Alibaba Faces Uphill Battle Against New E-commerce Challengers Amidst Underwhelming Q4 Results

Alibaba, the Chinese e-commerce giant, is gearing up to counter the mounting competition from emerging players such as PDD Holdings and ByteDance. Following its underwhelming financial results for the last quarter of 2023, Alibaba witnessed a 5.9% drop in its U.S.-listed shares, despite a $25 billion share buyback program.

Alibaba’s core e-commerce group, Taobao and Tmall Group (TTG), experienced a mere 2% year-on-year growth, reaching 29.07 billion yuan ($17.98 billion) for Q4 2023. The company’s overall quarterly revenue registered a 5% increase, totaling 260.35 billion yuan ($36.61 billion), falling below analyst estimates.

Addressing the challenges, Alibaba CEO Eddie Wu stated, “Our top priority is to reignite the growth of our two core businesses: e-commerce and cloud computing.” He emphasized the need for targeted investments in price competitiveness, service, and user experience.

To combat the tough market conditions, Alibaba plans to enhance its TTG platform by expanding the selection of branded and direct-from-manufacturer products. The company aims to focus on delivering attractive prices for quality products, responding to Chinese consumers’ growing caution about spending amid macroeconomic headwinds.

Alibaba faces intensified competition from PDD Holdings, the owner of Pinduoduo and Temu, and ByteDance, the parent company of TikTok and Douyin. PDD Holdings reported a significant 94% year-on-year growth for the quarter ending September 30, 2023, outpacing Alibaba’s 9% growth in the same period.

ByteDance, making inroads into Alibaba’s territory, particularly in live-streaming e-commerce, poses another challenge. With live e-commerce sales expected to surpass $800 billion by 2025, ByteDance’s Douyin app is diversifying into food delivery and leisure travel.

The rivalry is further fueled by ByteDance’s reported full-year revenue of $110 billion in 2023, inching closer to Alibaba’s total revenue of $130.1 billion for the 2023 calendar year (Alibaba’s fiscal year ends in March).

In response to the escalating competition, Alibaba reshuffled its senior management team and group businesses in late 2023. However, the company is now revising its ambitious restructuring plans announced earlier, citing unfavorable market conditions. Alibaba Chairman Joe Tsai emphasized a focus on selling off non-core assets, acknowledging the need to exit traditional physical retail businesses.

The company’s cloud-computing unit, once slated for a spin-off, faced hurdles in November, with Alibaba abandoning the plan due to U.S. tech export controls. Despite challenges, Alibaba’s cloud computing division saw a 3% year-on-year revenue increase, reaching 28.06 billion yuan ($3.95 billion) in the last quarter.

As Alibaba confronts a “not in a hurry” approach to IPOs for Cainiao and Freshippo, and explores divesting non-core businesses like the InTime department store chain, the e-commerce giant is navigating a complex landscape where strategic decisions are crucial to maintaining its industry leadership.

Alibaba’s shares continued their decline in Hong Kong, signaling the need for agile strategies to counter both domestic and emerging global competition.