Alibaba's "Overseas Partner" to Accelerate Profitability

Author | Huang Yu

Editor | Liu Baodan

Over the past year, with the rapid development of TEMU, Pinduoduo and Alibaba have been competing for the position of the top e-commerce market value leader; Alibaba must hold onto its own throne, and overseas business is undoubtedly a tool it must firmly grasp.

On the evening of August 15th, Alibaba released its second-quarter performance this year, showing that under the backdrop of Taotian Group, which has the highest revenue share, still facing growth bottlenecks, Alibaba's international digital business group (referred to as "Alibaba International") and Cainiao Group, the two main forces for going global, have become the biggest drivers of its revenue growth.

According to the financial report, in the second quarter of this year, Alibaba's total revenue was 243.24 billion yuan, a year-on-year increase of 4%. Among them, Alibaba International's revenue was 29.293 billion yuan, a year-on-year increase of 32%, still the most significant growth among all businesses; Cainiao Group's revenue was 26.811 billion yuan, a year-on-year increase of 16%, with growth second only to the international digital business group.

Regarding the strong growth of Alibaba International in the second quarter of this year, the financial report pointed out that it was driven by the growth of cross-border business, especially the AliExpress Choice business. With the synergies of cross-border business and cross-border fulfillment services, Cainiao also achieved high-speed performance growth.

In fact, Alibaba was the first player in China to embark on the global e-commerce journey, establishing an international station positioning itself as a cross-border B2B platform in 1999, and subsequently establishing and acquiring six major retail platforms.

During the golden period of the booming domestic e-commerce industry, Alibaba's overseas business seemed somewhat dim, but times have changed. In recent years, with the domestic e-commerce industry reaching its peak in terms of incremental growth, Alibaba International has returned to the spotlight and become an important growth engine for Alibaba.

However, maintaining sustained high growth as the scale continues to expand is not easy. Compared to the growth rates of the previous few quarters, although Alibaba International still has the highest growth rate within the group in the second quarter, the growth rate in the second quarter of this year has slightly slowed down. Data shows that in the 2024 fiscal year, Alibaba International's quarterly growth rates were 41%, 53%, 44%, and 45% respectively.

As the "going global partner" of Alibaba International, Cainiao's revenue growth rate has also slowed down. For comparison, in the 2024 fiscal year, Cainiao's revenue increased by 28% year-on-year.

In order to seek further breakthroughs in performance, Alibaba continues to invest in overseas markets.

Firstly, the construction of logistics capabilities. From full hosting to semi-hosting, competition among cross-border e-commerce platforms has become more intense since last year, but the logistics capabilities brought by Cainiao give AliExpress a differentiated competitive advantage within the industry.

Since September last year, Cainiao has launched the "Global 5-Day Delivery" in collaboration with AliExpress, a service based on the full hosting and semi-hosting models of AliExpress Choice business, which has had a significant stimulating effect on AliExpress orders. Currently, Choice orders account for 70% of AliExpress orders.

In addition, after launching the semi-hosting service providing logistics warehousing and other services earlier this year, AliExpress has further enhanced the "Overseas Hosting" model, mainly targeting merchants whose products are already overseas and have overseas qualifications Under the "overseas warehousing" model, AliExpress takes care of sales, marketing, and after-sales service, while merchants only need to handle shipping, similar to the semi-warehousing model introduced by TEMU. In order to attract more merchants, AliExpress has now partnered with three major overseas warehouses and opened up overseas warehousing entry services.

Increased investment overseas has impacted the short-term profitability of Alibaba International and Cainiao.

Financial reports show that in the second quarter, Alibaba International's adjusted EBITA was a loss of 3.7 billion yuan, nearly 8 times higher than the same period last year. Alibaba explained that this was mainly due to increased investment in AliExpress and Trendyol's cross-border business.

Cainiao's adjusted EBITA in the second quarter was 618 million yuan, a 30% decrease year-on-year, mainly due to increased investment in cross-border logistics fulfillment solutions.

However, from a quarter-on-quarter perspective, this has released positive signals for the profitability of the "going global partners". Compared to the first quarter, in the second quarter, Alibaba International's adjusted EBITA loss narrowed by 9%, and Cainiao turned losses into profits.

Additionally, there are market reports that Lazada, as Alibaba International's Southeast Asian e-commerce platform, achieved positive EBITDA in July this year, realizing profitability.

According to Wall Street News, Lazada CEO Dong Zheng stated in an internal speech that this profit proves the effectiveness of Lazada's business strategy, and Lazada will continue to increase investment in the Southeast Asian market under a sustainable operating model.

Some industry insiders believe that although Alibaba International's revenue has been growing rapidly, the continuous expansion of losses has raised concerns about when Alibaba International's business can turn profitable. Against this backdrop, Alibaba International has shifted its strategy from aggressive expansion to more refined operations.

During the conference call after the financial report was released, Alibaba International CEO Jiang Fan also stated that Alibaba's advantage lies in the fact that overseas e-commerce consists of multiple business segments, rather than a single model. Currently, Alibaba's overseas business is mainly undergoing upgrades and transformations in business models, changing the past situation of relatively low efficiency and weak service experience. Therefore, Alibaba International is still in the investment period, but efficiency is also being optimized to pursue healthier growth.

For Alibaba International, Lazada's profitability is a milestone victory.

The global cross-border e-commerce competition has entered a "protracted war", and a clear trend is that everyone has shifted from pursuing growth at all costs to focusing on profitable growth. As a strong competitor of Alibaba International overseas, TEMU is also predicted by many institutions to be on the verge of profitability.

Improving profitability undoubtedly remains the main task for Alibaba International and Cainiao in the future