Rural Shopper Spending Drives Alibaba’s Stellar Growth Figures

Jack Ma
Jack Ma, chairman of Alibaba Group arrives at the "Tech for Good" Summit in Paris, France May 15, 2019. (Photo: REUTERS/Charles Platiau)

Alibaba reported a 19 percent year-on-year sales growth in 2018 and shoppers base of 721 million in March, attracting the attention of economists and investors worldwide. The Chinese e-commerce giant attributed its stellar growth figures to increased shopping among rural citizens in the country.

According to Tech Crunch, Alibaba CEO Daniel Zhang said the Chinese online retail firm's impressive growth was impacted largely by an increase in rural shoppers. The company has been redirecting product launches to China's rural regions over the past few months.

Executive Chairman Joe Tsai further noted that the hike in annual consumers using the platform came from less developed areas in China. Alibaba is expecting spending in rural Chinese provinces to expand by up to $7 trillion within the next few years.

Industry analysts pointed out that Alibaba's move of prioritizing rural towns just as it does for urban regions could be a response to its rival Pinduoduo. The latter has been working to enhance its presence in rural Chinese provinces.

Aside from the growing number of rural shoppers in China, Alibaba's AliPay and Taobao subsidiaries also hauled in orders accounting for 30 percent of the retail giant's overall order records.

Alibaba Cloud refused to lag behind and reportedly expanded by 76 percent last year. The cloud arm of Jack Ma's brainchild reached RMB7.7 billion in market share. Growth is somehow slowing down as the firm expands but analysts are confident it will continue to see developments.

Aljazeera noted that the company's growth figures prove that Chinese tech behemoths can overcome the country's economic slowdown and other external headwinds. The outlet further explained that Alibaba was able to exceed Q4 2018 expectations.

Tsai said shortly after revealing the company's earnings report that "macroeconomic factors" are boosting the multinational conglomerate's growth targets even as fears over the China-U.S. trade war heighten.

RBC Capital Markets Analyst Zachary Schwartzman said Alibaba's "core business," its online retail platform, is doing very well. Healthy operations allow for the firm to explore potential investments in other businesses.

Other experts said Alibaba's forecast-beating earnings for fiscal 2019 indicate improving macro conditions in China amid ensuing trade disputes with the U.S. The Chinese tech giant's rival, JD.com, also released good results earlier last week.

Yahoo Finance predicted that the company may focus on monetization through improving ad-sales as part of the plan to establish growth foundations in the near future. Product-search results may be optimized further to improve the experience of online shoppers.

Alibaba is China's biggest e-commerce provider. In the global realm, it is now able to compete with the likes of Amazon. It has yet to be revealed how the China-U.S. trade war will affect the company's fiscal 2020 earnings.

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