Date
18 January 2017
Jack Ma is tapping the spending power of rural areas, where more than half the population live. Photo: Bloomberg
Jack Ma is tapping the spending power of rural areas, where more than half the population live. Photo: Bloomberg

Rural push helps Alibaba double profit

Alibaba Group Holding Ltd. reported higher than expected quarterly revenue and profit after the Chinese e-commerce giant shifted its focus to the countryside amid a slowing economy.

The company said sales for the three months to December surged 32 percent to 34.5 billion yuan (US$5.2 billion), while net profit more than doubled to 12.5 billion yuan.

Chairman Jack Ma is tapping the spending power of rural areas, where more than half the population live, by providing purchasing and delivery services as he captures a greater slice of the money spent on mobile shopping and advertising, Bloomberg News reported.

Along with a resilient middle class, that’s helping Alibaba capitalize on China’s shift toward consumption even as the economy grows at the slowest pace in 25 years, the report said.

“Alibaba continues to grow as urbanization and an ever more ambitious middle class continues to drive up China’s cost of living and consumption,” said Brian Buchwald, chief executive officer of Bomoda, a consumer intelligence company.

“At the heart of it is continued investment in mobile and simplifying payments for virtual and actual purchases.”

Alibaba has set up free internet-equipped computers and worked with local officials in inland regions to train potential buyers and sellers.

It now has a presence in 12,000 villages across the country, Bloomberg said.

“Our strategy is to sell goods from urban areas to villages, as well as help farmers sell farm products to people living in the cities,” chief executive Daniel Zhang told investors on a conference call.

Longer-term, Ma is investing in video content, media, on-demand services and cloud computing to generate new sources of income.

Chief financial officer Maggie Wu said she expects Alibaba’s revenue to grow faster than total transactions “for the foreseeable future”, suggesting that the company’s monetization ability will continue to improve.

The quarter included November’s annual “Singles’ Day” promotion which generated a record 91.2 billion yuan of sales, 60 percent more than a year earlier.

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