Alibaba’s (and Apple’s) earnings kept the Chinese consumer story alive.
Alibaba’s earnings report yesterday proves, again, that the Chinese consumer is doing just fine in a slowing economy. Thanks to those consumers, hope for something other than an economic crash isn’t misplaced in the world’s second-largest economy.
Alibaba said its quarterly revenue jumped by 32%; annual active buyers on its system rose to 386 million, up 20 million; gross market value, the dollar value of transactions, climbed by 28% to $112 billion; and earnings per share climbed by 30%.
Maybe most importantly for the company, Chinese smartphone users are buying a lot more stuff on their smartphones. Alibaba’s monetization rate, the commission rate that it charges sellers for every transaction, trended upward for the first time in five quarters, according to Jefferies Cynthia Meng in Hong Kong last night, thanks to mobile shoppers buying.
Alibaba could be an aberration. Maybe the low-priced goods popular on Taobao aren’t an indicator of consumer strength. Some corroboration of the trend from rivals JD.com (JD) and Tencent Holdings Ltd (TCEHY), when they report, would certainly be welcome. But recent data show the same positive story for Chinese consumers.
Start with the most widespread luxury consumer brand in China, Apple. New iPhone 6s in mainland China sell for close to $1,000. Yesterday the Cupertino company said China sales increased 99% in its latest quarter, to $12.5 billion, from $6.3 billion. CEO Tim Cook was quoted yesterday saying if he avoided TV and online news and only studied Apple’s numbers, “I wouldn’t know there was any economic issue at all in China.”
Looking only at China’s consumer data, you might say the same thing. China’s third quarter GDP highlighted a thriving services sector, which grew by 8.4% in the third quarter as manufacturing slowed to 6%, and even negative in some provinces heavily reliant on industry. Retail sales in September, meanwhile, grew by 10.9% in nominal terms.
That’s not to say all boats are being lifted equally. Weakness in China has been a thread running through the recent quarterly reports of western luxury groups such as Burberry, LVMH and Prada.
But a recent McKinsey survey of 1,200 Chinese consumers found that “many consumers are holding tight to their middle-class aspirations” after the summer’s stock market crash and dire headlines, out of the West at least, of the slowing economy.
Considering the series of positive consumer data released before Alibaba and Apple unveiled their quarterly earnings, the companies confirmed what appeared to be true: the Chinese consumer is doing fine, thank you.