Alibaba sees huge growth surge in last quarter
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Alibaba sees huge growth surge in last quarter

Ecommerce giant Alibaba showed that it hasn’t maxed itself out, delivering another quarter of incredible growth in the three months to December. The company increased revenue by more than half – slower than previous quarters, but impressive nonetheless given its size, and notably above analysts’ expectations. At the same time, Alibaba’s more than doubled in 2017, putting it in the same league as Facebook and Tencent – one of the modern world’s true tech titans with a market cap of over half a trillion U.S. dollars.

Over the last 12 months, Alibaba’s share price has appreciated by 86%

graph 0502 alibaba

SOURCE: Yahoo Finance

It’s a sensible point for the online giant to take stock of things. Inevitably, Alibaba will reach a point where it struggles to grow – and that point might be approaching. There are only so many Chinese people online; and smartphone sales are slowing in the country. Perhaps the most interesting thing is how Alibaba is reacting to this fact: similar to Amazon – the international Ecommerce powerhouse that Alibaba is often compared to – it’s looking to diversify into brick-and-mortar retail.

For Alibaba, the quest to conquer the offline world is lucrative, and progressing well. In China, as much as 84% of retail sales still happen offline (the fact China also has the world’s biggest Ecommerce sector is simply testament to the size of the country).

And, while Amazon purchased Whole Foods last year, Alibaba began making in-roads into the physical space way back in 2015, with an investment into popular electronics retailer Suning. Early last year, it pushed further, taking control of Intime Retail, a department store and mall operator. Then, in November, it took a $2.9 billion piece of Sun Art, one of China’s largest grocery store networks. Clearly, Jack Ma and his company are serious about offline sales.

Disclosure

Dominion holds Alibaba in its Global Trends Managed Fund.


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