Now that it’s a publicly traded company, Alibaba Group Holding Ltd. will be meeting every three months with investment analysts to take questions about its quarterly results. In the first such meeting today following Alibaba’s record-smashing $25 billion initial public offering in September, company executives—though not its colorful chairman Jack Ma—provided insights into many aspects of the sprawling company’s business.
In particular, they emphasized that Alibaba remains focused on growth opportunities in China. That’s a position Alibaba executives have repeatedly taken publicly over the past few years. However, the IPO fueled speculation that Alibaba would invest abroad. That’s particularly true because the company netted about $8 billion from the stock offering—the rest went to investors and employees—and made clear that it would not repatriate any of those funds to China, instead holding them in overseas bank accounts for use abroad.
Nonetheless, Joe Tsai, Alibaba’s executive vice chairman, told analysts on a conference call that the company is still investing heavily in China.
“For context when you consider (we have) 307 million active buyers, this … equals almost the entire population of the U.S.,” Tsai told analysts. “But that amount represents only about half of China’s Internet population and less than a quarter of the population of China.”
Alibaba also touched on several aspects of its current business and plans for the future in its quarterly call with analysts:
- Alibaba is eying launching its own mobile operating system. Fielding an analyst question Tsai confirmed it is looking into such a project though shied away from offering details.“Developing an OS for mobile in the long term (looks like) a winning strategy for us,” Tsai said. The operating system would be for all mobile devices not just smartphones, he said.
- The longer a shopper is with Alibaba the more she spends—a lot more. While gross merchandise value (the value of purchases on its marketplaces) per Alibaba shopper was down slightly by 2% Alibaba says this is largely a result of a 52% year-over-year increase new in active buyers. Newer buyers, Alibaba said, spend less. A customer who has shopped with Alibaba for one year spends about 1,000 yuan (US $163.52) annually. That increases to 15,000 yuan average annual spend (US $2,452.78) for a five-year Alibaba shopper and to 30,000 yuan (US $4,905) in 10 years, chief financial officer Maggie Wu told investors.
- More mobile details. In the 12 months ended Sept. 30, Alibaba generated $95 billion in GMV via its mobile apps and Alibaba accounts for 86% of total mobile GMV in China, according to iResearch, a Beijing-based market research firm that tracks e-commerce. 29% of total revenue across Alibaba’s China retail marketplaces is now derived from mobile, up from 19% from its previous quarter ended in June. Merchants are also spending more on mobile keyword advertising than desktop advertising.
- Taobao details: Taobao is an online marketplace that is open to any Chinese resident, and Alibaba says 8.5 million sellers offer their goods each year on the wide-open online bazaar. Taobao added a recommendation engine based on customer data. Additionally, strong-performing new categories include furniture and home furnishings, car parts and accessories, sports gear and baby products. More personalized search results led to an increase in conversions. Taobao has a higher mobile GMV than Tmall. An influx of new rural buyers from smaller cities are coming to Alibaba and they are more frequently making their first purchases on Taobao rather than the higher-end Tmall.
- New investments. Alibaba plans to continue investing in local and mobile projects and plans to add digital entertainment products to its marketplaces.
- Expanding into rural areas represents an opportunity for growth. 34% of Chinese consumers in urban areas shop online compared to only 9% of Chinese in rural areas, Alibaba executives said on the call. 600 million farmers now buy online from Taobao. Alibaba wants to expand its presence in rural areas, including by enabling farmers to sell their products to city dwellers in China. The company also aims to expand its sales to global consumers via AliExpress.com, a marketplace it launched in 2010 that facilitates sales from Chinese manufacturers and wholesalers to overseas consumers.
- Travel plans: Alibaba plans to continue to work on its new travel marketplace product, called Alitrip. Late last month it announced Taobao Travel (trip.taobao.com) will become an independent business and changed the name to Alitrip. Alibaba says Alitrip will not operate as a third-party online travel agency but instead let airlines, hotels and other leisure providers sell their services directly to consumers on the marketplace. Alibaba said on the call it recently invested in an enterprise resource planning company (ERP) focused on travel to help merchants supply their inventory in real time to consumers on Alitrip.
- Logistics moves: Alibaba early this year agreed to take a 10% stake in Singapore Post to improve delivery and logistics services in Southeast Asia for its sellers. In China, it is continuing to work on its China Smart Logistics Network, which works with 14 carriers across the country on fulfillment and shipping technology. Alibaba has invested $270 million in the network, which is designed to improve online delivery services throughout and China, and owns 48% of the logistics company. It has said in previous SEC filings it expects to complete its promised $385 million investment in the company by May 2015. For the massive online Chinese shopping day on Nov. 11, called Singles Day, (which racked up more online sales than Cyber Monday and Black Friday in the U.S. combined last year) Alibaba says the network is on track to be able to provide order status updates to shoppers. Alibaba is also looking at investments in warehouse space throughout China to help the carriers in the the network expand their capacity.
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