Alibaba’s International Business Expansion: A Strategic Move Amid Sluggish Domestic Growth

Alibaba Group, the Chinese tech giant, has been making strategic moves to expand its international business unit while facing sluggish growth in its domestic market. The latest earnings report from Alibaba revealed that the international e-commerce business unit, which includes platforms like AliExpress, Lazada, Daraz, and Trendyol, saw revenue increase by 44% year-over-year, compared to a mere 2% growth in the domestic businesses Taobao and Tmall Group.

The strong performance of Alibaba’s international business unit was driven by solid growth across all of its retail platforms, especially from the cross-border AliExpress Choice business. The company’s focus on international expansion comes as domestic consumption growth in China remains sluggish, and the tech giant seeks to consolidate growth trajectories and de-risk uncertainties of operating in multiple, competitive markets.

Despite the strong sales growth, losses also surged year-over-year for Alibaba’s international business unit, mostly due to increased investment in businesses like AliExpress’ Choice and Trendyol’s international business, partly offset by improvements in monetization.

The quarterly results follow a series of management shuffles at Alibaba and its subunits. Pakistan e-commerce platform Daraz replaced its CEO Bjarke Mikkelsen with James Dong, CEO of Southeast Asian e-commerce giant Lazada Group. Dong will work on a deeper integration between Daraz and Alibaba’s sister companies. In early January, Lazada executed a mass layoff across Southeast Asia, which affected employees of all levels, including senior management. The cuts were intended to streamline decision-making and boost organizational and business efficiency.

The latest management shake-ups have their roots in the Alibaba split last year, which was a strategy to navigate the regulatory developments in China that have long put pressure on the tech giant. The nature of Alibaba’s international business unit as a portfolio of diverse and individually complex businesses, ranging from Daraz to Lazada, also plays a key factor in the tightening of the ship to consolidate growth trajectories and de-risk uncertainties of operating in multiple, competitive markets.

Alibaba’s international business expansion comes as the e-commerce business that once propelled the company to success has run into challenges with upstart competitors such as PDD. China-based PDD Holdings reported third-quarter revenue nearly doubled, far outpacing Alibaba’s 9% growth during the same period. PDD’s revenue in the quarter was $9.44 billion, up 94% from $4.99 billion in the same quarter of 2022. Alibaba posted 9% year-on-year revenue growth in the third quarter to about $31 billion.

Alibaba’s Hong Kong-listed shares have plunged from an all-time high of 309.4 Hong Kong dollars ($39.59) on Oct. 28, 2020, to HK$71.50 on Monday. Similarly, Alibaba’s Southeast Asia unit Lazada is trying to fend off stiff regional competition from rivals such as Sea Limited’s Shopee and ByteDance’s TikTok Shop.

TikTok joined forces with Tokopedia, the e-commerce arm of Indonesia’s tech giant GoTo, in December. As part of the deal, TikTok will pump $1.5 billion into an enlarged Tokopedia entity. GoTo was formed through a merger between Gojek and e-commerce giant Tokopedia.

Alibaba’s international business expansion is a strategic move to diversify its revenue streams and mitigate risks associated with its domestic market. The company’s focus on international expansion comes as it faces growing pressure from rivals such as PDD and upstart competitors in various markets. By expanding its international business unit, Alibaba aims to consolidate growth trajectories, de-risk uncertainties of operating in multiple, competitive markets, and maintain its market leadership in the e-commerce industry.

In conclusion, Alibaba’s international business expansion is a strategic move to diversify its revenue streams and mitigate risks associated with its domestic market. The company’s focus on international expansion comes as it faces growing pressure from rivals and upstart competitors in various markets. By expanding its international business unit, Alibaba aims to consolidate growth trajectories, de-risk uncertainties of operating in multiple, competitive markets, and maintain its market leadership in the e-commerce industry. The strong performance of Alibaba’s international business unit, which includes platforms like AliExpress, Lazada, Daraz, and Trendyol, is a bright spot in the company’s recent earnings report and a testament to its strategic focus on international expansion.