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Technology

Alibaba Should Align Operations With Consumer Preferences, Says Analyst

Chinese e-commerce giant Alibaba Group should seek to align its operations better with constantly changing consumer preferences in order to maintain its dominance in the sector, a retail analyst has said.

Ankita Roy, retail analyst at GlobalData, was commenting on the back of Alibaba Group reporting a 34% increase in revenue in its most recent quarter, to RMB205.74 billion (€25.4 billion).

However, the business also saw its year-on-year adjusted EBITDA fall back 5%, due to its continued investments in diversified business domains, which will help it to attract a new customer base. The online giant also welcomed a further 45 million customers in the quarter, bringing the total number of active customers on its website to 1.18 billion.

Below Forecasts

“While Alibaba’s revenue growth was quite strong during the first quarter, it was less than the previous forecast of RMB 209 billion," said Roy. "Even though the company continues to excel in its e-commerce business, the discrepancy between the actual revenues and forecasts occurred due to the slowdown of other business units such as cloud services.

“Alibaba must continue to advance operations and expand its footprints in new addressable markets, like the recently added initiative to target consumers in low-tier cities to benefit from the rapidly growing Chinese e-commerce market. Although the company dominates the Chinese e-commerce market, new players such as Pinduoduo and social media platform WeChat are gaining popularity on account of their innovative marketing strategies.”

Data Security

In April of this year, Alibaba underwent regulatory scrutiny from the Chinese government over data security fears, and had to pay a $2.8 billion fine against anti-competitive practices, which led to the company posting an operating loss in the January to March quarter.

It has since bounced back, however, indicating that the issue had no lasting impact on its e-commerce business, and Alibaba has sought to acquire bolt-on investments that can ensure a strong growth trajectory.

“The company’s latest move to increase investment in Idle Fish, China’s largest second-hand digital marketplace, will help it to reach those customers who intend to buy second-hand products," said Roy. "Similar initiatives will enable the retailer to maintain dominance over the coming years.”

© 2021 European Supermarket Magazine – your source for the latest Technology news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: The European Supermarket Magazine

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