Alibaba had not published declining results for five years. But 2021 has been a particularly dark year for the Chinese e-commerce giant, hit by a series of sanctions and calls to order. After two satisfactory quarters, Chinese growth also slackened sharply from the summer, weighing on the turnover of number one in the sale. The group said in a statement that its profits had plummeted 81% for the three months of July to September, to 5.37 billion yuan (741.5 million euros), against 28.77 billion in the same period. in 2020. In reaction, its price fell by 11.13%, Thursday, November 18 on Wall Street.
The company’s record sales on the occasion of the “Singles Day” on November 11 were not enough to reassure investors. The turnover of its e-commerce activity has certainly increased by 31%, a little below forecasts. But it is on the marketing expenses of the brands, namely the costs incurred to be better referenced by the platforms, that the group realizes most of its profits. However, they have only grown by 3% in one year.
Numerous regulatory measures
Alibaba also lowered its growth forecast for 2021, from 29.5% to between 20% and 23%. This is due to the increased competition from other players such as Pinduoduo, which has more active users than Alibaba, especially in smaller towns, or that of its historic rival, JD. com. Not to mention newcomers like online video platforms Kuaishou and Douyin, the Chinese version of TikTok, which are sucking up a growing chunk of brands’ marketing budgets. While Alibaba controlled 78% of online sales in China in 2015, it would only capture 47.1% of the market in 2021, according to a study by eMarketer published in July. However, the cake continues to grow by 20% per year, to a total of around 1.850 billion euros, with the Middle Kingdom accounting for 52% of global online commerce.
The press release, however, does not make the slightest reference to the main black point for the company: the many regulatory measures it suffered after the cancellation of the IPO of Ant, its financial subsidiary, in November 2020. Since then, Alibaba has had to pay a record fine of 2.3 billion euros for abuse of a dominant position and review some of its practices, including imposing exclusivity on its merchants. Other sectors have also been taken over, such as online entertainment and education, affecting other champions such as ByteDance (TikTok) and Tencent, the world number one in video games.