May 21, 2019

Alibaba Reports Slower Growth as U.S.-China Trade War Intensifies

Alibaba Reports Slower Growth as U.S.-China Trade War Intensifies


One of the world’s leading internet giants appears to be feeling the effects of China’s economic slowdown and the trade war with the United States.

The Alibaba Group, China’s largest e-commerce company, said on Wednesday that revenue increased by 51 percent in the March quarter from the same period last year. That topped Wall Street’s expectations, and represents a pickup from the quarter before. But it is still the company’s second-slowest pace of revenue expansion since early 2016.

For the full year that ended March 31, revenue also grew by more than half. The company said, however, that the increase was partly the result of adding several recently acquired businesses, such as the takeout delivery service Ele.me, to its sales computations. Without those, it said, full-year sales would only have increased by 39 percent, the slowest growth in three years.

Alibaba also said the number of customers on its Chinese retail marketplaces for the full year that ended in March grew to 654 million, an increase of 102 million.

China’s economy has slowed since the tariff fight with the United States began last year. Diplomacy with Washington has frayed. Alibaba’s sprawling business makes it a closely watched bellwether for consumer and business sentiment in China. But the company’s size and breadth may also make it better positioned than many other Chinese businesses to weather the present choppiness.

With services from commerce and food delivery to payments and travel booking now under its umbrella, Alibaba has built such a vast ecosystem of interconnected products and platforms that its hold on Chinese consumers and merchants is almost unassailable, said David Dai, an analyst at Sanford C. Bernstein in Hong Kong.

Alibaba is “over all in a much stronger position as compared to any other internet or e-commerce company in China,” Mr. Dai said.

Yet in this season of high anxiety about the trade war and the global economy, China’s entire tech sector is feeling the pressure.

Leading companies have laid off workers. Start-ups, including some that Alibaba has invested in, are struggling. Coders are protesting long hours and unpaid overtime — a sign, industry observers say, that the years of breakneck growth and boundless optimism for Chinese tech companies are past.

Alibaba has said that it will not lay off any employees this year. But the company has not been immune to strain. Late last year, it said it would hold off on charging merchants more to advertise on its shopping sites, despite the hit to revenue growth that would cause.

Such ads, along with other services that help merchants reach customers, represent the biggest part of Alibaba’s sales, and nearly all of its profit. Unlike Amazon, Alibaba does not pocket proceeds from merchandise sales on its platforms. It makes money by charging third-party sellers to use its digital shelves and signboards.

Alibaba has said it will avoid ramping up ad sales until it has collected more data about whether new personalized ads in its shopping app are successfully convincing customers to hand over more of their money.

But Alibaba executives have also said the company does not want to add to its merchants’ expenses at a time when many of them are already jittery about the economy.



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