Alibaba, the Return of the E-commerce King?

Author | Liu Baodan

Author | Zhang Xiaoling

Over the past year, China's e-commerce giant Alibaba has been busy dealing with intense industry competition. At times, its revenue declined and its daily active user base was surpassed by Pinduoduo.

Now, with Jack Ma's return, Alibaba seems to be reclaiming the lost market.

On the evening of August 10th, Alibaba released its quarterly performance for the period from April to June 2023, with a revenue of 234.156 billion yuan, a growth rate of 14%. After experiencing five quarters of sluggishness, it has returned to double-digit growth.

More importantly, the number of users on Taobao has regained the lead. According to the QuestMobile report, the average daily active users of the Taobao app reached 402 million, and the total active users during the 6.18 period reached 915 million, ranking first and expanding its lead to 250 million.

Such achievements did not come easily, and Alibaba described the financial performance of this quarter as strong, indicating that the management is very satisfied.

In March, Alibaba completed the largest organizational transformation in history, splitting its business into six groups: Taotian, Alibaba Cloud, Local Services, International Digital Commerce, Cainiao, and Digital Entertainment. This directly brought positive feedback to its performance.

The fastest-growing group is the International Digital Commerce Group led by Jiang Fan, with a retail revenue growth rate of up to 60%. In addition, apart from Alibaba Cloud with a revenue growth rate of 4%, Cainiao, Local Services, Digital Entertainment, and other businesses all achieved growth rates of over 30%, showing comprehensive growth in all areas.

However, what fundamentally reversed Alibaba's performance is its dominant e-commerce business. After the split, Taotian mainly covers businesses such as Taobao and Tmall. Last quarter, Taotian achieved a quarterly revenue of 114.95 billion yuan, a year-on-year growth of 12%.

Previously, the growth of GMV on Taobao and Tmall had slowed down and even declined. Returning to double-digit growth indicates substantial progress in Alibaba's e-commerce business.

In the past few years, Taotian has faced great pressure, especially from Pinduoduo. At the end of 2020, Pinduoduo's annual active buyers exceeded Taobao for the first time, reaching 788.4 million. Since then, the two have been engaged in fierce battles, with Pinduoduo's average daily active users surpassing Taobao app for a long time.

In the past three months, Taotian's suppressed situation has improved, and Alibaba has regained its position as the number one in e-commerce.

As of June 30, 2023, the daily average active users (DAU) of the Taobao app increased by 6.5% compared to the same period last year, achieving high-speed growth for five consecutive months, and the growth trend is still continuing.

Against the backdrop of reaching the peak of incremental users, Taobao's user growth is equivalent to snatching users from competitors, and this is indeed the case.

Data from MoonFox shows that Taobao's monthly active data has seen the most significant increase in the second quarter, with a total monthly active user count approaching 877 million. According to a Goldman Sachs research report, Taobao's monthly active data is 258 million ahead of Pinduoduo, with the latter experiencing a 21% decline in daily active users in June. To regain lost ground and restore growth, Alibaba has carried out a series of bold reforms for Taotian.

Since the beginning of the year, Taotian first established five major strategies, including price competitiveness. In March, veteran Dai Shan returned as CEO of Taotian. In May, Jack Ma pointed out the strategic direction of returning to Taobao and focusing on users.

As a result, the focus of Taotian shifted to Taobao and formed a new development direction, which revolves around three major strategies: user-centricity, ecological prosperity, and technology-driven growth, with a core focus on user expansion.

To achieve this, Dai Shan focused on supporting small and medium-sized businesses and established the KA Service Department to improve the growth path from entrepreneurship to small and medium-sized enterprises and then to branding.

Dai Shan stated that in the last quarter, Taobao had a large number of new merchants joining, and a considerable portion of them quickly became new forces in the price competitiveness battle. The price competitiveness battle will continue to be a key investment project in the future.

Taking the 618 Shopping Festival as an example, Taobao introduced the Taobao Good Price Festival for the first time, attracting more lower-tier market and young users by providing cost-effective products.

Dai Shan's logic is that increasing the user base can attract more merchants, leading to transaction growth, revenue, and profit, which can then be reinvested in user expansion, forming a positive cycle.

On the evening of August 10th, during an analyst conference call, Dai Shan stated that the above strategies have shown initial effectiveness, and Alibaba's advantage in the e-commerce field is expanding.

Regarding the future strategy, Dai Shan stated that Alibaba will make resolute investments in user base growth, user experience improvement, merchant business enhancement, and merchant service improvement over the next three years.

However, she also admitted that Taotian's good performance is not only due to the implementation of price competitiveness strategies but also influenced by macroeconomic factors, especially consumption recovery, which has driven the increase in online retail penetration.

This also means that although Taotian has regained the initiative, to a large extent, this is an industry-wide recovery, and Taotian is not yet safe as competitors like Pinduoduo remain strong.

A former Alibaba employee told Wall Street News that Alibaba has conducted research and believes that the future's biggest competitor is Douyin, as innovation has the potential to disrupt the original e-commerce landscape.

In addition, innovative platforms such as Kuaishou and Xiaohongshu are also vigorously exploring commercialization paths. With the increasing number of trillion-dollar e-commerce players, market competition will only become more intense.

To cope with this trend, Taobao has upgraded from a trading platform to a lifestyle consumption platform, aiming to continue serving the largest consumer base while extending and upgrading into consumer and local life entrances.

On July 17th, Taobao underwent its largest revision in three years and launched "Night Taobao," providing entertainment and leisure content such as movies, games, and live streaming, venturing into the territory of platforms like Douyin.

The world of e-commerce and the internet never sleeps. Alibaba still needs to continue to face challenges.