CGTN Europe interviewed Jacques Roizen, Managing Director, China Consulting at Digital Luxury Group.
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00:00 Alibaba has posted an 86% drop in fourth quarter profits. This is despite a 7%
00:08 increase in revenue. The Chinese e-commerce giant is facing rising
00:13 competition from low-cost rivals like PDD. Jacques Roizen, the managing director
00:20 of China Consulting at Digital Luxury Group, takes a closer look at what the
00:25 results mean for Alibaba. It is good news in a very competitive e-commerce
00:31 environment in China for Alibaba to be posting a 7% increase in revenue. The
00:37 challenge is on their profitability. The earnings came out at 140, analysts were
00:46 expecting 142 and last year they had a profitability of 152 per share. And
00:52 that's you know unfortunately not that surprising because what we're seeing in
00:58 the Chinese e-commerce landscape is that Alibaba is being squeezed by the
01:03 emergence of Pinduoduo and Douyin and the strength of JD.com. If we also look
01:11 at the success of companies like Xian, Temo, you mentioned Pinduoduo, they have
01:17 really gone after the consumer offering enticing bargains. Is Alibaba on the same
01:25 page or do they have catch-up? I think you're absolutely right. The trend of
01:30 Chinese consumers going after discount and seeking promotion has always been at
01:38 the center of the Chinese e-commerce. When you think of the Douyin and Pinduoduo
01:43 you're having the biggest discount and a great consumer experience. And then the
01:50 other big competitor of Alibaba of course is JD.com. JD has invested amazing
01:58 amounts in providing exceptional logistics and exceptional service. And so
02:04 if you will you have Alibaba being squeezed on two sides, needing to improve
02:09 the customer experience and needing to invest in promotions, it was expected
02:15 from our perspective that their earnings would be challenged. Talk to me about the
02:20 way forward for Alibaba. Is it on the right track given the challenges and the
02:26 very competitive environment that you've just detailed or does it need to course
02:29 correct? I think first of all we need to step back and realize that Alibaba was
02:38 the dominating force and with nobody coming anywhere close. Alibaba had 70
02:45 sometimes 80 percent market share across many categories for a long time and it's
02:51 just no longer the case. Alibaba doesn't have a serious chance at defending those
02:56 market shares and keeping them at that level. And so they have to accept the
03:02 fact that eventually their competitors are going to grow faster than they are
03:07 growing. The challenge is how do they position themselves? I don't know that it
03:13 makes sense to continue investing in discount, continue to funding discount, to
03:19 at the end of the day try to hold on to customers that are always going to go
03:23 wherever the discount is the deepest. I think they should focus on the customers
03:30 that are looking for a you know better quality experience, better quality
03:37 brand experience and an opportunity to buy goods that they know to be authentic
03:43 which is one of Tmall's key points in the value proposition.