Retail

Alibaba’s Move On Everyday Items

Alibaba is on a mission to be the internet’s everything store in mainland China and beyond, and it has upped its investment in capturing spend on the type of everyday items consumers always need. Things such as soap, paper towels, cereal and laundry detergent — staple goods that Alibaba is hoping will carry its reach into the rural areas in China it has yet to fully capture.

Chief Financial Officer Maggie Wu says her firm is committed and will spend billions more than their competitors when it comes to pushing the essential products that people use everyday.

“We are pretty much sure that we are going to further invest because we have that luxury,” Wu told analysts on a post-earnings conference call. “While the other company is talking about investing a billion dollars, we are willing to invest multi-times of that number.”

The expansion seems to be a thinly veiled threat at Alibaba’s main rival in China, JD.com. JD mainly sells electronics, but had been investing in home goods as of late. It also comes as Alibaba has announced its biggest topline growth since 2014, when the company went public.

Apart from big ambitions to expand beyond China’s emerging market of young, well educated and increasingly capitalized young consumers, Alibaba CEO Jack Ma is also looking to expand Alibaba’s international footprint. His stated goal is that more than half his firm’s revenue comes in from overseas.
“Investors love hearing stories to show that the company has some kind of plan for mid-term growth. The global and rural area strategy falls into that category,” said Jeff Hao, a Hong Kong-based investment manager at China Merchants Securities Holdings. “In reality, these things take a long time to bear fruit, so Alibaba has to be ready to be in it for the long haul.”
And when it comes to consumer goods, Alibaba seems to be.  Last year it invested $4.6 billion  in Suning Commerce Group Ltd.,  giving it access to a vast network of storefronts and warehouses in smaller cities and rural areas. Suning had more than 1,600 outlets in about 290 cities in China selling appliances, books and baby products as of August last year.

“Rural and global investment and FMCG category could lower margin” in the short run, they warned.

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