Alibaba Earnings Avoid Jack Ma, Address Regulatory Issues

Jack Who? Government regulations? Problems? It was mostly smooth sailing for Alibaba as it announced its earnings from the fourth quarter of 2020. Absent from the company’s earnings call was any mention of the company’s founder and former CEO (Jack Ma). The company did address the current imbroglio with the Chinese government over Big Tech regulations. But mostly, Alibaba chose to focus on overall growth for the period and success with its expanded 11.11 global shopping holiday, formerly known as Singles’ Day.

By the numbers, the massive retail and entertainment conglomerate showed revenue up 37 percent to $38.9 billion. Annual active consumers on its retail marketplaces reached 779 million by the end of 2020, an increase of 22 million over 2019. A good percentage of the growth was driven by the 11.11 festival. The company extended what was originally a one-day festival occurring on Nov. 11 to last 11 days. According to the company’s earnings call, the extension created more sales opportunities for merchants, but it also took the pressure off infrastructure and delivery logistics.

The results from that extension were strong. The festival attracted 250,000 brands and five million merchants and generated RMB498.2 billion (US$74.1 billion) in GMV, an increase of 26 percent compared to t 2019. “Over 470 brands achieved more than RMB100 million in sales, showcasing the virtuous cycle effects of digital transformation across our ecosystem,” said a statement from Alibaba. “The shopping festival was also an opportunity for brands to launch new products and build brand awareness. During the festival this year, there were approximately 30 million new product launches and GMV, excluding unpaid orders, for new products grew strongly by 35 percent year over year.”

However, the continued crackdown on Big Tech from the Chinese government hung over the call. The company said it received a notice of an investigation from the State Administration for Market Regulation (SAMR) regarding the country’s anti-monopoly law. CEO Daniel Zhang said the investigation is ongoing and that Alibaba has established a special task force with leaders from its relevant business units to review its compliance.

The company also addressed the other elephant in the room: the ongoing drama regarding its affiliate, Ant Group.

“Due to recent significant changes in the FinTech regulatory environment in China, Ant Group is in the process of developing its rectification plan, which will need to go through the relevant regulatory procedures,” the company said. “Therefore, Ant Group’s business prospects and IPO plans are subject to substantial uncertainties. Currently, we are unable to make a complete and fair assessment of the impact that these changes and uncertainties will have on Alibaba Group. We will update the market once Ant Group has completed the relevant regulatory procedures for its rectification plan.”

When asked on the call about the regulatory issues, Zhang didn’t address them directly, but did note that from his perspective, Alibaba has grown so quickly because it is the best platform available for merchants and consumers.

“For most merchants, if not all, there are multiple different platforms out there that they can choose to work with,” said Zhang. “That is the reality, although we do have very few exclusive flagship store arrangements with a small number of merchants. Even with respect to those merchants, the fact is that their goods are also available through other channels or through their own channels with distributors. Our advantage is that we are extremely focused on consumption, and we are the No. 1 platform. And we’re providing a very high-quality consumer experience. So that is why, for all merchants, although they do have a choice of multiple platforms and are present on multiple platforms, we are probably the most important for most of them.”