Alibaba’s Profit Falls Amid Offline Expansion

As Alibaba looks beyond eCommerce to expand its empire, some investors are getting nervous: Since January, the eCommerce retailer has lost approximately $60 billion in market value, The New York Times reported.

On Friday (May 4), Alibaba reported a profit that was almost 30 percent below that of its last quarter — the first time the stock has registered that kind of decline in one and half years. While Alibaba did receive a boost in profit after selling its shares in an app last year, the company has spent significant amounts of capital on businesses such as cloud computing and brick-and-mortar retail.

However, due to the strength of Alibaba’s core business, the company still saw a 60 percent increase in total revenue over the same period — the first quarter — in 2017. And Alibaba foresees that sales will grow at a similar pace.

The news comes as Alibaba rolls out ventures such as Hema stores — physical supermarkets located in Beijing and Shanghai — as part of its omnichannel strategy. The first Hema stores debuted in 2015, offering grocery delivery to customers within three kilometers of each of its 13 locations.

At the new Hema stores, customers will be able to shop, dine and order groceries from their smartphones, and pay for it all with Alipay — Alibaba’s mobile payments platform. In addition, every barcode in the store will be a gateway to pricing and product information, meaning shoppers can simply scan packages with their phones to find out more.

Analysts project this move by Alibaba could be a trendsetter for other online retailers that wish to tap into the vast number of Chinese consumers still shopping brick-and-mortar retail. China’s online retail market remains underpenetrated at just 15 percent of the total retail market size, CNBC has reported.

Beyond Hema, Alibaba is building a physical mall to meld the worlds of offline and online commerce. According to a report by Chinese news source Caixin, the mall, which will be five-stories high and housed at Alibaba’s headquarters in Hangzhou, will combine physical shopping with technology similar to its current brick-and-mortar Hema supermarket strategy.