Troubled economies in Russia and Brazil
We discussed Alibaba Group (BABA) lowering the estimate for its GMV (gross merchandise volume) for fiscal 2Q16 in the previous part of the series. In addition to that, Alibaba expects its AliExpress business to take a hit from the troubled economies in Russia’s (RSX) and Brazil’s (EWZ) emerging markets.
Alibaba initiated its entry into the global market with investments in AliExpress, a global retail marketplace selling Chinese goods to consumers worldwide. The company expects a drop in AliExpress’s growth to low double digits by the end of fiscal 2Q16.
AliExpress is one of the main drivers of Alibaba’s cross-border sales. Another driver is Tmall Global, an online platform offering foreign brands to Chinese consumers. These investments have opened business expansion opportunities for Alibaba in the United States and Europe.
The chart above shows Alibaba’s Tmall segment’s continued strong growth. This segment has maintained GMV year-over-year growth rates at above 60% in the last few quarters. Alibaba has also mentioned that it’s always looking to invest in minority stakes in foreign companies. Earlier this year, Alibaba took on more than a 9% stake in US online retailer zulily (ZU), according to its SEC (Securities and Exchange Commission) filings.
An annual GMV of $1 trillion by 2020
Besides becoming a global name, one of the company’s other key goals is to achieve an annual GMV of $1 trillion by 2020. Alibaba reported a 34% GMV year-over-year growth in its fiscal 1Q16 earnings.
Amazon (AMZN) and eBay (EBAY) now have a new e-commerce competitor in town, and the battle has just begun. Who will emerge as the global e-commerce leader? This question will lead to interesting predictions in the coming months.