Chinese giant Alibaba in search of lost profits

Published on : 11/19/2021 – 10:47

Alibaba’s profit cave is much less stocked than usual. The Chinese e-commerce giant has, for the first time in five years, reported declining profits for the second quarter. The figures, released Thursday, November 18, indicate an 81% plunge in profits compared to the same period last year.

Bad news that did not please the financial markets. Alibaba’s stock ended Thursday down 11% on the New York Stock Exchange.

This drop in profits comes as a tightening of regulations in China has shaken the tech giants for several months.

Long regarded as a model of success for Chinese companies, Alibaba was the first to suffer retribution from the authorities.

A year ago, the Communist authorities had cut the wings of the private group, by stopping the gigantic IPO of its payment subsidiary Ant Group in Hong Kong, 48 hours before the event.

Presented as the biggest fundraiser of all time, the operation should have brought him 27.4 billion euros.

The following month, Alibaba came under investigation for obstructing competition.

The group founded by the whimsical Jack Ma has since been fined 2.3 billion euros in the spring.

Slower growth and new competitors

And the authorities then extended their regulatory tightening to other lucrative sectors (private tutoring, meal delivery, entertainment, video games), losing billions of yuan in capital.

But Alibaba is not only suffering from a stricter regulatory environment. The Chinese economy as a whole is also faltering. The country’s GDP grew by just 4.9% in the third quarter, its slowest pace since the rebound in international demand in early 2021, following an improvement in the fight against Covid-19 pandemic.

In addition, new players are nibbling Alibaba’s market share in its most strategic sectors. Another e-commerce giant, Pinduoduo can boast of having more active users than Alibaba, remembers Le Monde. Groups like Bytedance, the creator of Douyin, the Chinese version of TikTok, are succeeding in capturing more and more advertising spending. The latter have so far been Alibaba’s main source of profit.

The only good news for the historic e-commerce giant: the famous “singles party” – the great Chinese consumerist mass on November 11 – was a success for Alibaba since 74 billion euros were spent on its sites, or 8 , 5% more than last year.