Attempts to diversify: In a 2018 interview with The Information, Alibaba CEO Daniel Zhang said, “If, five years from now, Alibaba doesn’t have a new main business, we must have made a very big mistake.” Yet despite the company’s best efforts, it still makes most of its money from its ecommerce division.
- In 2018, Alibaba purchased Ele.me, a food delivery app, and spent hundreds of millions of dollars to steal market share away from Meituan, the largest food delivery platform in China. But Meituan still dominates the market: As of early 2021, Meituan had 67.3% market share by transaction value, compared with Ele.me’s 26.9%, per Qianzhan Industry Research Institute.
- Alibaba also attempted to copy Amazon’s success with AWS by launching its own cloud services. While the company is the world’s fourth-largest cloud provider, according to Canalys, its cloud business accounts for only 10.9% of its overall revenues and has yet to turn a profit.
Looking ahead: The biggest problem facing Alibaba in the coming year is weakening consumer demand. Despite strong economic growth in 2021, economic uncertainty related to problems in China’s property sector and its “zero tolerance” policy regarding the pandemic have led consumers to spend less.
- Both JD.com and Pinduoduo have increased their market penetration by offering goods at cheaper prices and entering underserved markets. However, Alibaba’s massive user base means its only option for expansion is to convince existing customers to spend more—a tricky proposition in an uncertain economy.