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Shanghai (AFP). Alibaba, the Chinese ecommerce giant, said Thursday that profit for the October-December period fell 74%. This is the company’s third consecutive quarterly decline. It faces many challenges, including a government crackdown, slower sales growth, and intensifying domestic competition.
Hangzhou-based Alibaba Group reported a “complex market environment” when it announced net income at 20.43 billion Yuan ($3.2 billion), down 74 percent over the previous year.
According to Bloomberg financial news revenue grew by just 10% to 242.6 million yuan. This is the smallest percentage increase the company has reported since 2014 when it went public.
Alibaba’s Hong Kong shares and US-listed shares have lost half of their value over the past twelve months due to the company’s troubles. The company’s problems were highlighted by a broad crackdown by Chinese regulators regarding alleged anticompetitive practices.
The scrutiny began in late 2020 and caused a record-breaking Alibaba’s digital-payments affiliate Ant Group IPO to be pulled at the very last minute. Alibaba was also hit with a $2.75 billion record for its alleged unfair practices.
Other tech giants were also hit with fines, as well as business restrictions.
The government has taken action against allegations of abuse of user information and monopolistic business practices. Authorities have expressed concern that Ant Group’s entry into online lending could lead to worrying debt levels in the economy.
However, the crackdown was also motivated partly by the perception that Chinese Big Tech had become excessively powerful and under-regulated.
As Alibaba’s days are over, the pressure mounts as earnings growth and sales jumps continue to diminish.
China’s annual “Singles Day” shopping spree, which culminates in November 11, is a highlight of the quarter.
It is the world’s largest shopping festival and now dwarfs the “Black Friday” promotions in America.
However, sales increased at a slower rate than usual this time around.
Alibaba reported a 10 percent quarterly increase of revenue, which was a significant decrease from its previous years of growth exceeding 40 percent.
Analysts claim Alibaba is facing sales challenges as China’s zero tolerance approach towards Covid — which can include targeted locksdowns, business closures, and other draconian steps — disrupts consumer spending and as Pinduoduo and JD.com intensify their competition.
The government’s pressure is not abating.
According to a Bloomberg report, Chinese regulators ordered the country’s largest state-owned banks and firms to conduct a new round in their financial exposure and other connections to Ant Group and its subsidiaries.
2022 AFP
