Despite the vast success and dominance of Alibaba in the Chinese and global e-commerce markets, the company is facing stiff competition from emerging platforms. Alibaba’s sluggish growth and disappointing quarterly results have raised concerns about the company’s ability to withstand the competition from new entrants like PDD Holdings, the owner of Temu and Pinduoduo, and ByteDance, the parent company of TikTok.
Alibaba’s TTG (Taobao and Tmall Group), the heart of its e-commerce operations, only managed a 2% year-on-year growth in the last quarter of 2023, equivalent to 29.07 billion yuan ($17.98 billion). This slow growth is alarming, especially when compared to PDD Holdings’ 94% year-on-year growth in the quarter ending in September 2023.
Competition Heats Up in China’s E-commerce Market
China’s e-commerce market is becoming fiercely competitive, with new players like PDD Holdings and ByteDance disrupting the industry with innovative business models. Pinduoduo, owned by PDD Holdings, operates as a community-buying platform, enabling consumers to place group orders in bulk to save costs. This model has resonated with the cost-conscious Chinese consumers, leading to rapid growth.
ByteDance, on the other hand, is making significant strides into Alibaba’s territory by venturing into live-streaming e-commerce. According to Insider Intelligence, sales from live e-commerce are projected to surpass $800 billion by 2025. ByteDance’s Douyin app is also branching out into food delivery and leisure travel, posing even more competition for Alibaba.
Alibaba’s Strategic Response
Alibaba CEO Eddie Wu has acknowledged the intensifying competition, dubbing China as “the world’s most competitive e-commerce market.” He further outlined Alibaba’s strategic response, which involves reigniting the growth of the company’s core businesses, e-commerce, and cloud computing.
To achieve this, Alibaba plans to enhance “price competitiveness, service, and user experience” through targeted investments. The company will also increase the selection of branded and direct-from-manufacturer products on the TTG platform, with a focus on offering “attractive prices for quality products.”
Alibaba’s Restructuring and the Future
Alibaba is also undergoing a restructuring process, although it seems the journey is not as smooth as anticipated. The company had announced plans to transform into a holding company and pursue IPOs for its divisions like Cainiao, a logistics service, and Freshippo, a grocery chain.
However, Alibaba chairman Joe Tsai revealed that they are “not in a hurry” to proceed with the IPOs due to unfavorable market conditions. Instead, the company is planning to divest some of its non-core assets, such as its InTime department store chain.
As Alibaba navigates these challenges, it will be interesting to see how the company adapts to maintain its dominance in the e-commerce industry. With new players like PDD Holdings and ByteDance rapidly gaining ground, Alibaba must act quickly and decisively to stay ahead.
