Alibaba said online shoppers in China started the year with caution

  • Alibaba CEO Daniel Zhang said during a quarterly earnings call that online sales remained weak this year through early February.
  • However, he said some categories are starting to see a rebound this month, and he said companies want to work hard to recover from the losses of the past three years.
  • Consumers in China are still living in an economy dealing with a real estate slump and lower global demand for Chinese exports.

Various Alibaba platform mascots are displayed at a shopping mall in Hangzhou, China, on February 20, 2023.

Kylie Shen | bloomberg | Getty Images

BEIJING — For Chinese e-commerce giant Alibaba, the consumption recovery has not yet fully arrived.

The company operates two of the largest online shopping sites in China, Taobao and Tmall. Despite rising competition, Alibaba’s results remain an important indicator of the economy.

“From January to early February of this year, overall sales of online physical goods remained weak,” Alibaba CEO Daniel Zhang said Thursday during a quarterly earnings call, according to a FactSet transcript.

“Our trade in China continued to be greatly affected by COVID cases as well as people traveling home or to other places during the Spring Festival holiday,” he said, referring to the Lunar New Year in late January.

But Zhang said that after the holiday and the Covid wave, demand for apparel, sports and outdoor products has rebounded.

China abruptly ended its strict Covid controls in early December. After the wave of Covid infection, business activity has started to return to normal in the past two months. Rule changes have allowed people to easily travel both domestically and internationally again.

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Consumers in China are still living in an economy dealing with a real estate slump and lower global demand for Chinese exports.

Alibaba’s Zhang has been relatively cautious in his remarks about the economic recovery. But he was optimistic that business would improve later in the year.

“What we see in all of the merchants is a strong desire to get back to work,” Zhang said. “They want to have a bumper year in 2023 to make up for all they’ve lost over the past three years.”

Alibaba’s Chinese trade revenues in the last three months of 2022 decreased by 1% to the equivalent of $24.64 billion, which represents 69% of total revenue. The overall results for the quarter were well above expectations.

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Alibaba stock performance for 12 months.

Restaurants in China also had a muted start to the year, only beginning to see a significant rebound in revenue in the week ending Feb. 16, according to analysis by Beijing-based BigOne Lab, an alternative data firm whose backers include S&P Global.

The weekly data showed that after a sharp recovery in revenue in 2021 from the initial shock of the pandemic in 2020, revenue growth for 2022 was fundamentally weak.

BigOne Lab data through January showed that restaurants in small towns have generally fared better than those in larger cities over the past few months.

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Nationwide, restaurant sales fell 6.3% in 2022, while retail sales in general fell 0.2%, according to China’s Statistics Bureau.

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The office is scheduled to release national retail sales for January and February on March 15. The two-month data is usually aggregated due to differences in the timing of the Lunar New Year holiday, which does not follow the Gregorian calendar.

China is also expected to announce its economic targets for 2023, including GDP, on March 5.

Other major Chinese consumer-facing companies JD.com, Meituan and Pinduoduo have yet to announce when they will release earnings for the fourth quarter.

However, video streaming platform iQiyi, sometimes called the Chinese version of Netflix, this week reported a net addition of 13 million subscribers at the end of December versus September — a significant increase after subscriber growth stagnated in the past two years.

The company expects to increase the number of subscribers this year. In January, the platform’s newly launched offerings included police drama “The Knockout,” whose popularity soared to a record high in the company’s history.

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