Alibaba’s first trading statement since its IPO has created a stir, with the quarter to the end of September surpassing expectation.
In its first trading statement since the record breaking IPO, the Chinese online leviathan has again made headlines, with its performance covering the quarter up to the end of September outstripping expectations.
While remaining the flavour of the month, the question is how long Alibaba can maintain its golden child status.
Alibaba reported revenues for the quarter increased 54% to $2.74bn (£1.72bn); beating analyst consensus of a 45% rise.
Performance was driven by a rise in online transactions, and greater revenues generated from its mobile services.
Looking at its domestic markets, retail revenues increased 48% compared with the same quarter of 2013, driven by a growth in online marketing services and commission revenue.
International retail sales nearly doubled compared with the same quarter a year ago, thanks to AliExpress – its B2C website.
Not sustainable
While impressive, its revenue growth is not sustainable. With competition intensifying, focus will be on Alibaba’s ability to expand internationally, further monetise its mobile capabilities, and attract more brands to its marketplace sites.
In its domestic market, eyes will be on how Alibaba fends off rivals, such as Tencent, which has been trying to turn its mobile-messaging app into a platform for services including ecommerce, looking to usurp Alibaba’s dominance.
Then there is Alibaba’s venture overseas.
With Tmall likely to be launched globally, its vast assortment of products at exceptionally competitive rates and just 3.5% commission, it has the potential to challenge Amazon’s main profit generator and put eBay – no longer able to hide behind PayPal, under increased pressure.
It was not all good news. Alibaba saw net profits for the quarter fall 39% to $494m (£311m). Despite this, margins remain enviably high with narrowing attributed, in part, to recent heavy investments in enhancing capabilities via smartphones and tablets.
With observers looking for improvements in Alibaba’s ability to monetise m-commerce, and the potential it presents, this is a sensible investment.
Alibaba is building a scalable business while generating profits, something some rivals have yet to achieve. As long as this continues, investors will be happy.
So for now at least Alibaba retains golden child status, and given its global ambitions and the resources available to achieve them profitably, this is likely to continue.
However, Alibaba’s potential to shake up virtually every aspect of retailing, won’t make it quite so popular among rivals.
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