Across five major e-commerce platforms’ GMV, Alibaba’s market share fell by 6% in the first quarter versus the fourth, according to Bernstein analysis.
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BEIJING — Alibaba was once the poster child for investing in modern China. Now the e-commerce market that fueled its growth is slowing, while new players eat away at Alibaba’s market share.
Pinduoduo shares have more than doubled since then, while Meituan shares have climbed 80%, and JD shares are up more than 50% in Hong Kong. Kuaishou is up by nearly 47%.
Alibaba shares have climbed about 42% in Hong Kong, and 33% in New York. Tencent is up only about 25%.
But except for Kuaishou and Pinduoduo, the stocks are still down for the year so far.
“Our top picks in the sector remain JD, Meituan, Pinduoduo, and Kuaishou,” Bernstein analyst Robin Zhu and a team said in a report this week. “Interest in Alibaba has persisted, chiefly from overseas investors, while feedback on Tencent has become very negative.”
Bernstein expects consumer and regulatory trends to favor stock plays in “real” categories — e-commerce, food delivery and local services — over “virtual” ones — gaming, media and entertainment.
A slowing e-commerce market
Over the weekend, the 6.18 shopping festival spearheaded by JD.com saw total transaction volume rise by 10.3% to 379.3 billion yuan ($56.61 billion). That is a new high in value — but the slowest growth on record, according to Reuters.
Merchants who spoke with Nomura said Covid lockdowns disrupted apparel production, while consumer demand was generally low, according to a Sunday report. High-end product sales fared better than mass-market ones, the report said, citing a merchant.
Alibaba, whose main shopping festival is in November, only said it saw growth in gross merchandise value from last year, without disclosing figures. GMV measures total sales value over a certain period of time.
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“Online retail growth is likely to be slower this year than in 2020 and 2021, and its gain in penetration rate may be weaker than the average of 2.6 [percentage points] during 2015-2021,” Fitch said in a report last week.
“This is due to a larger base, deeper integration of online and offline channels … and weaker consumer confidence on concerns of a slowing economy and rising unemployment,” the firm said. Fitch expects online sales of food and household goods to perform better than that of apparel.
In May, online retail sales of goods surged by more than 14% from a year ago, but overall retail sales fell by 6.7% during that time.
Fitch expects China’s retail sales to only grow by low single digits this year, versus 12.5% in 2021. But the firm expects online sales of goods can expand its share of total retail goods to around 29% in 2022, versus 27.4% in 2021 and 27.7% in 2020.
New players grab Alibaba’s market share
In that online shopping market, new companies have emerged as rivals to Alibaba. These include short-video and livestreaming platforms Kuaishou and Douyin, the Chinese version of TikTok also owned by ByteDance.
Across five major e-commerce platforms’ GMV, Alibaba’s market share fell by 6% in the first quarter versus the fourth, according to Bernstein analysis published early this month.
JD, Pinduoduo, Douyin and Kuaishou all grew market share during that time, the report said. Douyin’s GMV share increased the most, by 38%, although its combined market share with Kuaishou is only about 12% among the five companies.
In a sign of how Kuaishou has emerged as its own e-commerce player, the app in March cut off links to other online shopping sites.
“Their recent decision to cut off external links to [Alibaba’s] Taobao and JD shows that times have changed,” Ashley Dudarenok, founder of China marketing consultancy ChoZan, said at the time of the news. “Taobao is no longer the only main battlefield for e-commerce.”
In the quarter ended March 31, Kuaishou reported GMV on its platform of 175.1 billion yuan, a surge of nearly 48% from a year ago.
While Douyin dwarfs Kuaishou by number of users, what’s different for investors wanting to play the short-video e-commerce trend is that Kuaishou is publicly listed.
Users like cosmetics livestreamer Zhao Mengche often describe Kuaishou as having a “community,” in which he said the app is trying to integrate more brands and mimic a village market square — online. Zhao has more than 20 million followers on Kuaishou.
During this year’s 6.18 shopping festival, fashion-focused social media app Xiaohongshu claimed more merchants made their products available directly on the app, and said users could buy imported JD.com products through Xiaohongshu as well.
Ad spending declines
Looking ahead, companies were more inclined in the first quarter to spend on advertising closest to where consumers might make a purchase, rather than just building awareness, according to Bernstein. They estimated growth of 65.8% in Kuaishou e-commerce ads in the first quarter from a year ago, with Pinduoduo, JD and Meituan also seeing double-digit growth.
However, revenue across the top 25 advertising platforms tracked by Bernstein grew by 7.4% year-on-year in the first quarter, slower than 10.8% growth in the prior quarter.
And for ByteDance — the largest advertising platform in China in the first quarter alongside Alibaba — Bernstein estimated domestic ads grew by only 15% in the first three months of the year, despite livestreaming sales GMV likely nearly tripling, the analysts said.
They expect ByteDance’s domestic ads business to slow to the single digits, or even contract, in the second quarter.
— CNBC’s Michael Bloom contributed to this report.
OTTAWA – The parliamentary budget officer says the federal government likely failed to keep its deficit below its promised $40 billion cap in the last fiscal year.
However the PBO also projects in its latest economic and fiscal outlook today that weak economic growth this year will begin to rebound in 2025.
The budget watchdog estimates in its report that the federal government posted a $46.8 billion deficit for the 2023-24 fiscal year.
Finance Minister Chrystia Freeland pledged a year ago to keep the deficit capped at $40 billion and in her spring budget said the deficit for 2023-24 stayed in line with that promise.
The final tally of the last year’s deficit will be confirmed when the government publishes its annual public accounts report this fall.
The PBO says economic growth will remain tepid this year but will rebound in 2025 as the Bank of Canada’s interest rate cuts stimulate spending and business investment.
This report by The Canadian Press was first published Oct. 17, 2024.
OTTAWA – Statistics Canada says the level of food insecurity increased in 2022 as inflation hit peak levels.
In a report using data from the Canadian community health survey, the agency says 15.6 per cent of households experienced some level of food insecurity in 2022 after being relatively stable from 2017 to 2021.
The reading was up from 9.6 per cent in 2017 and 11.6 per cent in 2018.
Statistics Canada says the prevalence of household food insecurity was slightly lower and stable during the pandemic years as it fell to 8.5 per cent in the fall of 2020 and 9.1 per cent in 2021.
In addition to an increase in the prevalence of food insecurity in 2022, the agency says there was an increase in the severity as more households reported moderate or severe food insecurity.
It also noted an increase in the number of Canadians living in moderately or severely food insecure households was also seen in the Canadian income survey data collected in the first half of 2023.
This report by The Canadian Press was first published Oct 16, 2024.
OTTAWA – Statistics Canada says manufacturing sales in August fell to their lowest level since January 2022 as sales in the primary metal and petroleum and coal product subsectors fell.
The agency says manufacturing sales fell 1.3 per cent to $69.4 billion in August, after rising 1.1 per cent in July.
The drop came as sales in the primary metal subsector dropped 6.4 per cent to $5.3 billion in August, on lower prices and lower volumes.
Sales in the petroleum and coal product subsector fell 3.7 per cent to $7.8 billion in August on lower prices.
Meanwhile, sales of aerospace products and parts rose 7.3 per cent to $2.7 billion in August and wood product sales increased 3.8 per cent to $3.1 billion.
Overall manufacturing sales in constant dollars fell 0.8 per cent in August.
This report by The Canadian Press was first published Oct. 16, 2024.
