AliExpress fuels Alibaba International’s revenue growth by giving shoppers a ‘Choice’

Revenue for the e-commerce giant’s international arm jumped 45% in its latest quarter, marking its seventh consecutive quarter of strong gains

Key Takeaways:

• Alibaba International’s “Choice” service accounted for over 70% of its AliExpress B2C platform’s total orders, becoming a key growth driver
• Upgrading business models, supply chain arrangements, product innovation and continued investment are keys to rapid growth, said CEO Fan Jiang

By Teri Yu and Doug Young

Watch out, Amazon Prime. A new kid on the block is quickly gaining traction on the global e-commerce scene, as the year-old AliExpress Choice service becomes a major new growth driver for Alibaba International Digital Commerce (Alibaba International).

The international arm of Chinese e-commerce giant Alibaba Group (BABA.US; 9988.HK) reported accelerating growth in its latest quarter through March, posting its seventh consecutive quarter of strong gains. The unit has become one of the fastest growing segments among its parent company’s different businesses.

Alibaba International’s quarterly revenue jumped 45% year-on-year to $3.8 billion in the three months to March, according to the parent company’s latest quarterly results released on Tuesday. The growth came on the back of solid order and revenue gains for AliExpress, the company’s international retail platform that sells mostly under a cross-border model to a wide number of markets worldwide. Combined orders across Alibaba International’s marketplaces grew 20% year-on-year during the quarter.

Alibaba International’s annual revenue for its fiscal year through March rose 46% to a record $14.2 billion year-on-year, accounting for over 10% of Alibaba Group’s total. Besides AliExpress, its other major assets include Southeast Asian-focused Lazada, as well as Turkey-based Trendyol, which focuses on Europe and the Middle East.

“Our focus on upgrading our business models and supply chain arrangements, product innovation and continued investments in key markets are behind the success of the rapid and quality growth of Alibaba International,” said Alibaba International CEO Fan Jiang.

The company said it would increase its investments in key markets in a bid to improve customer experience, expand its customer base and strengthen its market position.

Among its various assets, AliExpress has emerged as one of the company’s biggest rising stars. The B2C marketplace was launched by Alibaba back in 2010 and now services more than 100 countries and regions. Besides Lazada and Trendyol, both obtained via acquisitions, the company also operates Daraz, focused on South Asia.

In addition to those B2C sites, Alibaba International also runs Alibaba.com, the B2B marketplace which was Alibaba’s first business at its founding in 1999.

In March last year, Hangzhou-based Alibaba announced its reorganization into six independent business groups, namely China domestic commerce, international commerce, cloud computing, logistics, digital media and entertainment and local services. Since then, Alibaba International has assembled its own management team and board, enabling it to set its own strategy in a bid to gain a bigger share in the international e-commerce arena where it competes with hometown peers like Temu and Shein.

Shining star in AliExpress

During the latest quarter, revenue generated by Alibaba International’s various B2C retail platforms grew 56% year-on-year to $3.09 billion, contributing over 81% of the unit’s total revenue.  The company didn’t break down revenue from its different platforms, though it highlighted AliExpress as a star performer whose growth has been significant recently on the back of its AliExpress Choice service.

The service was rolled out in March last year and selects value products for buyers across an extensive range of categories. It said Choice, which doesn’t require memberships, has been instrumental in enhancing overall customer experience, helping it to rapidly expand AliExpress’ customer base and shopping frequency. Just a year after its inception, Choice orders represented over 70% of AliExpress’ total as of April.

Items with the Choice tag offer a range of benefits, including free shipping to most of the more than 50 markets that the service covers. Choice also provides free returns in over 20 countries and a delivery guarantee in 23 countries as of December 2023, with orders being fulfilled as fast as within five days in some countries such as Belgium, the Netherlands, Spain and the UK. Choice also offers higher discounts on select goods.

During the quarter, AliExpress strengthened its collaboration with Cainiao, the logistics arm of Alibaba Group, to offer speedier deliveries by leveraging charter flights and utilizing Cainiao’s overseas warehouses. Taking advantage of that relationship, the number of orders delivered within five and 10 days has doubled from a year earlier. 

To seize on its momentum, AliExpress has increased its investment in marketing using methods such as adding influencers to its new live-streaming community in the UK, as well as appointing celebrities to be its ambassadors in the Middle East and Korea.

The platform has also become the first exclusive e-commerce platform sponsor of the UEFA Euro 2024 soccer championships, with plans to invest millions of euros in discounts, deals and engagement during the tournament set to take place in Germany for a month starting June 14.

Among Alibaba International’s other platforms, Trendyol continued to record double-digit order growth and further expanded its cross-border business in the Gulf region, where it has become the region’s top e-commerce app in terms of downloads. The quarter also saw Trendyol make additional investment to expand its merchandise categories and improve its delivery services.

Lazada continued to focus on improving its operating efficiency. The platform’s loss per order narrowed significantly during the quarter due to increased monetization and optimized operations.

Alibaba.com’s revenue during the quarter rose 11% to $716 million as a result of growth of its cross-border value-added services.

Alibaba International’s adjusted earnings before interest, taxes and amortization (EBITA) loss widened to $566 million for the quarter from $300 million a year earlier, as the company made further investments during the quarter to beef up Choice and support Trendyol’s expansion.

“Alibaba International still has great potential to improve. We will strive to achieve quality growth by providing the best goods and services. At the same time, we will focus on improving operational efficiency, helping to further narrow losses in certain businesses. We will also actively expand in various global markets with more focused investments,” added Jiang on Alibaba Group’s earnings call.

Alibaba Group modified some of its breakup plans last November, shelving the spinoff of its cloud business and putting a listing plan for its Freshippo grocery business on hold. It remains to be seen whether Alibaba International will proceed with its own fundraising plan given current market sentiment, which has seen a recent rally for offshore-listed Chinese stocks. The parent Alibaba Group also just announced that it is actively preparing to upgrade its Hong Kong listing status to primary by the end of August, which will boost its liquidity by making its shares more easily accessible to Chinese investors.

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