The challenge first comes from the

Editor’s Note: This article comes from “Tencent Technology” , Reproduced with permission.

Key points

  • Alibaba CEO Zhang Yong said that after this epidemic, many consumers have changed their lifestyles, and the outbreak of the coronavirus has indeed brought great challenges.

  • Alibaba CFO Wu Wei said that we expect that the revenue growth in the March quarter will be negatively affected, which means that the growth rate will slow down, and it does not rule out that it is a relatively large slowdown.

  • Wu Wei said that the epidemic had a big impact on the rookie. Because the courier did not return, the capacity was not enough, and there was a backlog of packages. In the previous days, the capacity was only a dozen percent, less than 20.

    In the evening of February 13th, Alibaba Group (NYSE: BABA) released the company’s unaudited financial report for the third fiscal quarter of fiscal year 2020 as of December 31, 2019 on Thursday.

    According to the financial report, Alibaba’s third-quarter revenue was 161.456 billion yuan (approximately 23.192 billion US dollars), and the market expected 159.209 billion yuan, compared with 117.278 billion yuan in the same period last year, an increase of 38% year-on-year. The net profit was 52.309 billion yuan (about 7.514 billion U.S. dollars), and the market was expected to be 30.335 billion yuan, compared with 33.052 billion yuan in the same period last year, a year-on-year increase of 58%.

    After the financial report was released, Alibaba CEO Zhang Yong and CFO Wu Wei attended the conference call to interpret the latest results and answer analyst questions.

    [Alibaba’s total revenue in the third fiscal quarter was 161.4 billion yuan, a 38% increase year-on-year] [Illustrated financial report | Chinese e-commerce retail and Alibaba Cloud business growth helped Ali’s third-quarter revenue increase 38% year-on-year]

    The following is the question section of Alibaba conference call analyst organized by Tencent Technology:

    Analyst: Consumers are constantly shifting to online shopping, and merchants are also doing business online. How much will the epidemic affect them? The second question is, for local services, how did Alibaba inject hungry business outside of takeaway?

    Zhang Yong: In fact, after this epidemic, many consumers changed their lifestyles. Many people now work remotely at home, work remotely, and purchase daily necessities, including health products, at home through e-commerce channels. Xian et al., The outbreak of coronavirus did pose a huge challenge.

    But on the other hand, it also gives people a chance to try new ways of living and working. When I think of it in the end, it should be said that this is an inevitable big trend. Whether it is in the enterprise or the residents’ life, there will be such an unstoppable trend of digitalization, which will continue to unfold. In the long run, such a development trend is still beneficial to the digitalization of the entire society.

    Regarding the second question, local living services, we think it is a very important area in consumption. Everyone knows that Alibaba has a long-term determination and commitment to develop our local life services.

    We don’t consider it a business, it’s more a foundation to support consumption. So we are very happy that now our Hu Xiaoming is the chairman of local life services. He can better drive the synergy between Alipay and local life services. Alipay started as a payment tool, but now it is becoming a very powerful consumer medium. .

    Analyst: Regarding the issue of Tmall and Taobao, I mentioned earlier that your supply and logistics have been affected in the epidemic. May I ask if you can tell us about the different product categories in terms of demand. Is there any demand now? What’s the difference, such as the changes in the demand for major categories of clothing and home appliances?

    Zhang Yong: In response to your question, we did see a lot of changes between categories during this time. Categories such as food, daily necessities, and fast-selling products still experienced very rapid growth. Of course, this growth comes from China’s original traditional e-commerce sales. Now these products are also very popular based on the sales of nearby ground-level stores.

    For other products like apparel and consumer electronics, there are indeed challenges. The challenge comes first from supply and from the worst of the epidemic. There is no doubt that consumers ’willingness to purchase these categories in these environments will also temporarily decline. But I believe things will get better in the future.

    Regarding regional changes, we can see that this epidemic has also made many new users and online users in low-tier cities start to buy many daily necessities. I think this will be a very good change for the future.

    Analyst: Regarding the financial impact of the outbreak. I just heard you say that the volume of business that is closely related to the production and distribution of the entity may be reduced. I heard you said that China ’s retail market revenue will decline from the March quarter, including CMR and commission income. Did you hear what you said? Please clarify a bit.

    Second question, if the result of this epidemic is a short-term effect, like SARS in 2003, do you think the recovery after this epidemic will be a V-shaped or U-shaped recovery curve? Or in other words, are there any factors that will prevent us from recovering immediately?

    Wu Wei: I will answer your questions about financial impact first, and then follow up onIs the Su curve U-shaped, V-shaped or left to Zhang Yong to answer. Just now we talked about the financial impact of the epidemic on the March quarter, and I pointed out two aspects. The first is the direct impact of the epidemic, and the second is the support and funding for businesses.

    In terms of overall impact, we expect that the revenue growth in the March quarter will be negatively affected, which means that the growth rate will slow down. It may not be ruled out that it is a large slowdown, but we do not know yet because it is now mid-February.

    Second, among the new retail businesses in China, including CMR, Taobao, Tmall, local services, and new retail services, these may experience negative revenue growth. This is the first point I want to clarify. .

    Zhang Yong: I answer the second question. It will be a V-shaped or U-shaped adjustment or recovery. I think it mainly depends on how much time the epidemic needs to end. If it takes a long time to end the epidemic, It may take longer to recover. Because many service industries are now interrupted. In recent days, I also see that the situation in some large cities other than Wuhan seems to be improving. Let ’s take a look at the development of this situation to know the time of recovery.

    Analyst: The first question is about local life services. We see that EBITA’s loss rate has narrowed. I wonder if this is a trend and will it continue? We also know if you are hungry. 48% of the new users are from Alipay’s APP. Does this mean that competition in this field is now rationalizing? The second question, we see that the operating leverage ratio has increased in product development costs. Can you introduce it a bit?

    Zhang Yong: Local life service business, we are committed and determined to promote long-term development. We manage this business, not to look at the EBITA ratio to manage. Our focus is to create value for businesses, consumers and customers. This trend is indeed true now. More and more companies are embracing digitalization, and more and more consumers are embracing digitalization in their lives. So for us, we are trying to find out where to find In what ways can we create more and better value for businesses and consumers.

    Wu Wei: Let me answer the second question, the leverage ratio in product development. If you look at it by item, you will see a big piece of it, which is the cost of employees. As our business grows, we are constantly looking for hiring, hoping to hire many top data scientists. Anyway, this quarter, we also recorded very strong revenue growth, but we did not reach the same speed in recruiting employees. You can understand it this way, business growth has its speed, but as the speed increases, some fixed costs will not be accelerated accordingly, thus forming what you said.

    Analyst: Regarding the progress of the epidemic, I just mentioned that there may be a negative impact on income growth. In this case, like our costIn addition to some fixed costs that must be spent on the end, we have some relatively costly changes. For example, will there be a corresponding reduction in what is required?

    Wu Wei: This question is about whether there will be some savings in costs and expenses in the current situation. It is true that there will be throttling. For example, more typical offline conferences, such as business trips, will certainly not be the same as the general quarter. We also “throttled” the throttling very quickly, because this is a bad thing, but there are some factors that can turn into good things.

    We have been working online for management since the beginning of the year, and our employees are also working online. Working from home is equivalent to working remotely. Actually, the efficiency is very good. The entire operation and operations are also very good. We took advantage of this time to also have some conclusions. Some things have to be offline, and they can be done well online. There are indeed some savings.

    Analyst: I want to ask a broad question, especially when it comes to the penetration rate of online retail, especially in China. You also mentioned when you just started the conference call that during the quarter, 27% of retail business took place online in China. You also said that some countries have higher penetration rates than you and some have lower penetration rates. What do you think of this range? Or how do you think it is high, or what percentage do you think online retail will reach?

    Zhang Yong: Thank you for your question. Regarding the penetration rate of online retail, it depends on different regions. Now our first-tier cities and the most developed cities should say that the penetration rate of online retail is still very high.

    But demand is still growing rapidly in low-tier cities. Just now we also reported that more than 50% of new customers are from less developed areas, not only low-tier cities, including rural areas, because 4G and 5G infrastructure will support it in the future. , So people in rural areas can enjoy the same digital life as urban residents.

    The second question is about categories. Indeed, there is still a considerable difference in online retail according to different categories. Before the outbreak, the demand for clothing and consumer electronics was still relatively large. High, but the penetration rate in food, especially fresh, is still low.

    However, due to the recent outbreak, we are seeing more and more people willing to go online for daily supplies, including the purchase of fresh food. Either an e-commerce platform, or a mobile app to buy from a nearby store. We think that after the epidemic, people may be more willing to buy daily necessities online.

    Analyst: No rookie was mentioned just now. Will the rookie be affected by the epidemic in March?

    Wu Wei: Regarding whether the rookie was affected by the epidemic, it will also show negative growth. It is as big as Chinese retail, Taobao, Tmall, or local life. The situation of rookie is actually financially acceptable. But the actual impact is quite large. Why do you say that? There is a reason behind it. Is from 2From the beginning of the month to the present, we also observed that because the courier did not return, there was insufficient capacity and there was a backlog of packages. In fact, in the previous days, the capacity was only a dozen percent, less than twenty.

    In this case, why isn’t that much impact on revenue? There are two reasons. The first reason is that the rookie’s revenue growth this year is actually very good, including the technical products are beginning to charge slowly, including the end of our service revenue growth is very good. On the whole, it will still increase from last year’s base. The second is domestic services, because rookie is a merged company. For example, the services provided to Tmall and Cat Super are offset internally, so although most of the revenue is affected, it is not actually reflected in the revenue line.

    Analyst: I just mentioned that the situation has improved in the past 12 days. It may not be quantitative. What kind of improvement can be described qualitatively and how much? After the epidemic test that you also mentioned comes, there will be some opportunities and opportunities. For example, it seems that there are more than 200 million people working remotely from home. Which three do you think are the best? The most important function or performance can support everyone’s needs? After the outbreak, what are the opportunities for business increase and development brought to the nails? For example, talk about DAU, MAU and other figures.

    Zhang Yong: In fact, the outbreak of the epidemic has brought great influence in the past 15 days and 10 days. Until Monday this week, there are many companies in many big cities including Beijing, Shanghai, Guangdong, and Shenzhen. The employees or some of them started to work again, and the network also started to recover, so in this sense, the situation began to improve.

    But the key is to look at the supply side, including the supply of products, including logistics capacity, and the supply of services. The demand is still there. I firmly believe that after the epidemic is over, consumers will definitely be willing to go out for consumption because they have been staying at home during this time. Nail nailed an explosive growth during the outbreak, and many people will use it. And you asked about the main performance. The main performance is that it can help people to work remotely from home. They can also conduct virtual meetings, including virtual classrooms. Students and teachers can interact.

    I also talked about the third point just now. DingDao launched a health check-in service. Everyone can report peace at DingDing. These functions are now welcomed by many companies, schools and organizations.

    In the face of explosive growth in demand, we have been working hard to increase the capacity of Nailing in the past ten days, but to increase its capacity, we also face some bottlenecks that need to be overcome, because some data are needed Some data centers cannot be used because they belong to the epidemic area and are under control. Overall, I think people are back to work now, which is a good thing.