (US$7,510 million), an increase of 24% year-over-year. Adjusted EBITDA, a non-GAAP measurement, increased 22% year-over-year to RMB68,380 million (US$10,480 million). Adjusted EBITA, a non-GAAP measurement, increased 21% year-over-year to RMB61,253 million (US$9,387 million).
Net income attributable to ordinary shareholders was RMB79,427 million (US$12,173 million), and net income was RMB77,977 million (US$11,950 million). Non-GAAP net income was RMB59,207 million (US$9,074 million), an increase of 27% year-over-year.
Diluted earnings per ADS was RMB28.85 (US$4.42) and non-GAAP diluted earnings per ADS was RMB22.03 (US$3.38), an increase of 21% year-over-year.
Diluted earnings per share was RMB3.61 (US$0.55 or HK$4.29) and non-GAAP diluted earnings per share was RMB2.75 (US$0.42 or HK$3.27), an increase of 21% year-over-year.
Net cash provided by operating activities was RMB103,208 million (US$15,817 million) and non-GAAP free cash flow was RMB96,210 million (US$14,745 million).
