Economic crisis-Alibaba’s dilemma



Economic crisis-Alibaba’s dilemma Alibaba’s performance difficulties On November 11, Alibaba (B2B) Company (1688.HK) released a financial report showing that in the third quarter as of September 30, the company…

Economic crisis-Alibaba’s dilemma

Alibaba’s performance difficulties

On November 11, Alibaba (B2B) Company (1688.HK) released a financial report showing that in the third quarter as of September 30, the company Revenue and profit growth continued to be strong: total operating income was RMB 780.2 million, an increase of 37% over the same period last year, and net profit was RMB 308.6 million, an increase of 49% over the same period last year.

On the same day, Manager Xu from Shilianbaina was trying to cancel all paid services on Alibaba. He ran a printing company focusing on the foreign trade market. In the past six months, his company has not received a single overseas order and is now preparing to fully withdraw from the country. Unfortunately, Manager Xu is not the only Alibaba member who no longer wants to pay.

Randomly interviewed 57 companies from Alibaba’s GoldSupplier Integrity Pass members that were about to expire. Among the 21 valid samples accumulated (the remaining samples were due to refusal to interview, the bankruptcy of some companies or the person in charge of B2B e-commerce) (resigned but invalid), 7 have already renewed, they think promotion on the Alibaba platform is effective; 9 samples have decided not to renew, they think the effect is average or ineffective; and the other 5 samples are still hesitating.

Alibaba is now facing difficulties because of concerns about the survival of its member customers. The financial crisis from the United States has caused a large number of Chinese manufacturing companies that export to the United States to either close down, suspend production, or lay off employees. Alibaba has fallen into the trough of an American-style economic cycle, and the environment is deteriorating. At the same time, problems with Alibaba’s yellow pages information platform have gradually emerged.

Low Price Guaranteed Income

On November 2, Alibaba submitted documents to the Hong Kong Stock Exchange and announced the launch of a new product GoldSupplier “Export Pass” worth 19,800 yuan. , the product originally priced at 50,000 yuan was upgraded to a GoldSupplier “treasure” worth 72,800 yuan.

For some time, Alibaba has taken successive actions to expand foreign trade customers: opening up the Japanese market and trying to let Chinese small and medium-sized enterprises provide supporting services for Japanese industries; cooperating with many local governments in China to allow more small and medium-sized enterprises to start learning Go online and use e-commerce. An Alibaba executive admitted that the real background for the launch of “Export Connect” was the slowdown in the growth of B2B international major customers on Alibaba.
Obviously, Alibaba’s series of actions are aimed at stabilizing its number of paying users.

Most of Alibaba’s revenue comes from the membership fees of more than 30,000 GoldSuppliers on Alibaba’s English website. The company’s financial report shows that in the first three quarters of 2008, revenue from the international trading market accounted for 64.59% of Alibaba’s total revenue. This number was higher in 2007, at 71.56%.

The big problem Alibaba currently faces is the slow growth of international paying members.

Since the end of 2007, the number of Alibaba GoldSupplier members who pay an annual fee of 50,000 yuan has only increased by 3,452, and the number of International Integrity Pass members with an annual fee of 600 U.S. dollars has only increased by 2,864. Jack Ma believes that what can bring stronger growth momentum to Alibaba in the future is the low-priced “Export Pass”. He tries to promote export-oriented small and medium-sized enterprises to continue to become his GoldSupplier members through the low price of 19,800 yuan to offset the GoldSupplier membership. Slowing growth situation.

The “Quarterly Monitoring of China’s B2B Market in the Third Quarter of 2008” released by Analysys International shows that although the delivery value of the online B2B e-commerce market in the Chinese market reached RMB 1.299 billion in the third quarter, the B2B e-commerce market The number of paid accounts has begun to slow down.

In fact, this is not the first time Alibaba has adopted a low-price strategy. In order to increase domestic trade users, Alibaba launched China Integrity Pass for individual users in the first half of this year, and the cost is 500 yuan lower than the annual 2,800 yuan of corporate integrity pass.
Alibaba’s series of actions are aimed at allowing more small and medium-sized enterprises to become its paid members, whether it is an international platform or a Chinese website.

Difficulties of Alibaba’s model

The bankruptcy of paying customers, budget cuts and non-renewal of contracts are Alibaba’s big dilemma.

Anqiu Fangyuan Electrical Appliance Co., Ltd. did not renew the subscription after it expired. Li Xiaoliang of the company did not feel that the effect of Alibaba’s annual promotion of 50,000 yuan was satisfactory. His product, uninterruptible power supply, is too niche and its buyers are too niche. There are relatively few inquiries coming to Alibaba. Manager Zhang from a company that exports sporting goods concluded that there are too many suppliers in the same category, so buying rankings will have a better effect, but not buying rankings will have little effect.
 
In fact, all B2B e-commerce websites in China currently have a root cause of “disease” – “membership fees”. This main profit model of B2B e-commerce companies puts them into a vicious cycle: in order to increase revenue, they must recruit members. However, when demand remains unchanged, decreases, or does not grow as fast as suppliers, The competition among suppliers of similar products is becoming increasingly fierce, and the average number of orders received by each paying member is getting smaller and smaller. As a result, the business received by paying members cannot cover the cost of membership fees and they eventually no longer renew their contracts.

In fact, Alibaba is still making low-key efforts to transform its trade model into a “multi-country to multi-country” transnational trade platform, providing a comprehensive trade platform for export companies in other countries. Lu Bowang, chief analyst of Zhengwang Consulting, said:�� This is because Alibaba’s current export companies have a relatively single source, with exports from China as their main mode, and have been greatly affected by the U.S. economic crisis.

Liu Tong, an analyst at Analysys International, believes that Alibaba’s current many low prices and measures to expand overseas markets are mainly to pave the way for next year’s business – although there are more companies closing down this year than last year, this year’s Financial reports may not reflect this clearly. “Because Alibaba’s customers pay annual fees, which are then spread evenly into each quarter, this year’s revenue is based on the beginning of the year and last year. The real difficulties will be reflected in next year’s financial report. “

If it is as Alibaba CEO Wei Zhe expected – the third and fourth quarters of next year will be when small and medium-sized enterprises feel cold, then Alibaba’s cold winter has just begun.
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