How is Alibaba’s Quick Commerce Shaking up the Market?

Chinese e-commerce company, Alibaba, has surpassed analysts' expectations for its quarterly review.

The company has reported strong growth, largely driven by its one-hour delivery options.

Its steady investments into AI has helped the company grow, as has its diversification into different markets.

Surpassing expectations

Alibaba is a leading B2b e-commerce platform, enabling simplified global sourcing. It offers AI-powered B2B sourcing solutions, covering end-to-end operations. It supports businesses throughout product search, online order placement, payment, inspection, logistics and after-sales support. Through this, it helps businesses around the world grow, due to simple and efficient sourcing processes.

Its solutions empower global small and medium-sized businesses to accelerate international growth by accessing more opportunities and undertaking digital trade. Through Alibaba, businesses can streamline ordering, from search to fulfillment, with full transparency and management of suppliers. 

Now, it has released its quarterly revenue, surpassing analysts estimations. The company reported a second quarterly revenue of 247.80 billion yuan (US$35bn), beating the estimates of 242.65 billion yuan (US$34.3bn). Despite this, it missed adjusted profit estimates of 5.49 yuan (US$0.78) per American Depository Share at 4.36 yuan (US$0.62). 

AI investments

Major players in China's 'quick commerce' sectors have been spending billions on their logistics, in an attempt to ensure low-wait time delivery and profit off market shares. To ensure it stays ahead of competitors, Alibaba has been heavily investing in artificial intelligence (AI). Earlier this year, the company noted a planned expense of 380 billion yuan (US$53.7bn) across three years into AI and cloud infrastructure.

Since then, Alibaba CEO, Eddie Wu, said this could grow in order to keep up with customer demand and mitigate supply chain challenges.

"We will be investing in AI infrastructure aggressively, the 380 billion yuan investment we previously mentioned might be on the small side given the customer demand," Eddie said.

Despite the company's 53% fall in net profit - to 20.61 billion yuan (US$2.9bn) - as a result of heavy investments, analysts believe these will evolve into long-term advantages for the retailer.

Shifting focus

Alibaba has recently began a shift into a consumer-facing focus, which has helped grow its profit significantly. Its diversified business is helping it stay ahead of competitors in the instant retail sector. After the release of its quarterly review, US-listed shares of the company opened up 2%.

Heavy discounting and subsidies from Alibaba and its competitors have raised investor concerns about significant cash burn, but Alibaba is confident in its growing profits. Its instant retail business has helped improve unit economics in recent months, with the company reporting its cost per order has halved since the summer.

Alibaba has previously lagged behind in consumer AI markets, due to its focus on enterprise clients. Now, though, it is investing into its consumer operations and is seeing a steady growth in that sector. 

Its expansion into the consumer AI market comes with the launch of a free app, which had more than 10 million downloads in its first week. This comes in the middle of a price war in China's domestic AI market, resulting in rivals slashing prices and creating solutions to remain in the top spot.