E-commerce giant success leaves room to innovate

The firm saw massive gains in core commerce, its main revenue segment.

Alibaba posted revenue of $7.7 billion, marking a 54% year-over-year (YoY) increase. That was largely from the firm’s “core commerce” segment, which generated 87% of its total product. It’s worth noting that the exceptionally strong performance could have been driven by November’s Singles' Day event, in which the firm processed $17.7 billion in sales, setting a new record.
It’s notable that as its revenue soars, Alibaba continues to add customers en masse and keep them engaged. In Q4 2016, Alibaba added 43 million users, to hit 493 million active monthly users total. And those users are engaged — in December, the firm had 443 million active buyers, meaning that 90% of the its total base actively shops on the service. For context, that indicates two-thirds of China’s 731 million internet users are Alibaba shoppers, according to TechCrunch. These figures are critical because they suggest that Alibaba is growing both its reach and its spend at the same time, which points to long-term success rather than a short-term bubble.

Resounding success in its core segments could give Alibaba more wiggle room to innovate. Recently, Alibaba CEO Jack Ma said the company is a “data company” rather than a commerce initiative, according to CNBC. That’s leading it to push other initiatives, like cloud computing, which saw 115% YoY revenue growth, as well as digital media and entertainment, which is just 8% of the company’s revenue but more than tripled on a YoY basis.

Like other companies in the payments and commerce space, finding ways to add value for consumers and grow revenue is important in case drastic economic changes impact consumer shopping habits. The firm’s success in its core business could give it more room to innovate and develop other streams of revenue that could help carry the the company in the long term.

E-commerce has been on the rise in the last several years, thanks in large part to titans in the industry such as Amazon and Alibaba. E-commerce will truly become the future of retail, as nearly all of the growth in the retail sector now takes place in the digital space.

BI Intelligence, Business Insider's premium research service, forecasts that U.S. consumers will spend $385 billion online in 2016. Moreover, BI Intelligence predicts that number will grow to $632 billion in 2020.

This is hardly surprising considering e-commerce's healthy growth. Though the U.S. retail average growth rate in the first half of 2016 was just 2% for total retail, it was 16% for e-commerce.

The number of online shoppers has grown by nearly 20 million from 2015 to 2016. And these 224 million shoppers are spending more, as the total amount spent online grew from $61 billion in the first quarter of 2015 to $68 billion in Q1 2016. Finally, these customers are transacting more frequently, as the number of online transactions has risen by 115 million from 2015 to 2016.

But all of this shopping online creates its own set of challenges, both for consumers and the companies that are trying to get their products onto shoppers' screens and into their shopping carts. In short, you need a plan.

And to create your ultimate e-commerce battle plan, you need the right intel.

BI Intelligence is here to help.

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