Alibaba, the Chinese Amazon, is in trouble. At the time of the publication of its second quarter results, the e-commerce giant unveiled figures in retreat and a feverish health. For the first time, the company’s future was not detailed through targets or earnings projections.
The company has become a behemoth that, like Amazon, has been slowly killing small retailers. China as much as the United States has gone on the hunt for overly powerful companies weakening competition and stifling any possibility of building a business in the same market. Alibaba is also present in cloud computing and as an Internet search engine.
Declining results, no projections
The company’s revenues were down 5% compared to the same period in 2020. The published report shows a quarterly profit of 45.1 billion yuan, or more than 5.8 billion euros. On the other side of the Pacific, Amazon is doing much better with net profit up 48% year-on-year to $7.8 billion (€6.58 billion) in the second quarter of 2021.
Beyond the declining performance, Alibaba is also blaming the first-ever quarter in which its results missed estimates in the space of two years. According to Bloomberg, all of the company’s businesses are affected. But behind these economic results, there are far more influential political barriers lurking.
At the opening of trading on August 3 in New York, the company was down 3%. Doubts are setting in as the giant struggles to recover from a start to the year marked by the largest antitrust fine ever imposed in China. It was in the order of 2.34 billion euros, April 10, and plunged Alibaba in deficit of one billion euros at the end of the quarter.
The national authorities justified the correction in view of the results of a months-long investigation, during which the evidence was formal that Alibaba had “abused its dominant position” since 2015. The fine is part of a series of antitrust actions. Here are a series of examples below:
- Cancellation, at the last minute, of the IPO of Alibaba’s financial arm, Ant Group, in the last quarter of 2020.
- A fine of more than €1 billion hanging over Tencent’s head (Alibaba’s big local competitor)
- China has also issued very specific instructions on the subject of private education on the Internet, to regulate the platforms that would consider breaking into the online education sector
- Didi Global Inc (VTC shopping) is removed from the app stores after its IPO on the orders of the State (which will hurt the Japanese conglomerate SoftBank)
This The unstable environment has led Alibaba to deny any details on the company’s objectives for the coming months. The company is moving forward in limbo. Alibaba “is going through an investment phase,” said economic analysts at Daiwa House Group in a report relayed by Bloomberg. These investments will not be used for the group’s growth, only to comply with new state guidelines.
The efforts of the authorities to shrink the size of the giant already seem to bear fruit. In a report published on July 30, a researcher from the market research company eMarketer said that Alibaba’s share of e-commerce sales in China will fall below 50%. Perhaps the end of a time, for the giant that aimed at the billion customers before the end of 2021.