Alibaba International Records Strong Growth, Lazada Milestone

Key Takeaways:

• Alibaba Group’s international e-commerce arm posted 32% revenue growth in its latest quarter, driven by strong performance for its cross-border businesses
• The company’s diverse mix of cross-border and local e-commerce offerings presents big potential for more market expansion

By Teri Yu and Doug Young

Times may be tough for e-commerce giant Alibaba Group Holding Ltd. BABA, as it battles stiff competition on its home turf in China. But the air looks much clearer for its separately run international arm, Alibaba International Digital Commerce Group (Alibaba International), which is drawing on its unique hybrid of global suppliers and shoppers to outshine its parent.

That strength was a highlight in Alibaba Group’s latest quarterly report released last Thursday, where Alibaba International showcased strong double-digit revenue growth and an expanding global footprint. Alibaba International reported its revenue surged 32% year-over-year to $4 billion in the three months to June, representing an eighth consecutive quarter of gains since it became an independent operating unit of Alibaba Group.

The unit has been able to maintain its momentum by consistently focusing on three key drivers, namely: ongoing upgrades to its business model and supply chains; product and technology innovations; and sustained growth in key markets, Alibaba International CEO Jiang Fan said on Alibaba’s earnings call after it released its results.

Revenue from Alibaba International’s B2C platforms rose 38% to $3.26 billion year-on-year in the three months to June, while revenue from its Alibaba.com B2B wholesale marketplace rose 12% to $771 million on increased cross-border value-added services.

The company operates a number of marketplaces, all selling goods to consumers outside China. In addition to Alibaba.com, its other major sites include its global online marketplace AliExpress; Lazada, targeting Southeast Asian buyers; and Trendyol and Daraz, targeting Middle East and South Asia buyers, respectively.

Apart from improved monetization, a major contributor to the company’s strong performance was the strong cross-border business on its retail marketplaces, particularly from its Choice program on AliExpress. The platform continued to record rapid year-on-year order growth, with orders from the Choice program commanding a high percentage of the overall total. That indicates strong stickiness for the program from shoppers who like Choice’s discounts without membership requirements.

AliExpress also significantly reduced average delivery times and achieved higher efficiency with its semi-consignment and full consignment models with sellers. As a result, Choice’s unit economics improved by close to 20% on a sequential basis.

In addition to its continued success with Choice, the AliExpress platform further expanded its supplier base beyond China and now includes local merchants offering a more diverse array of products for its consumers while also better serving demand for local items.

In June, AliExpress struck a deal with leading Brazilian retailer Magazine Luiza (Magalu) allowing the two companies to sell products on each other’s platform. As a result, each company will open and operate a storefront on the other’s platform. The pair will also complement each other’s product offerings, with AliExpress adding fashion and accessories on Magalu, while Magalu will bring household electronics to AliExpress’ storefront targeting local Brazilian consumers. The platform’s user traffic in June surpassed that of Shein as a result.

Lazada Milestone

While AliExpress continued its status as one of Alibaba International’s primary growth engines, the latest results were also noteworthy for revealing a significant turning point for Lazada. The unit recorded its first positive EBITDA in July, reflecting a significant reduction in its operating loss through improvements to its monetization and operating efficiency despite intense regional competition.

Alibaba International said that Lazada plans to boost its investments in Southeast Asia, adhering to its operating model and strategic initiatives. “This milestone reinforces our confidence to efficiently invest in the Southeast Asia market to consolidate our market share,” said Jiang. With operations in Thailand, Singapore, Vietnam, Malaysia, Indonesia, and the Philippines, Lazada saw its Thai segment already become profitable last year.

During the quarter, Trendyol increased both its monetization capability and profitability, further cementing its leadership position with enriched product offerings and user growth in the wider Gulf region.

Alibaba International also invested heavily to ramp up brand awareness for its different platforms. It became the exclusive e-commerce partner of the 2024 UEFA European Football Championship and appointed former British soccer star David Beckham as its AliExpress global ambassador in a bid to boost the platform’s profile globally. During the Paris Olympics, Alibaba.com also engaged NBA star Tony Parker as its ambassador, drawing on his appeal to reach more users in the U.S. and Europe. That promotional spending partly explains why the unit’s adjusted earnings before interest, taxes and amortization (EBITA) loss for the quarter widened to $510 million.

CEO Jiang also emphasised that product and technology innovation are playing a key role in the continued growth across the company’s platforms. It launched Aidge, its commerce-focused and AI-powered toolkit, at the end of last year targeting merchants looking to boost their efficiency and streamline their global operations. The solutions cover a range of functions, including customer service, cross-platform product placement, product description optimization, multilingual search and price recommendations. The company said it is now serving around 500,000 merchants, covering 100 million SKUs, using Aidge.

“Our strategic focus is twofold, first enhancing operational efficiency across all business segments, while actively investing in key markets to drive growth and scale in order to achieve more substantial profitability at scale in the future,” said Jiang.

Alibaba International is not a standalone listed entity yet and its results are still consolidated into its parent’s. Alibaba Group has previously said the international arm could eventually do its own capital raising, but has not provided any recent updates. Alibaba Group’s stock rallied 4.6% after the release of its results last Friday. The stock is currently up about 8.5% so far this year.

This article is from an unpaid external contributor. It does not represent Benzinga's reporting and has not been edited for content or accuracy.