Consumer mind share is Alibaba’s most valuable asset 

With one billion annual active consumers in China, consumer mind share is Alibaba’s most valuable asset, according to CEO Daniel Zhang.

“We don’t need to be paying money to induce the consumers to come back,” he said during an earnings call. “We have that mind share of the consumers, and that’s what’s capable of driving a lot of organic traffic; we get consumers coming back even when their willingness to consume may have weakened during the pandemic period.”

Why it matters

That user base, along with a portfolio of different apps, “positions us to further improve that mind share and capture the opportunities”, Zhang believes. It also plays into reduced marketing spending, as CFO Toby Xu reported the “sales and marketing expenses ratio decreased to 12% in June quarter [from 13% a year earlier], reflecting our efforts in optimizing user acquisition and retention spending across businesses”.

Takeaways

• Alibaba’s three core strategies embrace consumption, cloud and globalization. On the first of these, “we will focus on growing our wallet share in different consumer segments instead of pursuing further absolute increase in our user base in China”, Zhang said.
• Premium users are growing in number as consumers with the highest spending power show “strong loyalty to our platforms”, he added.
• Alibaba is focusing less on the nationwide market and more on particular cities and regions to achieve local economies of scale. “The digitalized network integrating intercity commerce and fulfillment has become a new infrastructure in modern urban life”, Zhang noted.
• On the Taobao app, more than half of products are now being displayed to consumers via short-form video, rather than images and text. 

Key quote

“The most valuable asset that Alibaba owns today, that we built up over the years, is mind share. Users come to Alibaba with a consumption mindset” – Daniel Zhang, CEO, Alibaba.

Sourced from Motley Fool