Digitization, Ant Financial IPO Troubles Show Up In Alibaba Earnings

As expected, the Ant Group initial public offering (IPO) suspension was a factor in Alibaba’s earnings announced Thursday morning (Nov. 5), as China’s largest eCommerce company posted a solid revenue increase but took a hit in profits.

By the numbers, revenue was up at $22.8 billion, an increase of 30 percent over the company’s Q3 tally in 2019. Annual active consumers on the firm’s China retail marketplaces reached 757 million, marking an increase of 15 million over Q2. Income from operations is where the company took a hit and where the Ant IPO suspension was visible. The company’s profits dropped 33 percent to $2 billion, which it said was due to an “increase in share-based compensation expense related to Ant Group share-based awards granted to our employees.” If not for that impact profit would have been up 44 percent. Alibaba owns 33 percent of Ant Group, formerly known as Ant Financial.

“As a major shareholder Alibaba is actively evaluating the impact on our business,” said Alibaba CEO Daniel Zhang, “in response to the recent proposed change in the FinTech regulatory environment. And we’ll take appropriate measures accordingly.”

Exactly what those measures will be will most likely play out over the coming weeks. For now, Zhang says the company will focus on domestic consumption, cloud computing and data intelligence, and globalization. On the earnings call, Zhang addressed the company’s mega-shopping Holiday Singles Day, held on Nov. 11. This year the company added a new window to extend the holiday. That second window happened from Nov. 1 to 4.

“We have made this change for a number of important reasons,” Zhang said. “We want to give consumers more time to browse and get the deal they want while easing pressure on the logistics infrastructure. This helps consumers receive their package sooner and enjoy a better shopping experience. Our merchants will also benefit exposure and a setting opportunities that will help them recover from the impact of November 11 this year, which goes beyond online shopping for physical goods.”

Zhang mentioned accelerating the digitization of the marketplace platform as well as the digitization of payments several times as a key initiative for the company. It was also a key message from  Kivanc Onan, head of B2B Payments, Financing and Protection, North America for Alibaba during the recent PYMNTS B2B Week of panels, videos and reports.

Onan pointed out that digitization removes the friction of connecting buyers and suppliers and stated that his firm takes manufacturers online through virtual storefronts and can help set payment terms that take large (and small) firms beyond a reliance on checks, cash or cards.

Part of that digitization initiative was the reason that Alibaba recently invested $3.6 billion to acquire a controlling stake in Sun Art Retail Group Limited. “We continue to innovate New Retail formats and models by digitalizing our offline retail partners and enabling them to offer an integrated omni-channel experience for consumers,” Zhang said. “Through this deeper collaboration with Sun Art, we will be able to digitalize offline traffic, synchronize online and offline channel inventories, broaden our supply chain network and increase online purchases.”