BABA - Alibaba

[LearningMachine]

1 hour ago, Spekulatius said:

FWIW, the CC that LM was referring to can be found on tikr.com:

https://app.tikr.com/stock/transcript?cid=42083601&tid=263579308&ts=2249661&e=710924151&refCode=o94y6y#

 

Thanks @Spekulatiusfor sharing.  Good to see that my memory wasn't totally failing me :-). 

Also, thanks for sharing the link to Chinese e-commerce being 52%.  Even though Jack Ma's scmp hadn't come up with the figure itself, eMarketer's data itself is based on "reported and estimated revenues from major online retailers [Alibaba :-)]."  Please see https://www.emarketer.com/chart/244424/retail-ecommerce-sales-china-2019-2024-trillions-of-total-retail-sales.

 

Could China be decades ahead of the U.S. on e-commerce penetration, or is there a chance that Alibaba is making up numbers, which cause the e-Commerce percentage calculation to be higher?  Maybe there are folks on the forum who live in China and can share how much per year they spend on Alibaba, and how much they spend outside, and what other normal Chinese do based on their income levels? 

 

I agree there is no reason for Alibaba to make up numbers to survive.  However, greed has no limits, especially when it is not illegal to make false statements and you can escape punishment easily.  There was also no reason for Jack Ma to give only 30 some percent of AliPay to Alibaba instead of coming up with a method to share highest possible with Alibaba while still getting license.   The reason for cooking numbers could still be to allow Jack Ma and Joseph Tsai to unload at the highest possible price. 

 

I think the way these guys think is that they have a bigger risk to worry about being sentenced by the CCP for other reasons, that is, saying something wrong about CCP.  The risk of getting into trouble for making false statements to shareholders is LOWER for them than the risk with CCP. However, the reward for making false statements to shareholders is HUGE. 

Edited May 8, 2021 by LearningMachine

[LearningMachine]

2 hours ago, adhital said:

@LearningMachineI think the fraud  was with the pre-ipo sales data and not the quarter since  Ernst and Young started audit. That’s why auditor was not fined. 

Hi adhital, is that also the reason why no-one was sentenced?  :-).  Even if auditor had been fined, that is not a big enough deterrence against making false statements.   Also, I thought the issue with sales was found after ipo based on receipt numbers.  My guess is that "pre-ipo sales data" is just rhetoric, and auditor and executives got away with the money without any punishment by using "guanxi", that is, calling favors on local folks to escape punishment for any crimes, and sharing part of the windfall with the locals. 

I think the incentives are too huge for these folks to make false statements, and there is little deterrence against it. 

Edited May 8, 2021 by LearningMachine

[LearningMachine]

If the eCommerce percentage figures based on Alibaba's claims are really 52.1% in 2021, and will go to 58.1% by 2024, there is little reason for Costco to open physical stores in China anymore.  Instead it will be better to go after big majority of the population online. 

 

There is little reason for opening new Freshippo stores or membership-based X stores to compete with Costco anymore.

 

There is little reason for Alibaba to acquire Sun Art.

 

There is little reason for Walmart to open more physical stores in China. 

 

There is little reason to open TMall malls anymore. 

 

 

Methodology is based on data from major online retailers (Alibaba :-)).  Please see https://www.emarketer.com/chart/244424/retail-ecommerce-sales-china-2019-2024-trillions-of-total-retail-sales

Edited May 8, 2021 by LearningMachine

[concerto]

I just don't understand why this point is particularly important in evaluating Alibaba. China ecommerce penetration - whether it's 20% or 30% or 50% - is growing quickly, which is a significant factor behind the bull thesis here (it's definitely unlikely to remain stable or contract over the next few years). The Chinese economy is also growing relatively quickly (at least relative to the US). Also, Alibaba definitely operates a real business - it's not a fraud, it makes actual dollars, and it is known to be ubiquitous and dominant in China. I don't think anybody contests those statements (no Chinese person I've met has ever said that Alibaba's properties were small, or rarely used, or unimportant) - so why would they just make up numbers? What would be the benefit of inflating GMV from 6 trillion to 7 trillion RMB? "Greed has no limits" is a true statement - we've seen that statement proven true again and again - but lying at this scale, with a business this dominant, would be pretty absurd with little obvious upside and a huge amount of obvious downside.

Also, if they were really just lying about their financials, the recent Chinese regulatory probe probably would have uncovered something. Alibaba is one of the most heavily scrutinized companies in the world, including by regulators, and fradulent financials would be difficult to hide for this long from an all-powerful government that has a clear vendetta against the company. If the objective is to reduce Alibaba's dominance or to hurt Jack Ma, would the CCP be complicit in hiding fraud?

I think, at some point, there needs to be some basic level of trust in these companies to have a productive discussion. If the fundamental belief is that Alibaba is a fraud / lying / is publishing dishonest financials, there is not much that we can tell you here that will be able to change your mind. Everything we say will be based on the company's disclosures, public disclosures, etc., all of which can reflect manipulated or dishonest numbers.

I agree with you that Chinese divisions of US auditors are unreliable, and that fraud is a persistent and significant problem with Chinese companies, including many of those listed in the US. But Alibaba's been listed for a long time, there has very little serious recent short activity around the name (unlike GSX, which I think was a pretty consensus short that paid off with Archegos), and I'm having trouble finding a motive. Why lie about an obviously exceptional business? How far off would the lies really be from the truth?

Other concerns about Alibaba - risk around the take rate, competitive pressure from PDD, potential asset theft by Chinese nationals, etc. - are pretty valid and should be seriously evaluated against the bull case. I think the probability of fraud, however, is just so low that it's not really worth putting as a central point in evaluating this business.

Edited May 8, 2021 by concerto

[LearningMachine]

@Concerto, I'm not saying Alibaba is not a real business or that it doesn't make actual dollars. 

The reason ecommerce penetration figure is important is because @Spekulatius had offered that as a data-point to make more believable Alibaba's numbers that the 190 million middle class Chinese consumers spend ~3 to 6 times on Alibaba compared to what a U.S. consumer spends on Amazon. 

As I mentioned earlier, the incentive for making false statements would be for Jack Ma and Joseph Tsai to finish unloading their BABA shares at a high valuation. 

I wouldn't question so much if the Chinese law was such that making false statements in SEC filings was illegal and people were getting sentenced for making false statements like we have here in the U.S. 

I also wouldn't question so much if there were not any cockroaches - we already know of some cockroaches here, e.g. Jack Ma stripping AliPay from Alibaba, JackMa and Joseph Tsai unloading like crazy, Daniel Zhang making a perhaps Freudian slip at the April 12 call that the overall average Chinese consumer spend is RMB900 ($140 USD) not RMB9000 for all Chinese consumers including the vast majority that are spending low figures, especially in smaller cities - a number that might be more reasonable for a country with 1/6th GDP per capita when compared to Amazon's $600 figure in a country with 6 times GDP per capita, Aliababa selling additional shares in Hong Kong to raise cash even though they claim to have a lot of cash, etc.   Where there are some cockroaches, there will probably be more. 

The answer also doesn't need to be binary here.  The answer here can be that we collectively figure out the probability range for Alibaba's numbers being incorrect. I understand that might not work for everyone.  Some of us don't think in ranges and spectrums, and like to have a clear answer in our mind that "we trust Alibaba because Munger is investing in Alibaba" but maybe this is not one of those clear-cut situations, and the answer might be that the probability that Alibaba is faking its numbers is somewhere between 10% and 90%.  For those who are ok with thinking in probability ranges, maybe we can collectively refine that probability range so that people can size their positions appropriately. 

Edited May 8, 2021 by LearningMachine

[Jmac42600]

14 hours ago, LearningMachine said:

If the eCommerce percentage figures based on Alibaba's claims are really 52.1% in 2021, and will go to 58.1% by 2024, there is little reason for Costco to open physical stores in China anymore.  Instead it will be better to go after big majority of the population online. 

 

There is little reason for opening new Freshippo stores or membership-based X stores to compete with Costco anymore.

 

There is little reason for Alibaba to acquire Sun Art.

 

There is little reason for Walmart to open more physical stores in China. 

 

There is little reason to open TMall malls anymore. 

 

 

Methodology is based on data from major online retailers (Alibaba :-)).  Please see https://www.emarketer.com/chart/244424/retail-ecommerce-sales-china-2019-2024-trillions-of-total-retail-sales

By this logic couldn't you say that because ECommerce penetration is only 14% in the US then there's no reason for physical retailers like Walmart to expand online? Maybe I'm wrong but I don't agree with this point. Why wouldn't a business want to expand?

Also, I understand that you're trying to show the bear case here. But your calculations that you're basing your assumptions on you even stated "are probably incorrect." You made a lot of very interesting assumptions that none of us know could be close to reality or far from it. For example, you assumed people spending less than RMB 2k and people spending between RMB 2k and 7k was a 50/50 split. What if its a 10/90 split, or a 20/80. That would completely change the whole premise of the questions you would be asking. While completely making all of these assumptions, you are asking for others to come and argue against you with some "believable numbers." Again, maybe I'm wrong here and not trying to argue, but just trying to think through everything here critically. I'm choosing to believe that Alibaba's numbers have a high probability of being factual, and I think the incentives are way more in the favor of that assumption than yours. But again, maybe I'm wrong, we'll find out eventually. 

[concerto]

@LearningMachine  Understood, appreciate the thoughtful response. Also just want to say for the record that I appreciate your willingness to take the other side on this one - it's definitely an unpopular opinion, but as a bull I've been worried looking at the stock price remain stagnant while everybody and their mother seems to be in total agreement. It's helpful to understand the bear case and you've revealed a number of blind spots I didn't know I had on this name.

I think we all take a probabilistic approach to assessing risk - every company on earth has a non-zero chance of being at least partly fraudulent, so we stumble around in the dark trying to understand whether there is a significant chance of a company's downside being 100%. You say Alibaba may be 10% to 90% a fraud - I think it's more like 1% or less.

For what it's worth, I think 50% is probably too high for ecommerce penetration. JD's latest investor presentation seems to peg the number at ~25%, and there was a footnote in Alibaba's presentation that seemed to agree. Still likely quite a bit higher than the US.

The point about GMV per capita is also misleading - in the Investor Day presentation you linked earlier, Alibaba noted they had 90% penetration in developed areas and 45% in less developed areas. Developed areas obviously house more wealth, and China definitely has some issues around income inequality. Combine that fact with 1) your assumptions were high-level at best, and the distribution of GMV based on spend or income is very vague and most likely non-linear with a skew to the upside, and 2) higher relative ecommerce penetration in China, I don't find the numbers all that unbelievable. 

As a reference point, I think PDD is the absolute floor here - in their Q4 investor presentation, they disclosed an average of 2,115 RMB/year spent by active buyers on the platform. Given PDD is clearly the low-cost alternative to Alibaba operating in less developed regions, I'd say Alibaba's real GMV/user would naturally be much higher. I doubt both PDD and BABA are lying.

Your other points revolve a lot around trying to read the tea leaves - you mention the scummy moves by Jack Ma and Joe Tsai (fundamentally dishonest? Perhaps. But publicly listing a massive adjacent business that does a huge amount of transaction volume for a fraudulent affiliate in a very high-profile IPO seems like an irresponsible and unnecessary layer of complexity and risk), the dual-listing in Hong Kong (I thought this was undertaken when Trump outlawed investment in a few select Chinese businesses. I'd imagine management viewed a secondary listing as a good backstop to protect against an unpredictable president with a clearly anti-China agenda), and the lack of consequences in China (honestly you're right on this, I wish there would be some real legal consequences here).

As is probably unsurprising to you, I remain unconvinced that we've uncovered anything that points to a fraud being committed here.

Edited May 8, 2021 by concerto

[LearningMachine]

1 hour ago, Jmac42600 said:

By this logic couldn't you say that because ECommerce penetration is only 14% in the US then there's no reason for physical retailers like Walmart to expand online? Maybe I'm wrong but I don't agree with this point. Why wouldn't a business want to expand?

I wouldn't say that because it would still be a rational decision to go after a growing online pie. 

It would be a less rational decision to go after a declining B&M pie if the pie has already become so small per Alibaba's numbers. 

If the B&M pie has gone down to 41.9% in China all up, and has gone down to even lower in developed areas, little point in building any commercial retail real estate in developed areas. 

I think the truth is that China is not decades ahead of the U.S. in e-commerce penetration at 58.1% by 2024.  If the truth is that B&M percentage is still pretty high in China, then Costco and Walmart are making wise decisions.  I've more faith in Costco and Walmart making wise investment decisions than Alibaba's numbers being correct because of the incentives & deterrence in place when comparing U.S. and Chinese legal systems. 

Edited May 8, 2021 by LearningMachine

[LearningMachine]

1 hour ago, Jmac42600 said:

But your calculations that you're basing your assumptions on you even stated "are probably incorrect." You made a lot of very interesting assumptions that none of us know could be close to reality or far from it. For example, you assumed people spending less than RMB 2k and people spending between RMB 2k and 7k was a 50/50 split. What if its a 10/90 split, or a 20/80. That would completely change the whole premise of the questions you would be asking. While completely making all of these assumptions, you are asking for others to come and argue against you with some "believable numbers." 

You can do the math assuming different splits, and numbers are still unbelievable. 

Even when looking at it without doing any splits, that is overall average Chinese consumer numbers provided by Alibaba, Chinese GDP per capita ($10K) is only about 7 times what Alibaba claims consumers are spending with it (RMB 9000, i.e. $1400 USD).  In other words, what Alibaba claims average Chinese consumer is spending with it is 14% of Chinese GDP per capita.  

By comparison, U.S. GDP per capita ($65K) is 108 times what Amazon claims U.S. non-prime consumers are spending with it ($600).   In other words, Amazon is claiming what non-prime U.S. consumer spends on it is less than 1% of U.S. GDP per capita - much more believable numbers.

With Alibaba, RMB 900 ($140 USD), which is 1.4% of Chinese GDP per capita is a much more believable number.  RMB 900 came out of the mouth of no-one other than Daniel Zhang at the April 12 call.  Did he make a mistake or was it a Freudian slip given that the number is so close to being reasonable compared to Amazon's numbers, albeit still more than 40% higher than Amazon's equivalent number compared to U.S. GDP is in the U.S for non-prime consumers?

 

Edited May 8, 2021 by LearningMachine

[Jmac42600]

32 minutes ago, LearningMachine said:

I wouldn't say that because it would still be a rational decision to go after a growing online pie. 

It would be a less rational decision to go after a declining B&M pie if the pie has already become so small per Alibaba's numbers. 

If the B&M pie has gone down to 41.9% in China all up, and has gone down to even lower in developed areas, little point in building any commercial retail real estate in those areas. 

I think the truth is that China is not decades ahead of the U.S. in e-commerce penetration at 58.1% by 2024.  If the truth is that B&M percentage is still pretty high in China, then Costco and Walmart are making wise decisions.  I've more faith in Costco and Walmart making wise investment decisions than Alibaba's numbers being correct because of the incentives & deterrence in place when comparing U.S. and Chinese legal systems. 

I disagree. Costco by expanding into China is simply just copying their existing strategy and expanding into a new market. That provides growth for them as a company because they are expanding their TAM and reaching new customers. Despite the fact that physical retail sales are declining as a % of total, you are neglecting the even larger pie which is the Chinese economy growing. Just because eComm sales may make up 70-80% of total sales one day, doesn't mean Costco or even Alibaba can't benefit and grow as a business by opening up physical locations in China. An industry can be losing market share but still grow if the industry is growing.

 

22 minutes ago, LearningMachine said:

You can do the math assuming different splits, and numbers are still unbelievable. 

Even when looking at it without doing any splits, that is overall average Chinese consumer numbers provided by Alibaba, Chinese GDP per capita ($10K) is only about 7 times what Alibaba claims consumers are spending with it (RMB 9000, i.e. $1400 USD).  In other words, what Alibaba claims average Chinese consumer is spending with it is 14% of Chinese GDP per capita.  

By comparison, U.S. GDP per capita ($65K) is 108 times what Amazon claims U.S. non-prime consumers are spending with it ($600).   In other words, Amazon is claiming what non-prime U.S. consumer spends on it is less than 1% of U.S. GDP per capita - much more believable numbers.

With Alibaba, RMB 900 ($140 USD), which is 1.4% of Chinese GDP per capita is a much more believable number.  That number came out of the mouth of no-one other than Daniel Zhang at the April 14 call.  Did he make a mistake or was it a Freudian slip given that the number is so close to being reasonable compared to Amazon's numbers, albeit still more than 40% higher that Amazon's equivalent number is in the U.S?

 

I don't really see how Chinese consumers spending a larger % of GDP per capita on eCommerce is that unbelievable. Remember, this isn't as overly simplistic as you're making it out to be. There are many factors here that you're choosing to ignore in your overly simplified analysis. Income inequality, higher penetration of online spend in China vs the US, less competition in China vs the US, different cultural and demographic profiles, etc. Maybe I'm wrong, but I'm not in agreement with you. Time will tell. 

[LearningMachine]

2 hours ago, Jmac42600 said:

 An industry can be losing market share but still grow if the industry is growing.

@Jmac42600, this is a good point.  Thanks for raising it. 

[LearningMachine]

3 hours ago, Jmac42600 said:

I don't really see how Chinese consumers spending a larger % of GDP per capita on eCommerce is that unbelievable. 

If the difference was a small percentage or a small multiple, it could be believable. 

Here, Alibaba is claiming the average consumer expenditure on Alibaba as a percentage of GDP per capita is more than 1400% of what Amazon is claiming is the average non-prime U.S. consumer is spending on it as a percent of per-capita-GDP (more than 650% of what Amazon is claiming is the average prime U.S. consumer is spending on it as a percent of per-capita-GDP). 

Saying that 742 million people in a population of 1.4 billion are on average spending 14% of GDP-per-capita on Alibaba is the equivalent of Amazon saying 174 million people in a population of 328 million in the U.S. are on average spending on Amazon more than $9,100 per year (14% of U.S. GDP-per-capita).  This would include super-market workers, teachers, engineers, doctors, everyone...

How many people on this board are spending more than $9,100 per year on Amazon? How many know their maids, teachers, grocery workers, etc. are spending on average more than $9,100 per year on Amazon? 

Edited May 9, 2021 by LearningMachine

[adhital]

@LearningMachine GDP per capital is another misleading average indicator to quantify spending. Income disparity is not comparable with the US with much wider distribution curve between haves and have-nots. . Average is not the way to look into Chinese consumer market yet IMO. The devil is always in the details and one number doesn't justify the analysis. 

Just an example, as of 2018 (https://chinapower.csis.org/china-middle-class/#toc-1), ~50% of population, over 600million, has  dollar-per-day spending amounts between $10 to $50 a day.  Taking upper-middle mid point, over 200Million spends over $12,000/year.  why cant BABA take 10% of that pie? 

Almost 50% are rising to be a middle class and that's where the TAM is expanding and they reason why I'm willing to take risks with BABA, JD, PDD or whatever out there are on sale right now. 

 

[LearningMachine]

On 5/8/2021 at 5:40 PM, adhital said:

Taking upper-middle mid point, over 200Million spends over $12,000/year.  why cant BABA take 10% of that pie? 

Out of 1.4 Billion people in China, 18% are 0-14 years old, 71% are 15-65 years old, 11% are 65 and over.  I didn't look hard for what percentage are 15-18 years old.  Let's assume 80% are over 18 and earning (forget about college to give you benefit of doubt :-)).

80% of 1.4 Billion is ~1.12 Billion people. 

16.17% Upper middle of 1.12 Billion people is 181 million people - close to your 200 million people figure. 

Say, for collective-truth-seeking's sake, I buy your argument for now that those 181 million people with $12,000 per year are spending 10% on Alibaba, i.e. $1200 per year!  By the way, using the same argument, you can easily convince yourself that U.S. folks with $91,000 per year are spending $9,100 per year on Amazon even though that is not the truth!!!!!

Anyway, let's go with your logic for collective-truth-seeking's sake for now.

Ready for the bigger surprise?

Alibaba is claiming not 181 million people, but 742 million people on average are spending $1400 per year on it!  

742 million of 1.12 Billion is 66.25%.

Your High and Upper Middle buckets add up to only 17.61%.

To get to 66.25%, lets add in Lower-Middle bucket consisting of 34.62% folks.  Let's say they have $15 per day, i.e. $5,475 per year.  Now, they are spending 25.5% of their money on Alibaba. 

Wait, that still doesn't add up to 66.25%, i.e. 742 million people.  High, Upper Middle and Lower Middle buckets take us only to 52.23%.

To get to 66.25%, now we have to reach into the Low bucket, those who have $2-$10 per day, that is, $730 to $3,650 per year.  To spend $1400 per day on Alibaba, these folks have to now spend 191% to 38% of what they have on Alibaba!  Forget about spending money on internet, cell-phone plans, power, water, shelter, transportation, cars, travel, healthcare, children's education, savings, etc., etc. . 

 

 

Edited May 10, 2021 by LearningMachine

[Lakesider]

Sorry if ive missed something here, but you know alibaba sells to users globally right, not just in China? All of its revenue doesnt need to come from inside china. 

[LearningMachine]

31 minutes ago, Lakesider said:

Sorry if ive missed something here, but you know alibaba sells to users globally right, not just in China? All of its revenue doesnt need to come from inside china. 

Numbers we are talking about here are what Alibaba claims for China.  Please see earlier discussion in the thread with slides from https://www.alibabagroup.com/en/ir/presentations/Investor_Day_2020_FinancialInvestmentPerspectives.pdf

 

 

 

 

Edited May 10, 2021 by LearningMachine

[sjh]

I think the 9k number isn’t Alibaba specific.

“1. Average consumer annual spending on China retail marketplaces.”

 

[concerto]

1 minute ago, sjh said:

I think the 9k number isn’t Alibaba specific.

“1. Average consumer annual spending on China retail marketplaces.”

 

China retail marketplaces = Taobao + Tmall, as defined by Alibaba.

[LearningMachine]

29 minutes ago, concerto said:

China retail marketplaces = Taobao + Tmall, as defined by Alibaba.

Thanks @concerto.

At 5:35 mark in the following video, Maggie Wu confirms her claim of "Average ARPU for our annual active consumers on platform is 9000 RMB." 

https://edge.media-server.com/mmc/p/43h5bjuf

9000 RMB multiplied by 742 Million Annual Active Consumers is RMB 6.678 Trillion.

Alibaba needs to make these claims in order to justify its claims of total GMV (including outside China) of RMB 7.3 Trillion.  That claim in turn is needed to justify what it claims is its take rate and revenue. 

Edited May 10, 2021 by LearningMachine

[adhital]

6 hours ago, LearningMachine said:

Say, for collective-truth-seeking's sake, I buy your argument for now that those 181 million people with $12,000 per year are spending 10% on Alibaba, i.e. $1200 per year!  By the way, using the same argument, you can easily convince yourself that U.S. folks with $91,000 per year are spending $9,100 per year on Amazon even though that is not the truth!!!!!

That's a % of disposable income but again, I don’t know how many are spending on BABA. I don’t think anyone can  quantify this without looking into each consumers income statement. All I did was playing with dollar-per-day spending amounts expressed in purchasing power parity terms, based on data from that one site, and trying to understand the probability of fraud  with BABA's reported number as you've stated. 

BABA is not claiming that the only 190 million middle class spend $X. This is what they're saying:  "High-spending consumers consist of consumers who spent more than RMB7,000 on our China retail marketplaces during LTM ended June 2020. According to the Income Survey in June 2020 conducted by Beijing Normal University, there are 230 million people in China with more than RMB36,000 in annual disposable income. Using an online retail penetration rate of 20-25% in 2019, based on NBS data, we estimate that this group of people would spend more than RMB7,000 per year online"

In 2020, the total retail sales of the consumer goods industry in China amounted to approximately 6 trillion dollar, almost equal to US.  According to the report you shared, 45% of China's sales is online. In comparison, US accounted for 14% of sales. Even if we assume, BABA and Amazon both taking 50% market share, the reported numbers doesn't seems to be fraudulent by neither of them.  

[LearningMachine]

45 minutes ago, adhital said:

BABA is not claiming that the only 190 million middle class spend $X.

Indeed BABA is not claiming that only 190 million middle class spend $X.

BABA is claiming 742 million consumers are on average spending RMB 9000 ( $1400 USD) on it. Are you saying you believe that claim or you don't believe that claim?

 

At 5:35 mark in the following video, Maggie Wu confirms her claim of "Average ARPU for our annual active consumers on platform is 9000 RMB." 

https://edge.media-server.com/mmc/p/43h5bjuf

Edited May 11, 2021 by LearningMachine

[concerto]

1 minute ago, LearningMachine said:

Indeed BABA is not claiming that only 190 million middle class spend $X.

BABA is claiming 742 million consumers are on average spending RMB 9000 ( $1400 USD) on it. Are you saying you believe that claim or you don't believe that claim?

I mean....to be fair, they're claiming that 550mn people spend < $1000 USD and 190mn people spend > $1000 USD with an overall average of $1400 across all buyers. I'd imagine the actual distribution follows power law and is mostly driven by big spenders with high incomes, attributable to income disparity and higher ecommerce penetration. Just to note - Alibaba probably has higher market share in China ecommerce than Amazon does in the US, which would also drive higher average consumer spend.

[LearningMachine]

50 minutes ago, adhital said:

"High-spending consumers consist of consumers who spent more than RMB7,000 on our China retail marketplaces during LTM ended June 2020. According to the Income Survey in June 2020 conducted by Beijing Normal University, there are 230 million people in China with more than RMB36,000 in annual disposable income. Using an online retail penetration rate of 20-25% in 2019, based on NBS data, we estimate that this group of people would spend more than RMB7,000 per year online"

@adhital, this quote is not the entirety of BABA's claim regarding how much consumers spend on BABA on average.  This quote is just BABA's footnote for definition of "High-Spending Consumers", which they claim to have a high retention rate with. 

For the entirety of BABA's claim you have to listen to the video link I posted above, and look at the snapshots of the slides above. 

@concerto summarizes it well that BABA is claiming that on average customers are spending $1400 USD on it (RMB 9000), and then they go on to define categories high-spending consumers and "moderate and low spending consumers", and what is their retention rate for each of those categories. 

[adhital]

18 minutes ago, LearningMachine said:

BABA is claiming 742 million consumers are on average spending RMB 9000 ( $1400 USD) on it. Are you saying you believe that claim or you don't believe that claim?

@LearningMachine, sure,  I'll listen to this video. I'm a shareholder so I should believe this number right ? But as pointed by concerto, I think, the top % spenders are concentrated on a few % of population.  For e.g. BABA's platform is the leading e-marketplace for luxury goods in china and getting higher share of top-spenders and perhaps in similar other areas as well. Overall, I think this concentration risk is higher then a GMV fraud and JD is getting into that territory

However, looking at the big picture, if we agree that 1/ the total retail sales of the consumer goods industry in China amounted to approximately $6 trillion, 2/  ecom share 40% (It's getting close to 50%) and 3/ BABA's share 50%  (It's higher then 50% based on various reports). The result = 40% of 50% of $6T= $1.2T , not too far from what they're reporting 

[LearningMachine]

2 hours ago, adhital said:

However, looking at the big picture, if we agree that 1/ the total retail sales of the consumer goods industry in China amounted to approximately $6 trillion, 2/  ecom share 40% (It's getting close to 50%) and 3/ BABA's share 50%  (It's higher then 50% based on various reports). The result = 40% of 50% of $6T= $1.2T , not too far from what they're reporting 

@adhital, I'll take numbers provided by someone who will be sentenced for providing false numbers.  Because we don't have that available for China, for this discussion's sake, I'll take numbers provided by National Bureau of Statistics of China (NBS) even though I don't fully trust NBS's numbers. 

#1. Total Retail Sales of Consumer Goods: NBS claims RMB 39.1981 Trillion for 2020 at https://data.stats.gov.cn/english/easyquery.htm?cn=C01. This is close to your number.

#2. Ecommerce share: NBS claims Online Retail Sales in Goods of RMB 7.01982 Trillion at http://www.stats.gov.cn/tjsj/ndsj/2019/indexeh.htm.  2019 is the latest annual report provided by NBS that I could find, and it has data from 2018. JD apparently has access to 2020 data from NBS and provides on slide 2 that Online Retail Penetration in 2020 is 24.9%.  So much for eMarketer's claims of 52.1% based on Alibaba's data .  JD defines in footnotes that source is NBS and that the percentage is "calculated as online physical goods consumption divided by total retail consumption."  Please see https://ir.jd.com/system/files-encrypted/nasdaq_kms/assets/2021/03/11/5-38-59/JD.com Inc 4Q2020 Financial and Operational Highlights.pdf.  24.9% of RMB 39.1981 Trillion is RMB 9.76 Trillion.

#3. Alibaba's share. Would it be possible to share authoritative source of your claim of Alibaba's share?  I hope you won't claim eMarketer or Alibaba data is authoritative.  Ideal source would again be someone who will be sentenced for making a false statement.  In absence of that, we could take NBS.  In absence of that, we could take a competitor that has incentive to show more accurate figures for Alibaba.  

 

Edited May 11, 2021 by LearningMachine