Firm will have to focus more on bricks and mortar: experts
Chinese e-commerce giant Alibaba Group will reach its gross merchandise volume (GMV) target of trillion by 2020, analysts said, but the company will need its bricks-and-mortar connections to maintain its growth momentum.
Considering its current GMV and annual growth rates, Alibaba will achieve its goal for online transaction volume in the next three years, Lu Zhenwang, founder of Shanghai Wanqing Commerce Consulting, told the Global Times on Sunday.
"If it can keep its annual growth rate at 20 percent, it can reach its goal. But it should take into account the fact that the growth of the e-commerce business market has been decelerating in recent years," he said.
In the 2017 fiscal year, the GMV on the company's retail marketplaces grew 22 percent year-on-year to 7 billion, Alibaba said in its annual financial report released on May 18. Within that amount, the mobile GMV accounted for 79 percent of the total.
During the company's 2017 Investor Day Summit on Friday, Alibaba's Executive Chairman Jack Ma Yun told the audience that his target for Alibaba is to hit a GMV of trillion in the fiscal year ending March 31, 2020, create 100 million new jobs and serve 2 billion customers, Alibaba's website said.
Alibaba, which is listed on the New York Stock Exchange, saw its share price soar by 58.8 percent on a year-to-date basis on Friday, closing at 9.44.
"The company's rapid growth is now highly dependent on its Tmall platform and it aims to embrace more traditional large-scale retailers and department stores," Lu said. Lu further noted that Alibaba has been shifting its focus from its online marketplace, Taobao, to Tmall, which has been established as a brand-building platform. The total online retail market scale reached 5.3 trillion yuan in 2016 in China, up 39.1 percent year-on-year, according to a report released by domestic industry research center 100ec.cn on May 17. Alibaba's Tmall accounted for 57.7 percent of the market share in the business-to-consumer sector, ranking first, the report showed.
The number of online consumers in the country grew 8.6 percent year-on-year in 2016, rising to 500 million.
Thanks to increasing consumer demand in China, as well as the penetration of the Internet, Alibaba will be able to maintain its growth momentum, Liu Dingding, a Beijing-based industry expert, told the Global Times on Sunday. "To achieve the target, Alibaba has to further tap into the rural market in China and overseas markets," he said.
In 2016, the e-commerce market scale in China's rural areas reached 482.3 billion yuan (.9 billion), surging by 36.6 percent year-on-year, 100ec.cn report showed. And it is expected to surpass 600 billion yuan in 2017.
Investing in brick-and-mortar stores is still challenging for e-commerce firms and retailers, as they have to resolve certain issues such as higher operating costs, Lu noted. In the next three years, Alibaba's transaction volume will be equal to that of some national economies around the world, and may even surpass that of some middle-income developed countries, he said.
Based on the current GMV, Alibaba is ranked the 22nd largest economy in the world, news outlet huxiu.com reported. And the company is expected to become the world's fifth largest economy in 2036.
"The company will disrupt traditional business models and technology, so the application of new technologies, for example, drone-powered delivery, is highly likely," he said.