Article / 28 October 2015 at 10:00 GMT

#SinglesDay: Mobile leads Alibaba to robust earnings beat

China Watcher / Shanghai
  • Alibaba's Q3 revenue, earnings beat consensus and mobile was the highlight
  • The online shopping giant is ready for its annual one-day shopping spree
  • As China's middle class grows, it seeks quality rather than bargains
  • Watch for signs of Chinese consumer maturity at Singles' Day next month
  • November 11 shopping spree will be much more than just a Chinese event

By Neil Flynn

Chinese online retail giant Alibaba announced its calendar third-quarter results on Tuesday morning, beating expectations for both revenues and earnings. Mobile continued to be the highlight of the quarterly report, now accounting for over 60% of transactions, and just below 50% of revenues. These strong earnings set the tone for the Singles’ Day shopping event on November.

Robust results

Alibaba’s revenues of 22.17 billion yuan beat analysts’ expectations by 850 million yuan, and non-GAAP EPS of 3.63 yuan beat expectations of just 3.42 yuan. This was a strong quarter by the firm, which saw year-on-year revenue growth improve from the slight disappointment in the calendar second quarter.

Steady year on year growth
Alibaba Revenues

Source: Alibaba Investor Relations

The strong growth that we continue to see in Alibaba's Tmall platform is an indication of the evolving tastes of Chinese consumers. The main difference between Taobao and Tmall platforms is the quality and price of the products: Taobao typically has the cheaper goods from independent retailers, and hence a greater likelihood of having counterfeit products. 

This business model suited the early growth of Alibaba, because it offered a wide range of cheap goods to consumers.


Mobile was the highlight of Alibaba's Q3 results, making up over 60% of the online retail giant's transactions, and nearly 50% of its revenues. Photo: iStock

But as the middle class grows, and quality is preferred over low price, Tmall has established itself as the major platform. This is because consumers can buy brand name goods direct from domestic and overseas companies, meaning that the quality is better and the likelihood of counterfeit products is much lower.

This change in consumer behaviour has been evident over the past four quarters, because as year-on-year growth in Taobao GMV has fallen from 42.9% to 15.4%, Tmall GMV year-on-year growth has remained relatively stable, falling from 60.1% to just 56.3%.
Taobao in decline, as Tmall's strong growth rolls on
Alibaba Marketplace Revenues

Source: Alibaba Investor Relations

Monetisation rates approach convergence

One of the most impressive aspects of the earnings report is the growth of mobile monetisation. Over the past few quarters, I have discussed that the firm has been focusing primarily on building the mobile user base rather than monetising it, such is the nature of the online retail market in China. 

Despite this trend, growth in the mobile monetisation rate has been steadily rising, and is now just three basis points below the firm's average and eight basis points below the non-mobile (PC) monetisation rate.

Aside from the growth in mobile, the PC monetisation rate has remained stable over the past three years, decreasing by just three basis points. This is clearer if we ignore the calendar fourth-quarter results every year, which are affected by strong Singles’ Day sales. 

Likewise, the company average monetisation rate has remained constant over the same period, increasing just two basis points. This is because as the mobile monetisation rate has been rising, so has mobile’s contribution to revenues.

This blended rate has perhaps hidden the growth in mobile monetisation, but given that we will see mobile monetisation surpass PC monetisation over the next two quarters, the blended rate will begin to show strong growth.

Monetisation rates converging:
Alibaba monetisation rate

Source: Alibaba Investor Relations

Mobile juggernaut

Mobile continued to go from strength to strength in the calendar third quarter, and this sets the stage for the seasonally strong calendar fourth quarter. Mobile GMV of 440bn yuan contributed 61.7% to total GMV and mobile revenues of 10.5bn yuan contributed 47.5% to total revenues. 

This demonstrates immense growth in Alibaba’s mobile platform, especially given that a year ago, mobile contribution to GMV and revenues was 35.8% and 22.1% respectively.

The growth of this contribution rate is now at its highest ever, and there seems to be no signs of slowing. GMV contribution will likely breach 70% by the middle of 2016 and I would be very surprised if revenue contribution doesn’t surpass 50% by the next quarter. An important consideration is the level at which this contribution rate begins to tail off.

An interesting comparison is VIPshop, which is a business that is typically more geared towards mobile shopping than its rivals. As of the end of the calendar second quarter, VIPshop’s mobile contribution to GMV was 76%, and this should be seen as a high point for Alibaba. 

In reality, the PC business isn’t going away, so there will still be significant contribution in the long run, but it appears that the ceiling for mobile contribution to GMV is between 80% and 85%.

Mobile’s contribution to GMV:

Alibaba's Mobile Progress

Source: Alibaba Investor Relations

Youku Tudou bid

Perhaps unsurprisingly, little was made about the Youku Tudou privatisation bid, which is still ongoing. Alibaba previously held a stake in the online video platform and is aiming to buy out the rest of the company. 

This does show a notable strategy from the firm as it diversifies away from its core retail platforms. The firm acquired a stake in video platform Wasu last year, and is building out its video offerings with Youku, which is the second-largest platform behind the Baidu iQiyi and PPTV platforms. 

The Youku Tudou acquisition was likely inevitable, as the firm has been utilising its relationship with Alibaba over the past few quarters. As I noted in a previous earnings review of Youku, the firm is integrating ecommerce into its shows, and Alibaba is likely looking to leverage this as another major entry point into its shopping channels.

The Youku Tudou earnings call may perhaps shed more light into the future of the two firms, but given that the deal likely won’t be completed by next month, investors shouldn’t expect much other than the standard pre-prepared remarks.


There are signs that Chinese consumer behaviour is maturing, with shoppers less focused on bargains, and chasing quality goods instead, including top foreign brands. Photo: iStock
Singles' day

Singles’ Day will focus on four key areas: globalisation, omni-channel, mobile and logistics. Globalisation will be an ongoing theme from last year, and from a broader perspective in the industry as a whole during 2015. Firms have been focusing on cross-border ecommerce, which is where consumers can buy directly from foreign brands, without having to pay the markup for a third-party distributor. 

Not only does this conform to my belief that Chinese consumer behaviour is maturing, but it also increases the amount of firms that can participate. Quite simply, Singles’ Day isn’t just a Chinese event.

The investment in Suning will be a major part of Alibaba’s omni-channel Singles’ Day event. Whereas previous events have been a mad rush to buy cheaper goods online, the addition of offline stores into Singles’ Day will encourage more consumers to buy large ticket items. A 50% discount on a range of TVs would be appealing, but a consumer would more likely make the purchase if they can visit a Suning store beforehand in order to inspect the TV.

The growth of mobile over the past four quarters has been impressive, but for Singles’ Day, PC has traditionally been the most profitable, as shown by the monetisation rate chart. In order for mobile to become a much more valuable part of the Singles’ Day event, Alibaba should be looking to boost the monetisation rate for mobile.

Finally, the firm’s investment in its logistics subsidiary Cainiao will be key for Singles’ Day. As I have discussed numerous times before, one of the most important parts of the consumption decision is the delivery time, and this is why rival has been successful over the past two years. Singles’ Day will be no different, and Alibaba must offer quick delivery times, even despite the heavy volume. In addition, Singles’ Day will now feature offers on foods, meaning that quick delivery will be essential. 

– Edited by Robert Ryan

Neil Flynn is a portfolio manager at Alcuin Asset Management. Follow Neil or post your comment below to engage with Saxo Bank's social trading platform.


The Saxo Bank Group entities each provide execution-only service and access to permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on or as a result of the use of the Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. When trading through your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of ourtrading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws. Please read our disclaimers:
- Notification on Non-Independent Invetment Research
- Full disclaimer

Check your inbox for a mail from us to fully activate your profile. No mail? Have us re-send your verification mail