Investors fret as online giant Alibaba expands offline

SHENZHEN • Alibaba, China's online shopping giant, is increasingly going offline.

That is making some investors nervous. The firm last Friday reported a fall in profit of nearly 30 per cent in the latest quarter, the first such decline in a year and a half.

One reason: Alibaba got a bump in profit last year from selling its shares in a social media app.

Another culprit, however, was heavy spending on Alibaba's businesses outside of e-commerce, including cloud computing and brick-and-mortar retail - which the firm, counterintuitively, likes to call "new retail". Those ventures are part of Alibaba's plan to broaden its empire and become more of a full-service technology company akin to Google.

But some investors appear to be fretting about the cost of such expansion to its profits. Alibaba has already lost around US$60 billion (S$80 billion) in market value since its shares peaked in January. They remain well above their level of a year ago, however, thanks to strength in Alibaba's core online business.

In the first three months of the year, total revenue increased by more than 60 per cent over the same period last year, the company said on Friday. It added that it expects a similar pace of sales growth for the coming financial year.

For what has become one of the world's biggest Internet firms, figuring out how to get even bigger was never going to be straightforward. Or cheap. In March, Alibaba poured an additional US$2 billion into its South-east Asian online emporium, Lazada, which is fighting it out with Amazon in the region.

Back at home in China, the company is investing heavily in its entertainment and cloud service businesses, both of which are losing money. And it is rapidly expanding its footprint in physical retail, to collect different kinds of data about customers' habits and desires.

Hema, the company's chain of high-tech supermarkets, now has dozens of stores across China, a large chunk of which opened in the first four months of this year alone.

Alibaba has also invested in an electronics retailer, a home-improvement chain and a department store operator. Recently, it opened a mall in its home city, Hangzhou. It took control last year of its logistics affiliate, Cainiao, and in April it swallowed up a food-delivery service, Ele.me.

NYTIMES

A version of this article appeared in the print edition of The Straits Times on May 07, 2018, with the headline 'Investors fret as online giant Alibaba expands offline'. Print Edition | Subscribe