Saturday February 15, 2020 ((rezonodwes.com)) – Chinese merchants cannot have their products produced and workers remain stranded at home due of the new NCOV19 coronavirus outbreak.
Alibaba said sales increased 38% in the quarter ended December 31, before the coronavirus closed much of China.
Alibaba Group Holding Ltd.BABA -0.33% said the epidemic that has blocked residents across China is hampering and can cause slower growth as employees stay home from work and packages are not delivered. “We are currently being tested,” said director general of online retailer Daniel Zhang on Thursday.
China's most valuable technology company is therefore facing one of its biggest ands challenges over its 20-year history, and it's up to its new generation of leaders to tackle it. Founder Jack Ma stepped down as executive chairman of Alibaba last year.
Company executives said they expect short-term challenges, but said Alibaba could benefit from them. the future, as locks trapping people inside their homes encourage consumers to move more online shopping.
Before the coronavirus epidemic closed much of China from At the end of January, Alibaba had exceeded even high expectations. The company announced on Thursday that last quarter sales rose to 161.5 billion yuan (23.2 billion US dollars), up 38% from the same period a year earlier, while net profit quarterly had increased 58% to 52.3 billion yuan.
China slowly returns to work after stopping the coronavirus
Life in China is far from normal then factories are trying to boost production after extended Lunar New Year holidays due to the virus epidemic. James Areddy of the WSJ visits the factory district of Shanghai and explains how the slow start will affect the economy of the country.
M. Zhang spent most of Thursday's conference call focusing on Alibaba's response to the coronavirus, prompting many local governments in China to cut public transportation and lock up residents in an attempt to stop the spread of the virus. This has created a chain of problems for a business primarily engaged in supplying products to people.
Much of Alibaba's business is to charge merchants for sales or advertising in its gigantic marketplaces online. But some merchants cannot have their products made in factories that remain dark. Workers are stranded at home, while some local governments have made it difficult to reopen manufacturers by requiring them to meet strict safety requirements, such as providing all workers with hard-to-buy masks and gloves nationwide shortage.
The demand for the product is there, but the supply is not, said Maggie Wu, chief financial officer. “The means of production in the economy have been hampered,” she said.
Then there are Alibaba's own employees. The company said that its logistics branch was operating at 20% of its capacity because many couriers could not return to the workplace, and Mr. Zhang said that a significant amount of packages had not been delivered on time.
In addition to this, Alibaba employees based at the company's headquarters in Hangzhou worked from their homes and communicated via video chat and other digital means, after certain districts of the Eastern Chinese metropolis have locked residents, allowing them to leave the house once every few days. .
Finally, consumers are not buying as much consumer clothing and electronics as they normally would, said Zhang. “Consumers are less willing to shop at the height of the epidemic,” he said.
Alibaba, which also offers food delivery services, said orders for restaurants were also down because many restaurants remain closed. But Mr. Zhang said that Alibaba has seen a significant increase in online purchases of groceries and basic goods.
Getting people to try these deliveries online can benefit Alibaba once the epidemic of coronavirus completed. “This will present short-term challenges for the development of Alibaba's businesses in all areas, but at the same time, we will see opportunities created by the forces of change,” said Mr. Zhang.
Ms. Wu, CFO said growth may slow in Alibaba's Chinese retail market, as well as in its local delivery business. She said it was too early for Alibaba to quantify the financial impact of the coronavirus, but thought it would be a one-time event and demand from Chinese consumers would rebound.