Alibaba warns of slowdown in Chinese consumer spending

Alibaba’s US-listed shares fell more than 10 per cent after the ecommerce group cut its sales forecasts sharply, citing slower growth in Chinese consumer spending.

In quarterly results on Thursday, Alibaba said it now expected 20-23 per cent sales growth in 2022 compared with an earlier forecast of 30 per cent growth after experiencing “softer market conditions”.

Recent Chinese economic data have painted a gloomier picture of the country’s growth prospects. Retail sales rose just 2.5 per cent year on year in August, far below economists’ forecasts of a 7 per cent rise and the slowest increase in 12 months.

Alibaba is also grappling with tougher competition from established rivals such as Pinduoduo and JD.com as well as newer upstarts, all of which are trying to steal market share.

Maggie Wu, Alibaba’s chief financial officer, said competitors were “increasing investment to acquire users and show a high level of spending”. The rivals have been luring merchants away from Alibaba’s Taobao ecommerce business with lower set-up, transaction and advertising costs.

Alibaba said it had increased subsidies to its merchants to stop them from going to competitors.

“Competition in China’s ecommerce is reflected in Alibaba and JD.com’s declining profit margins — a reflection of the increasingly hard-fought battle for shoppers’ wallets,” said Michael Norris, a tech analyst at research firm AgencyChina.

Revenue rose 29 per cent to Rmb200.7bn ($31.4bn) in the three months to the end of September compared with the same period last year. The numbers were flattered by the consolidation of supermarket chain Sun Art, which was acquired last year.

Net income fell 87 per cent to Rmb3.4bn, missing forecasts. Alibaba cited high investment and losses from equity investments as the cause of the drop.

The company’s disappointing earnings report comes after its share price began to pick up from October, when analysts estimated that the worst of Beijing’s regulatory assault on the internet sector was over.

Alibaba pointed to stronger performance elsewhere, with revenues at its cloud computing unit increasing 33 per cent to Rmb20bn, part of its “multi-engine approach to growth”, the company said.