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Jacob Cooke on Alibaba & JD’s earnings

Published on: August 21, 2023

In this week’s episode of The Negotiation’s After Hours, WPIC co-founder and CEO Jacob Cooke speaks to Todd Embley about Alibaba and JD’s earnings.

Check out the discussion above. You can also read the edited transcript below.

Todd Embley:
Hey everybody, my name is Todd Embley and welcome to another edition of The Negotiation After Hours, our new video series, where we speak to WPIC Marketing + Technologies, co-founder and CEO, Jacob Cooke on the top consumer tech and business stories from China and other APAC markets.

Jacob joins us from Vancouver. Jacob, welcome back.

Jacob Cooke:
Thanks, Todd.

Todd Embley:
All right, last week in Vancouver, how’s the trip back home been?

Jacob Cooke:
Yeah, it’s been great.

It’s been great to get the extended amount of time in our Vancouver office and anxious to get back. But yeah, it’s been great, obviously. You know, was unable to do this with Covid.

So first time in a couple of years, I was able to get in this office for more than a month. It’s been great.

Todd Embley:
Yeah, and the weather looks fantastic. Beautiful blue sky behind you. Love Vancouver architecture.

In the last two weeks, several of China’s tech majors have reported their quarterly earnings. Tell us about the results and what your takeaways are.

Jacob Cooke:
Sure. I’ll start with Alibaba, which was reported last week.

Alibaba had really strong earnings with revenue up 14% for the quarter that ended in June. That was well above everybody’s forecasts. So not surprising for us.

I think the most significant metric in the earnings report was the revenue from Alibaba’s domestic e-commerce unit was up 12%. That’s right in line with what we were expecting. And that unit is now the Taobao T-Mobile Group. which has been severed off, but as it’s still part of the group, that’s half of all of Alibaba’s revenue coming from e-commerce.

So obviously, substantially significant to the overall revenue. That 12% increase is huge — huge for a company that size already.

Daniel Zhang, I think, said it best that Alibaba’s results reflect the economy’s resilience and confidence in consumption recovery because this isn’t certainly the only data point that we’ve seen that backs up these numbers.

The second takeaway I think is Alibaba has put itself in a strong competitive position to capture that ongoing consumption recovery.

A big story in the last couple of years has been the rise of Douyin and PDD.

You know, Douyin was social commerce model and PDD with extensive discounting. I think in response, Alibaba has invested big in user retention, loyalty programs, and content which we’ve talked about on the show before.

And the quarterly report, I think to me, made it clear that those investments are paying off.

Taobao’s daily active users were up 6.5% in June, which is significant. That also contributed to a very strong 6.18. And that in turn drew in more ad revenue.

So Alibaba reported the number of members of its 88 VIP program was up by double digits this year, as was the GMV from program members. That’s just incredibly positive. It just shows that China’s consumer market has matured.

And for several years now, I’ve been focusing on sustainable business development and customer loyalty programs are a key pillar of that effort, and Alibaba seems to be at the top if not even winning that game.

The final takeaway is that it seems the ongoing reorganization has injected a lot of energy into the company. I’m looking forward to following the developments in AI, and we’re gonna see some pretty exciting stuff as well for next year.

Todd Embley:
Yeah, we definitely will. What about JD.com?

Jacob Cooke:
JD reported this week and also beat forecasts with Q2 revenue up 7.6%.

I think the big story of this year was the 10 billion RMB subsidy program that they launched in March. Investors didn’t love it at the time, but obviously, it seems to be paying dividends now bringing a lot of customers back into the platform that were sticky in Q2.

So I think JD’s low-price strategy positioned the company well for an environment where consumers are still price-conscious coming out of the pandemic.

I’m not sure if that’s going to hold well in the long term, but either way, it certainly could. But the low-price strategy coupled with service and logistics advantages, I think has broadened the user base and made the platform a preferred choice over PDD and, you know, in the 3C and appliance verticals.

Todd Embley:
Okay, so we’ve had these positive earnings, but the market hasn’t exactly rewarded these two stocks.

So what’s going on there?

Jacob Cooke:
Well, I think if you look at it, first of all, Alibaba is up this year significantly as a stock.

It didn’t reward it at the time. I just think that probably a lot of analysts are looking at this. They see the other data from companies like ours that saw that consumption recovery in advance.

So really, we can probably expect that this was already priced in. Yeah, but the stocks are having decent years. So I think that’s probably okay. Let’s keep an eye on it in a couple of months.

Todd Embley:
Sounds good, we’ll come back to that in a couple of months. Again, thanks Jake, thanks everybody for listening. We’ll see you next time.

Jacob Cooke:
Thanks, Todd.

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