Alibaba’s US$2.8 Billion Fine Isn’t its Only Problem
Kanebridge News
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Alibaba’s US$2.8 Billion Fine Isn’t its Only Problem

Chinese e-commerce company has competition hot on its heels.

By Jacky Wong
Fri, May 14, 2021Grey Clock 2 min

Chinese regulators recently slapped a US$2.8 billion fine on Alibaba. But the company actually has a larger problem: maintaining its lead over the competition.

The Chinese e-commerce giant reported an operating loss of $1.2 billion for the quarter ending in March. The loss was mostly because Alibaba booked the $2.8 billion fine for anticompetitive behaviour in that quarter. Excluding the fine, Alibaba’s operating profit would have risen 48% from a year earlier. Regulators say the company forced merchants to sell goods exclusively on its platform instead of those of its rivals, in a practice called er xuan yi, meaning “choose one out of two.”

It was a difficult year for Alibaba regulator-wise—its finance affiliate Ant Group saw its initial public offering derailed—but it has been a great year for business. Alibaba’s e-commerce and cloud businesses benefited from the pandemic. Revenue last quarter grew 64% from a year earlier. Partly that was due to the addition of Sun Art, a supermarket chain Alibaba acquired last year, but even excluding that, its sales grew 40%.

But the company needs to invest more to fend off the competition. With the latest regulatory scrutiny, it might also need to spend more to keep merchants happy. The company’s adjusted earnings before interest, taxes, depreciation and amortization, which excludes the one-off fine, grew only 18% year-over-year—implying shrinking margins. Alibaba has been putting money into food delivery and grocery e-commerce. The latter in particular faces strong competition from others as all Chinese tech giants see this as a chance to get their hands on relatively untapped rural areas. The business is unlikely to be profitable in the near future.

Apart from usual rivals JD.com and Pinduoduo, Alibaba could face competition from Tencent. Tencent’s WeChat has increasingly become a platform for shopping through its mini-programs, basically apps within the chat app. Merchants and even e-commerce platforms like JD.com can do their businesses through these mini-programs. Tencent said in January gross merchandise sales for physical goods on mini-programs last year grew 154% from a year earlier, without indicating the actual amount.

Live-streaming e-commerce is another area that is growing fast. Kuaishou and Douyin, the Chinese version of TikTok, have seen strong growth in this area, even though they are still much smaller than Alibaba.

Alibaba has managed to come out of an eventful year in a good shape. There are, however, still plenty of challenges ahead: Both regulators and the competition are hot on its tail.

Reprinted by permission of The Wall Street Journal, Copyright 2021 Dow Jones & Company. Inc. All Rights Reserved Worldwide. Original date of publication: May 14, 2021.

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When people talk about making a seachange, chances are this is the kind of property on the NSW South Coast that they have in mind.

Open for inspection for the first time this Saturday, 24 Point Street Bulli offers rare absolute beachfront, with never-to-be-built-out north facing views of the ocean. Located on the tip of Sandon Point, this two-storey property is a surfer’s dream with one of Australia’s most iconic surf breaks just beyond the back wall.

On the lower floor at street level, there are three bedrooms and two bathrooms, including a family bathroom and an ensuite in the master suite. A fourth bedroom is on the upper floor, along with the main living area, and is serviced by its own bathroom. 

While this would make a spectacular holiday home, it is well equipped for day-to-day living, with a spacious gourmet kitchen and butler’s pantry set into the articulated open plan living area on the first floor. A separate media room to the street side of the property on this level provides additional living space. 

Every aspect of this property has been considered to take in the light and views, with high ceilings internally and spacious, north facing decks on both levels to take in views of rolling waves. If the pull of the ocean is irresistible, it’s just a 100m walk to feel the sand between your toes.

The house is complemented by a Mediterranean, coastal-style garden, while the garage has room for a workshop and two car spaces.

An easy walk to Bulli village, the property is a 20 minute drive from the major hub of Wollongong and just over an hour to Sydney.

 

Open: Saturday August 6 2pm-3pm Auction: Saturday September 3 Price guide: N/A but expected to exceed $5.3m paid in March for 1 Alroy Street 

Contact: McGrath Thirroul – Vanessa Denison-Pender, 0488 443 174