Russian Invasion of Ukraine Proves To Be Another Headache For Alibaba: WSJ

The Western sanctions on Russia became a bone of contention for Alibaba Group Holding Ltd BABA, as Russia proved to be a bright spot for its AliExpress, the Wall Street Journal reports.

AliExpress Russia was the country's second-largest e-commerce company, with about a 10% market share before the invasion. Since the war, orders from Russia have dropped mainly due to shipping delays and the ruble's depreciation.

In early March, AliExpress.ru stopped receiving orders from Ukraine. It contributed 8% of the 86 million visits to the site in February. The WSJ notes that Russia, Spain, France, and Poland were its top four countries by gross merchandise value in 2019.

Although international e-commerce accounted for only ~5% of Alibaba's total revenue, analysts saw great potential in Europe. 

Alibaba founder Jack Ma looked to plow more resources into Russia, including dozens of employees from Alibaba's headquarters in Hangzhou and investing $100 million to form a joint venture with three Russian corporate titans.

The value of goods sold on the Russian JV's platform jumped 46% in 2021.

The West has sanctioned all of Alibaba's local partners or their leaders in the JV with AliExpress. "Bad EU-China relations are bad for Chinese companies' expansion in Europe," an analyst said.

WSJ writes that an expert suggested that choosing to continue doing business in Russia involved a growing reputational risk for Alibaba in European markets and the U.S. The risk would further worsen as NATO countries ramped up sanctions on Moscow.

Alibaba already battled a domestic regulatory crackdown, growing competition, and the halving of its share price.

Price Action: BABA shares are trading lower by 3.43% at $111.18 on the last check Friday.