Jiang Fan responds to Alibaba International Performance: Large-scale Investment Period, Choice is the First Priority for Growth

[Ebrun Original] On February 7th, Alibaba released its third-quarter fiscal 2024 performance. The revenue of Alibaba International Digital Business Group increased by 44% year-on-year to 28.516 billion yuan; the adjusted EBITA loss was 3.146 billion yuan, compared to a loss of 645 million yuan in the same period last year, with a significant year-on-year and quarter-on-quarter increase.

During the conference call, Jiang Fan responded that the losses of Alibaba International mainly came from three aspects:

1. The proportion of AliExpress Choice (full-service/semi-service model) business in the cross-border business has significantly increased. This business is still in the early stage, needs to be scaled, and then strive for long-term convergence of losses;

2. It was the peak promotion season for cross-border e-commerce this quarter, with expanded marketing investment;

3. Partial early investments in emerging markets such as the Middle East.

Jiang Fan stated that the next period of time will be a large-scale investment period for AIDC, especially for the Choice business. Based on the current data, the user experience and retention of the Choice business have improved compared to before, and there will be better returns in the long term. Next, growth will be the first priority.

At the same time, AIDC will continue to make controllable investments in Southeast Asia. Jiang Fan stated that Southeast Asia is still an important market for AIDC, with great penetration potential and a balance between efficiency and growth. They will continue to narrow down the losses.

Below is the original text of Alibaba's financial report conference call (AIDC related):

Q: What markets are the key focus for international businesses? How do we consider the geopolitical risks in the United States? In the future, what proportion of investments will be external financing, and how much will be provided by the group?

A: International business is divided into cross-border and local businesses.

In the past few quarters, the efficiency of local businesses has rapidly improved, and the losses have continued to narrow down. It is expected that this trend will continue.

As for the cross-border business, which targets all global markets, when deciding how to allocate future investment markets, the focus is mainly on the investment return rates in different markets, and dynamic evaluations will be made based on the performance efficiency over cycles.

AIDC already has a business foundation in the United States, including B2C and B2B businesses, and many of the international clients also come from the United States. Therefore, the U.S. market is a long-term market that AIDC pays attention to. The decision to increase investments will be based on the value and returns in the U.S., and of course, geopolitical risks will also be considered in the investment process.

As for the financing arrangement of AIDC, they will find the right time to conduct financing according to market conditions. Before that, they will use their abundant offshore cash to support business growth.

Q: In this quarter, the AIDC department's losses have expanded to approximately 3 billion yuan. Considering the significant growth markets such as the AliExpress Choice hybrid model and Trendyol, which are still in the early development stage, what are the expectations for future investment pace? How will the economic benefits and competitive environment of these projects be evaluated?

A: The losses of the AIDC business in this quarter mainly come from three aspects: 1. The AliExpress Choice model has significantly increased its share in cross-border e-commerce, and it needs to be scaled in the early stage, then strive for long-term convergence of losses. 2. During the peak promotion season, marketing investment will be expanded. 3. Emerging markets such as the Middle East, are in the early investment stage. In the next period of time, there will be a large-scale investment period, especially for Choice. We have seen that the user experience and retention of the Choice model are better than before, and it will be the first priority for growth in the next cycle.

Q: Regarding the AIDC business, how much does the Indonesian market contribute to Lazada? What is the impact of TikTok's cooperation with Tokopedia and the Indonesian government's restrictions on cross-border e-commerce on Lazada? How are we going to deal with this challenge?

A: The Southeast Asian market is a very important market, with great market penetration potential and they will continue to balance scale and efficiency. It is currently in the phase of rapidly narrowing down the losses and will continue to grow. They will continue to make controlled investments in Southeast Asia to drive growth. The impact of the restrictions imposed by the Indonesian authorities on us is relatively limited, as we have always complied with regulatory requirements.