Alibaba sales beat estimates after making mobile, rural inroads

Sales at Alibaba rose 32 per cent to 34.5 billion yuan (S$7.4 billion) in the three months ended December, the company said in a statement on Jan 28, 2016.
Sales at Alibaba rose 32 per cent to 34.5 billion yuan (S$7.4 billion) in the three months ended December, the company said in a statement on Jan 28, 2016.PHOTO: REUTERS

SHANGHAI (BLOOMBERG) - Alibaba Group Holding's third-quarter revenue beat analysts' estimates after an online-sales extravaganza and expansion into rural China helped the nation's biggest e-commerce operator defy a slowing economy.

Sales rose 32 per cent to 34.5 billion yuan (S$7.4 billion) in the three months ended December, the company said Thursday. That compares with the 33.2 billion-yuan average of estimates compiled by Bloomberg.

Record revenue during November's annual "Singles' Day" promotion drove transaction growth as Alibaba captured more sales from mobile e-commerce, which is replacing shopping from computers.

Billionaire Chairman Jack Ma is trying to tap the spending power of the countryside with the Internet expected to blanket all of rural China by 2020, according to the China Academy for Rural Development at Zhejiang University.

"Alibaba is on track to gain more shoppers in rural areas and smaller cities in China," said Mr Li Yujie, an analyst at RHB Research Institute Sdn in Hong Kong. "The sales promotion in November also gave the company a boost."

Longer-term, Mr Ma is investing in video content, media, on-demand services and cloud computing to generate new sources of income as he takes the e-commerce company global. Shares of Alibaba closed Wednesday at US$69.54 in New York. The stock has declined 14 per cent this year after a 22 per cent slump in 2015.

Gross merchandise volume in China rose 23 per cent to 964 billion yuan in the quarter, while mobile GMV almost doubled to 651 billion yuan.

More than half the purchases through Alibaba's e-commerce platforms were done from mobile devices, which generate less advertising revenue for the company than desktop computers because of the smaller screens.

While it's crucial that Alibaba serve the growing ranks of consumers acquiring a taste for shopping through smartphones and tablet computers, smaller mobile screens typically generate less advertising revenue.

The Nov 11 Singles' Day promotion logged a record 91.2 billion yuan in sales, a 60 per cent increase from the year earlier. A third of buyers made purchases from merchants and brands outside of China during the one-day event.