Why Alibaba’s GMV growth rate slowed down in the past
The Chinese economy is facing an economic downturn. It’s going through a major shift from high growth to moderate growth. In the previous part of this series, we saw that despite economic headwinds, Alibaba (BABA) managed to increase its revenues in China (FXI) at a healthy growth rate. However, the troubled Chinese economy has slowed the pace of growth for Alibaba’s GMV (gross merchandise volume), the most common and most important performance metric for e-commerce players.
Having said that, it would be unfair to judge Alibaba’s performance solely on the GMV growth rate, since the company is lot more than just an e-commerce player. It has invested heavily to expand its business beyond the e-commerce space.
The company has a strong M&A (merger and acquisition) history, including the recently acquired Youku Tudou video site and the Southeast Asian e-commerce company Lazada. These acquisitions are likely to boost the company’s growth prospects and provide additional ways to monetize its business.
How Alibaba plans to turn the tables
Alibaba recently announced that it’s focusing on building a customer base in rural regions of China. The objective is to reach out to an untapped user base in rural areas and boost online sales. This, in turn, is expected to generate more revenues. In the past year, the company made good progress building a countrywide network that covered the major villages in China.
Meanwhile, Alibaba plans to expand overseas and is investing in businesses to generate meaningful revenue streams. These include cloud computing, online payments, logistics, and media and entertainment.
The company, through these strategic initiatives, expects to double its GMV by 2020 to 6 trillion yuan (~$1 trillion) and reach 2 billion customers.