Alibaba is leveraging its Singles' Day holiday to boost sales amid a revenue decline
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Alibaba brought in $16.7 billion in total revenue in its fiscal Q2 2020 (ended September 30, 2019), growing 40% annually, per its earnings release. This represents a deceleration from both last quarter, when its revenue jumped 42% year-over-year (YoY), and its fiscal Q2 2019 (ended September 30, 2018) when its revenue increased 54% YoY. Business Insider Intelligence
Its key core commerce segment racked up nearly $14.2 billion in revenue this quarter - accounting for 85% of the firm's total revenue and growing approximately 40% YoY. But this is also a deceleration from its performance a quarter prior, when it rose 44% YoY, and in the comparable period a year ago when it surged 56% YoY.
The sliding performance of Tmall - one of Alibaba's top platforms, which connects brands with consumers - may be a key factor in Alibaba's slowing commerce revenue growth. Tmall is reportedly the top player in China's business-to-consumer (B2C) e-commerce platform market, but its annual growth in physical goods gross merchandise value (GMV), excluding unpaid orders, was notably down this quarter, likely hurting Alibaba's overall performance.
In Alibaba's fiscal Q2 2020, this GMV metric increased 26% YoY, but last quarter it was up 34% YoY, and it grew 30% YoY in its fiscal Q2 2019. It's likely difficult for Tmall to grow its GMV given its established position and volume in the market, but if Alibaba can't pick it up, its quarterly statistics will likely continue to dip.
Singles' Day, the world's largest e-commerce sales day, which was originally launched by Alibaba, could serve as both a short- and long-term salve for Alibaba's sales performance.
- Alibaba racked up nearly $31 billion in GMV on Singles' Day, which occurs on November 11, in 2018, and it should reach new heights in 2019. The e-tailer has already kicked off its 11.11 Global Shopping Festival, culminating on Singles' Day, and it will see over 200,000 brands take part. This will likely see Alibaba set a new quarterly revenue record for itself in its fiscal Q3 2020 and potentially temporarily assuage any concerns about its performance.
- It's using Singles' Day as an opportunity to get merchants on Tmall to upgrade to Alibaba's new online store format, which could boost Tmall's performance beyond the sales holiday. The new format, called Flagship Store 2.0, debuted in July and can enable brands' online storefronts on Tmall to offer personalized content, augmented reality (AR) features, omnichannel opportunities, and other features, all of which could entice consumers to make more purchases. Alibaba reports that thousands of merchants have upgraded in advance of Singles' Day, and that could both boost Alibaba's performance during the sales holiday and well after if the new features can successfully attract more sales.
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