When Jiang Fan, Co Chairman and CEO of Alibaba International Digital Business Group, officially took over the international business, he stated that globalization is an important strategy for Alibaba to seek growth in the next ten to twenty years. After Jiang Fan took over, the international business sector was like a dark horse, standing out among Alibaba's six major business sectors.
Recently, Alibaba Group announced its first quarter performance for the fiscal year 2025. This quarter, the synergistic effect of cross-border business and cross-border fulfillment services continues to emerge, driving Alibaba International Digital Business Group and Cainiao Group to maintain high-speed growth.
According to the financial report, Alibaba International Digital Business Group's revenue was 29.293 billion yuan, a year-on-year increase of 32%, still the most significant growth rate among all businesses, with international retail business growing at a high speed of 38%. Cainiao Group's revenue was 26.811 billion yuan, a year-on-year increase of 16%, second only to the International Digital Business Group in terms of growth rate.
However, behind high growth lies sustained high investment, and globalization is not a proposition for Alibaba alone. In the past year, facing pressure from established e-commerce platforms such as Amazon and eBay, as well as the encirclement of the "Four Little Dragons of Going Global" in China, Alibaba's international business, which started earliest, also needs to make multiple adjustments to cope with competition.
This quarter, Alibaba International's adjusted EBITA was a loss of 3.7 billion yuan, an increase of nearly 8 times compared to the same period last year. The management of Alibaba International has stated that the next period will still be a period of large-scale investment.
From the situation in various global markets, it can also be seen that the current situation is uncertain, the competition for market share is still ongoing, and investment is still necessary. But Alibaba International is also trying to find a balance between investment and losses while maintaining growth.
Jiang Fan stated during the financial report conference that he will focus on improving business efficiency in the future, while further enhancing profitability in some businesses and regions, in order to turn losses into profits as soon as possible. In this competition, the continuous investment and refined operation of Alibaba's international business sector will be the key factors determining the outcome.
Continuous investment
This quarter's financial report shows that international business revenue increased by 32% year-on-year, with cross-border business being the main driving force. Among them, AliExpress Choice performed outstandingly, with increased order volume and monetization rate.
AliExpress is upgrading from a platform business model to a supply chain driven platform model, combining hybrid business models such as semi custodial and full custodial. By April 2024, Choice orders will account for over 70% of the overall orders on AliExpress.
The custody model has truly become the core model of the platform, and it also marks a significant step forward in the overall user experience of the platform, "said Wu Shuang, the head of the custody mechanism of AliExpress, in an interview with 21st Century Business Herald.
This transformation is still ongoing. Jiang Fan pointed out during the financial report conference that AliExpress is in a relatively early stage, and the transformation of its business model to a custody plus platform model is still in the investment period.
The hosting business mainly solves the core problem of cross-border e-commerce, logistics, which is achieved through the cooperation between AliExpress and Cainiao. During the financial report conference, Jiang Fan stated that the average delivery time for this quarter has significantly decreased compared to the previous quarter, as the strategy of "going abroad to meet customers" has shortened the average delivery time and improved efficiency.
We continue to promote synergies between Cainiao and our cross-border e-commerce business, enhancing end-to-end service capabilities by building a highly digitized global logistics network, "Alibaba said.
The application of AI is another trend that Alibaba has invested in. Zhang Kaifu, Vice President of Alibaba International Digital Business Group and Head of Alibaba International AI Business, stated in an interview with 21st Century Business Herald that Alibaba International's investment and determination in AI are significant, and it adopts an "application first" strategy to quickly verify the actual effectiveness of AI technology.
It can be seen that whether it is early entry into the custody mode, improving logistics efficiency, or deepening AI empowerment, Alibaba International's grasp of market trends and insights into the needs of merchants and consumers are relatively accurate. But also due to its determination to expand and cope with increasingly fierce competition, Alibaba has been investing heavily in international business.
The management of Alibaba International mentioned in the previous financial report conference that the next period will be a period of large-scale investment for Alibaba International, especially in the Choice business based on the custody model. Therefore, the losses are still huge.
This quarter, the International Digital Business Group reported an adjusted EBITA loss of 3.706 billion yuan, compared to a loss of 420 million yuan in the same period of 2023, indicating an increase in losses. This is mainly due to increased cross-border business investments in AliExpress and Trendyol.
The adjusted EBITA of Cainiao, which is deeply tied to international business, decreased by 30% to 618 million yuan in the second quarter of 2024, compared to 877 million yuan in the same period of 2023, mainly due to increased investment in cross-border fulfillment solutions.
However, compared to the previous period, the growth rates of international business and Cainiao have slowed down, with international business losses decreasing and Cainiao achieving a turnaround from losses to profits. Alibaba's international business has entered a stage of refined operation.
Jiang Fan stated in the financial report conference that on the one hand, he focuses on improving the operational efficiency of various businesses, while on the other hand, he further enhances the profitability of some businesses and regions, and strives to turn losses into profits as soon as possible; On the other hand, we actively invest in key markets to achieve high-quality growth, with the expectation of achieving larger scale profits in the future.
Currently, we are rapidly optimizing efficiency and expect significant improvements in business models such as AE Choice in the coming quarters. As the new model gradually stabilizes, while pursuing growth, we will also continue to focus on efficiency Jiang Fan stated.
New market competition
While maintaining high growth, Alibaba International has increased its investment in key countries. The continuous improvement of experience also gives AliExpress confidence to increase investment in core key markets, expand its user base, and maintain its leading position in the market, "said Jiang Fan.
This year, taking advantage of the popularity of sports events, Alibaba International has made frequent moves. Taking AliExpress as an example, in March, UEFA officially announced that AliExpress, a cross-border e-commerce platform under Alibaba Group, has become the official partner of the 2024 European Championship. In May, AliExpress signed football superstar David Beckham as its global spokesperson, marking its largest global brand ambassador cooperation project to date.
In response to the recent hot Middle East market, AliExpress has also signed famous Saudi football stars Salem Al Dawsari and Feras Al Brikan as spokespersons for the Middle East. The two have accumulated 2.4 million social media followers and are highly popular in the Middle East, especially in Saudi Arabia.
In addition to AliExpress, Alibaba International has different brands in different markets around the world, such as Lazada in Southeast Asia, Trendyol in the Middle East and Türkiye. These platforms are operated by local teams, forming a combination of cross-border and local businesses.
Jiang Fan once said that, globally, through cooperation with localization platforms such as Lazada in Southeast Asia, Trendyol in the Middle East and Türkiye, the platform can directly sell its products to these specific markets. This strategy not only avoids the high cost investment of building brand awareness from scratch in new markets, but also leverages the existing local C-end brand influence to quickly gain market share.
In the Middle East market, Trendyol has developed rapidly in recent years and has become a major e-commerce force in Türkiye and even the Middle East. This quarter, Trendyol platform increased its investment in specific markets such as Europe and the Gulf region.
In the Southeast Asian market, e-commerce platform Lazada recorded a positive EBITDA in July this year, achieving profitability. Prior to this, Alibaba had repeatedly injected funds into Lazada, with a total investment of approximately 7.7 billion US dollars.
Jiang Fan stated during the financial report conference that adjustments will be made based on market conditions in the future, hoping to maintain this market share while continuously optimizing profitability.
Although Southeast Asia and the Middle East are emerging markets in e-commerce, the competition is becoming increasingly fierce at present. In Southeast Asia, local e-commerce platform Shopee has consistently ranked first. In the Middle East, Amazon and local platforms Noon and SHEIN hold the majority of market share. In the past two years, emerging platforms such as TikTok Shop and Temu have also accelerated their layout in these emerging markets and grown rapidly.
In an uncertain market, increasingly fierce competition also means that Alibaba International's investment will continue. Alibaba Group CEO Wu Yongming mentioned during the financial report conference that "most of the businesses will gradually achieve breakeven within 1-2 years", which does not include Alibaba International.