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Zhang Yong talks about the unsustainable business model of Taobao vegetable subsidy From Alibaba

The following is the Zhang Yong talks about the unsustainable business model of Taobao vegetable subsidy From Alibaba recommended by And this article belongs to the classification: cloud computing, Enterprise financial report, Investment & Economy, Electronic Commerce.

On February 2, 2021, Alibaba group released its financial report for the third quarter of fiscal year 2021 (the fourth quarter of 2020).

According to the financial report, from October to December 2020, Alibaba achieved a revenue of 221.08 billion yuan, which is expected to be 215.32 billion yuan, compared with 161.46 billion yuan in the same period last year, a year-on-year increase of 37%. In December 2020, the number of mobile active users in China’s retail market reached 902 million per month, and the number of active consumers reached 779 million per year, with a single quarter net growth of 22 million.

After the financial report was released, Alibaba CEO Zhang Yong and CFO Wu Wei attended the conference call to interpret the latest performance and answer questions from analysts.

The main contents of the conference call are as follows:

Bank of America analyst: my question is about businesses. There are more and more online sales channels. In addition to some traditional competitors, there are also platforms such as short videos and small programs. At the same time, the regulatory authorities have also introduced some anti-monopoly measures. What impact do these have on the retention rate of platform businesses? In terms of operation, what measures can be taken to improve the retention rate?

Zhang Yong: with the increasing number of platforms, different forms of user products can create e-commerce opportunities. As long as there are users, users have stay, and some social means of payment and logistics, anyone can do some e-commerce, which is actually the way of using traffic. In fact, it has become the norm for businesses to operate on multiple platforms and websites. In addition to reaching the exclusive flagship store model with a small number of businesses, Alibaba also has its own channels and third parties to operate on other platforms, which is a reality.

Our advantage is that our primary user nature is consumption, providing quality and guaranteed consumption experience. Despite the possibility of multi platform operation, we are still the main position of operation. From the perspective of businesses, both the retention rate, activity and concentration have increased, because the mode of e-commerce is more and more important for their whole business. And Alibaba is the main position of their retail online and offline operation. We have technology, we provide a variety of operation tools with technical support, and realize the possibility of improving the comprehensive efficiency of continuous operation.

At present, there are some live broadcast platforms and short videos. What the platform provides is a kind of advisory activity. This mode is also a part of our business, but not all of it. I hope that businesses can see the growth of overall business and the improvement of efficiency, including the improvement of profit margin, on our platform, because we provide businesses with very perfect business equipment and tools, There is also technology, so for businesses, we are still a very important platform.

Analyst of Barclays Bank: my question is about Alibaba’s outlook for capital expenditure. It has launched many new technologies and made a lot of new progress in damoyuan. It has also made rapid growth in the cloud. It has made a lot of investment in cloud infrastructure, innovation and cloud computing. What is Alibaba’s plan for capital expenditure?

Wu Wei: according to our report, the total quarterly expenditure in December was 5.8 billion yuan, of which 4.9 billion yuan was operating expenditure, mainly in it. In the future, our investment in it R & D and Dharma Institute will be further strengthened, so both the absolute value of CAPEX and the proportion of revenue will increase.

JP Morgan analyst: when the management mentioned the change of policy environment, they said that Alibaba will take more social responsibility in the future, so what kind of change will this reflect in the operation? What kind of financial impact will the changes in operation bring?

Zhang Yong: for a platform economy like Ali, we always take social responsibility as a part of our work and thinking. In the future, the development of platform economy and social economy is highly integrated, which also means that we need to take on more responsibilities. For Ali, we should give full play to the characteristics of platform economy in terms of social responsibility, and be able to create new opportunities It serves small and medium-sized enterprises to assist their production, circulation and export, including their transformation and upgrading in the production process. This is not separated from operation. On the contrary, it is highly related and consistent with the ecological prosperity of our business and platform economy.

From this point of view, taking on more social responsibility is conducive to the prosperity of the platform, and ecological prosperity in turn helps to take on more social responsibility. We will not consider this from a separate financial perspective, but from the perspective of the ecological value of the whole platform, we will also pay more attention to this aspect in the future.

Citigroup analyst: my question is about profit reinvestment, especially in the commercial market. You also plan to lower the leverage ratio of EBITA in the commercial market. Can you do some sorting, such as the growth stage of different sectors, Taobao special price board, Taobao shopping and so on, as well as the strength and return of reinvestment?

Zhang Yong: what we always emphasize is that we always invest in the future. Although these Seed Businesses in the core commercial sector are new businesses, we always look at these new opportunities from the macro perspective of ecosystem. In order to maintain our market position in the commercial sector, we constantly launch new services to meet different new needs.

Taobao special edition is growing very fast, and has exceeded 100 million Mau in this quarter. We are very happy about this, Taobao special edition is a very important business segment for us, it can let us better in-depth and contact with the audience in low line areas, at the same time, we can also play our advantages in product supply and supply, including 1688. In fact, Ali has a very strong supply and supply capacity in terms of cost-effective goods to meet the needs of these people with low consumption power.

In the aspect of Taobao live broadcasting, we have also invested in it for a period of time. Its scale is growing. Hundreds of thousands of live broadcasting are carried out on the platform every day. In addition to the live broadcasting carried out by KOL, many of them are carried out by the stores themselves. Taobao live is highly integrated with our overall retail platform. It is not a separate business segment, but a form of new retail.

Taobao shopping is a new and unique business model developed by us. I have already introduced it in my previous opening statement. We value value proposition rather than subsidies to expand our business. We emphasize user experience and business sustainability. We use our own business model instead of burning money like many businesses in the market It’s an unsustainable business model to obtain consumers and sales volume by means of financial support and subsidies.

The way we adopt is to highly integrate Taobao shopping with Taobao’s existing app. We have added an entry for shopping on the app. So far, this feature has achieved very good results. We can help consumers through Taobao shopping, especially consumers in low tier cities, to obtain local dishes more easily, and can help us obtain new uses Households. We will continue to make use of different resources, including new retail, enterprises and diversified supply channels. In the core business part, we do not manage by focusing on EBITA, but we have a very clear strategic goal, and we are confident that we will continue to increase investment in this area.

At present, the function of Taobao shopping is still in an adaptive stage. This function is only open to some consumers. In the future, we will expand this business to consumers all over the country, and we will continue to cooperate with more suppliers.

Jeffrey investment bank analyst: my question is about the current cloud business competition situation faced by Alibaba. What kind of strategy will the management adopt? What is the trend of gross profit rate?

Zhang Yong: we think that cloud computing is a business with great potential. We think that all walks of life will need such business as cloud computing. Of course, we also see fierce competition in the market. However, it is obvious that Alibaba has huge advantages in several different aspects. The first advantage is that we have a huge e-commerce service and logistics platform. We are the first In order to meet our own needs, we create highly scalable services, first meet such needs, and then provide them to third-party customers. Our first advantage is scalability.

Our second advantage is that we can provide excellent data intelligent processing capabilities and applications to serve our customers. In China, many customers think of going to the cloud. Going to the cloud is not for the sake of going to the cloud itself, but to make better use of data through going to the cloud. So the ability and application of data intelligence is the key. Similarly, Ali obviously has unique and rich experience in this aspect Experience.

The third advantage lies in technology and science and technology. Over the years, we have been investing heavily in the development of the most advanced and leading technologies in the cloud, including through Dharma Institute, and constantly recruiting first-class engineers and scientists. Our quality is far ahead of us in many key aspects of product performance, including database storage, other product services and so on Our competitors. We also continue to get customer praise and positive feedback, so the leading technology is also our very important advantage.

In general, we continue to invest in PAAS, IAAs and SaaS. We work with partners in different industries to build a cloud based ecosystem. The above is our efforts in cloud technology language. We are very optimistic about the future development potential of this business.

UBS analyst: my question is that overall, the growth rate of EBITA and ebida tends to be stable in recent years. Does the investment in the special price board and other business sectors mentioned by the management affect this growth rate? Or will the profit growth of other business sectors have a positive impact?

Wu Wei: when we ask about Alibaba’s financial outlook, we all ask how the profit growth will be and how the profit margin will be maintained. We are also very grateful because everyone has high expectations for us. We have been creating and increasing profits, and the profit margin growth trend is also very good. We have been asking ourselves, if we have to choose, we should make profits I think the answer is no need to think about, it must be reinvestment, and we have been doing this all these years. This is our background. Then I will answer this question in detail.

Let’s look at the situation of Ali. In the past 12 months, our profits have been considerable. In the past nine months, we have created 147.8 billion yuan, which is based on our partial reinvestment. It is good to have such profits, but we should also see that the potential of the market is very large, so we will continue to strengthen our confidence in reinvestment. Comparing our profit increment with the data of the past two years, the first nine months of this year and the first nine months of last year, our profit increment is nearly 30 billion. Now we see that the market has great potential, and the current strategies are pushing forward. If we clearly see the output and see that we can successfully get the results, we will actively increase investment.

Now that we see the market potential and competitive pattern, and our own business progress, in my opening statement, I said that we will reinvest next, which means that we certainly do not take margin as the first priority, but we have a good foundation for the growth of profits. Our key businesses, such as Taobao tmall, are still creating relatively healthy profits.

Analyst: with the resumption of some epidemic prevention and control measures in China, what impact do you see on the business in January? What will be the impact on the momentum of recovery?

Zhang Yong: in China, the government is taking some new measures to prevent and control the epidemic. At the same time, it encourages people to stay in place for the new year. We have also paid close attention to these situations. So far, we have not seen any impact on consumption or our business. But this year’s January is still different from last year’s January, because last year’s Spring Festival was at the end of January, while this year’s Spring Festival is in the middle of February. There is a time difference between last year’s and this year’s Spring Festival.

The implementation of such isolation and blockade measures in some cities has indeed brought some challenges to logistics. However, as the government encourages us to stay in place for the Chinese new year, we expect to continue to guarantee the last kilometer’s operating capacity.

Analyst: please talk about the achievements of the management in some innovative businesses, such as transportation and self driving cars. The Chinese government is encouraging the development of nationwide intelligent transportation. How can Ali participate? How to win in this sector?

Zhang Yong: we look at intelligent transportation and self driving cars from different perspectives. In terms of intelligent transportation, in fact, Alibaba cloud has been doing it all the time. We have intelligent transportation solutions that are deployed in different cities and regions. We believe that in the future, they will be deployed more widely. In the aspect of self driving cars, Dharma Institute has a special team for many years. Our focus is how to apply cars to the field of logistics. We have deployed such technologies in some campuses and residential areas to complete the terminal distribution, such as from the post station to the home or dormitory. We are already doing it, and we believe that this technology will be more widely used in the future We will continue to pay close attention to their future development direction, and we will continue to invest.

HSBC analyst: the first question is about Alibaba’s investment in new business, which new business management thinks has the largest potential market, and can produce the largest synergy effect, because Alibaba is the first company in the industry to participate in the research on new retail and cloud business, and has achieved great success at present, and its market position is also low It is very stable, so which of these new businesses can produce the greatest synergy, and what strategies can be adopted to amplify the synergy? The second question is that the current losses are constantly narrowing. Can we specify which businesses are losing money in debt collection?

Zhang Yong: in terms of new business, we are constantly incubating some new business, not only in the core business, but also in other fields. In terms of this process, we are very patient and have long-term confidence in a business. Today, we are showing signs of either special edition or live broadcast, which is also the basic investment after a period of time In the beginning, our businesses have made clear the customer value, and we will continue to invest. At the same time, we also invest in some businesses that can bring different customer value, whether it is the core business or other business sectors. This is the direction we focus on.

Wu Wei: basically, our businesses with relatively large losses have narrowed across the board, and some of them have even made profits. For example, the losses of smaller businesses such as lazada are narrowing. Yunhe rookie used to be a big loss maker, but now they are on the way to break even. I think the bigger changes are local life, hungry and rookie. We often discuss that we want to narrow the loss and expand our business, so we have options for reinvestment when we see the situation clearly We have made a lot of discussions on how to invest, and now it is quite clear that the next quarter is the end of the fiscal year, which is also a prospect for the new year. At the quarterly financial report meeting, we will further communicate with you.

Alibaba: 3q20 revenue 221.084 billion yuan, a year-on-year increase of 37% Alibaba: 2q21 revenue 155.06 billion yuan, a year-on-year increase of 30% Alibaba: 2q21 financial report teleconference record community group buying market is still in the white hot stage Alibaba: 4q20 revenue 114.31 billion yuan, a year-on-year increase of 22% Amazon: 4q20 net sales of 125.6 billion US dollars Bezos will resign as CEO Alibaba: 1q21 revenue 153.75 billion yuan, a year-on-year increase of 34% Amazon: 2q20 net profit 5.2 billion US dollars, a year-on-year increase of 100% pinduoduo: 2q20 revenue 12.193 billion yuan, a year-on-year increase of 67% Alibaba: 4q20 financial report teleconference record still has the potential of user growth in the low-end market Amazon: 3q20 financial report teleconference record too large orders in the second and third quarters The first strategy of this year is to ensure the safety of employees and customers. Jingdong: the net income of 3q20 is 174.2 billion yuan, up 29.2% year on year. Jingdong: the income of 1q20 is 146.2 billion yuan, up 20.7% year on year. Amazon: the net sales of 1q20 is 75.5 billion dollars, up 26% year on year. Which sinking users have been caught by pinduoduo’s strategy of Encircling Cities from rural areas

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