BABA-SWR ignites the second engine.

Author: Cao Anxun

Editor: Zhou Zhiyu

As the most dazzling internet giant in China, Alibaba's rapid growth momentum has faded under multiple challenges.

In the third quarter of the 2024 fiscal year, Alibaba's total revenue reached 260.35 billion yuan, a year-on-year increase of 5%. Particularly in the domestic retail sector, facing competition from Pinduoduo, Douyin, JD.com, and others, Taotian Group's revenue was only 129.07 billion yuan, a year-on-year increase of 2%.

This is a challenge that Alibaba has never encountered before. As the growth rate of Taotian's revenue lags behind, BABA-SWR's cross-border e-commerce business is becoming a new performance engine for BABA-SWR. Jiang Fan, CEO of BABA-SWR International Digital Business Group, is also back in the spotlight.

On February 7th, Alibaba's Q3 fiscal report for the 2024 fiscal year showed that the cumulative revenue of BABA-SWR International Digital Business Group (hereinafter referred to as BABA-SWR International) was 28.516 billion yuan, accounting for 10.95% of BABA-SWR's total revenue, making it the second largest business after Taotian Group in terms of revenue.

At the same time, BABA-SWR International achieved a year-on-year growth of 44%, becoming the fastest-growing business within BABA-SWR, surpassing Cainiao Group's 24% and Daway Entertainment Group's 18%, leaving BABA-SWR Cloud's 3% and Taotian's 2% far behind. BABA-SWR International business has become a key driver of its revenue growth.

During the performance meeting, Jiang Fan also stated that scaling growth would be the top priority for the development of the group's international business.

Zhao Dan, Chief Internet Analyst at Pu Yin International, believes that in the current environment of mild economic recovery, competition in the domestic e-commerce industry remains fierce. BABA-SWR's core e-commerce business has not shown improvement, and in the short term, it still faces significant pressure. Apart from cross-border e-commerce, BABA-SWR's other businesses are performing flatly.

Specifically, in the fourth quarter of 2023, BABA-SWR International's revenue from AliExpress and other overseas local e-commerce platforms reached 23.26 billion yuan, a year-on-year increase of 56%. Among them, AliExpress orders grew strongly by 60%; revenue from BABA-SWR International sites was 5.256 billion yuan, a year-on-year increase of 8%.

This is mainly attributed to the boost from AliExpress Choice business. As one of the "Four Little Dragons" going global, AliExpress launched a selected seller business in March last year. After joining this business, sellers' products will receive higher priority in display and enjoy operational support and marketing resources provided by AliExpress. Its core lies in the fully managed and semi-managed models widely used by major cross-border e-commerce platforms. In less than a year, this business has quickly gained the support of sellers. By January 2024, orders from Choice accounted for about half of the total orders on AliExpress.

Some cross-border e-commerce sellers mentioned that in January, AliExpress issued subsidy announcements for a week, raining red envelopes, and vigorously inviting merchants to join the semi-managed program.

However, the rapid growth in scale brought by AliExpress's substantial subsidies has also created a burden on profitability. During a conference call, Jiang Fan frankly admitted that one of the main reasons for the international losses of BABA-SWR was the promotion of AliExpress Choice business (fully managed/semi-managed models). The AliExpress Choice business has significantly increased its proportion in cross-border business, is still in its early stages, needs to scale up, and then focus on converging long-term losses.

Jiang Fan's plan is to exchange subsidies for market share and scale. This is a dangerous yet fascinating double-edged sword.

On one hand, with the cross-border e-commerce industry becoming increasingly competitive, Jiang Fan urgently needs to seize opportunities and market share amidst the backdrop of the fierce battle of the "Four Little Dragons" going global against Amazon. On the other hand, facing continued losses, Jiang Fan is also under pressure and scrutiny from investors.

Furthermore, the challenges of cross-border e-commerce regulation are becoming increasingly apparent. Regulatory authorities and cross-border e-commerce platforms need to strengthen standardized management in aspects such as product quality, logistics, after-sales service, and privacy protection to create a fair and healthy consumer environment.

These are the questions that Jiang Fan will need to answer well in the future, and he must quickly provide satisfactory answers to both investors and the market.

During the conference call, Jiang Fan mentioned that the next period will be a large-scale investment phase for BABA-SWR International, especially for the Choice business. He believes that the Choice business will yield good returns over the long term.

BABA-SWR also has high hopes for BABA-SWR International and is prepared to allocate resources to support it, allowing this engine to unleash even stronger horsepower.

BABA-SWR's CFO, Xu Hong, stated that BABA-SWR International will look for the right time to seek external financing based on market conditions. Before that, BABA-SWR has sufficient overseas cash to provide funding for BABA-SWR International.

CEO Eddie Wu revealed in the earnings report that the group's top priority in the future is to reignite growth momentum in the two core businesses of e-commerce and cloud computing. It was specifically mentioned that they aim to "maintain the strong growth momentum of international commercial operations." Chairman Joseph Tsai also emphasized that BABA-SWR will focus on investments in core businesses such as domestic and international e-commerce in the future.

This indicates that after returning to the BABA-SWR partner sequence last year, Jiang Fan will become increasingly important, becoming the main force and new hope for boosting BABA-SWR's performance.

It is truly remarkable how the tides of business ebb and flow, with unpredictable ups and downs.

Over three years ago, due to family conflicts, Jiang Fan was expelled from the BABA-SWR partner sequence and "exiled" overseas. Unexpectedly, after the organizational transformation of "1+6+N," BABA-SWR International regrouped, with acquisitions, semi-management, personnel adjustments, and large-scale subsidy investments in full swing. With a track record of success, Jiang Fan has made a strong comeback. However, Jiang Fan cannot afford to be complacent. The global cross-border e-commerce industry is currently undergoing unprecedented changes. The era of rapid expansion has ended, ushering in a new era of refined operations and increasing competition.

In the future, Jiang Fan will need to continue to battle with competitors such as Amazon and Tumu, and adapt to local regulatory policies in order to partake in this trillion-dollar market feast.