Alibaba has announced impressive quarterly results, up 39% YOY, but there are still longer term questions to be asked, says David Jinks MILT, head of consumer research at international e-delivery specialist Fastlane International.
Alibaba has just revealed its quarterly earnings results and as expected they showed year-on-year profits up – 39% YOY – with revenue of £2.55bn ($3.75bn). However, there are still a number of issues to bear in mind before investors fall for Alibaba’s spell, not least of which are its logistics plans and its ongoing battle with counterfeit goods. Alibaba - a poor woodcutter – took on a gang of thieves and won in the old legend. Today, alas, theres no magic phrase like Open Sesame that can thwart counterfeiters selling through Alibaba; but Jack Ma and the Alibaba team have responded to complaints from western manufacturers and the US Trade Representative very seriously.
Alibaba is now stamping out the selling of counterfeit goods on its popular subsidiary sites such as Taobao (Chinas largest online marketplace). Additionally, the company has just hired Apple’s former investigator, Matthew Bassiur, to help stamp out counterfeits. It’s a tough job and one that could impact on Alibabas domestic profits, though its necessary to ensure the company doesn’t end up on a US blacklist of sites.
Its second key battle is to reduce delivery costs. Alibaba is planning to invest further in Singapore Post, but that deal has been slower to complete than expected and was recently postponed again from 7 April to 31 May. Both companies are still in the process of fulfilling a number of conditions, according to SingPost. The idea is that the e-commerce giant will hold a total 14.51% stake in SingPost. One of the reasons SingPost is so attractive is because of its subsidiary, Quantium Solutions International (QSI). QSI provides end-to-end ecommerce fulfilment across the Asia Pacific region. QSI will become the joint venture vehicle of SingPost and Alibaba.
SingPost/QSI will then look after everything from setting up websites to managing inventories and transportation, operating across over 50 distribution centres across at least 18 countries – including major ecommerce markets in the US, Europe, China and the rest of the Asia Pacific region. A logistics hub in the city-state costing 182 million Singapore dollars ($132 million) is scheduled for completion this year. Once in operation, it will consolidate ecommerce deliveries from across the world.
Amazon shares have come good recently partly because of its bold investment in logistics. Alibaba needs similar development of its own fulfilment operation to achieve the same long term results.
There’s been lots of good news from Alibaba recently as its gross merchandise volume (GMV) surpassed $463 billion dollars under a year. Many investors like its investment in Groupon and also the company is set to gain from its spin-offs, Ant Financial, potential public listing. But it needs to overcome the issue of counterfeits and to ensure its logistics plans come to fruition before Alibaba can really claim to be a cave full of treasures.