Alibaba launched its first metaverse mall at the end of May, just ahead of China’s 618 Shopping Festival, which officially began last Tuesday and ends on June 18th. The number 618 corresponds to June 18, the birthday of JD.com, one of Alibaba’s biggest competitors.
Esty Dweck, CIO
Obviously, all Chinese e-commerce giants are participating in the event; many promotions, “red packs” and various commercial benefits are distributed to encourage Chinese consumers to consume.
Additionally, 618 this year comes at a key time for Chinese tech giants, with rumors circulating that government crackdowns are finally over and Chinese authorities will back China’s rise, hit by very strict Covid policies.
So the question is whether launching a mall in the metaverse could be a reflection point for a better future for Alibaba.
Alibaba recorded the slowest growth in its history
Alibaba recorded the slowest growth in the first quarter of this year due to the Covid disruption. However, what the company has to offer remains favorable to the conditions of the pandemic. It should be remembered that months of pandemic lockdowns in the US have led to US tech stocks ballooning while their Chinese counterparts have suffered heavy government crackdowns over the same period.
As a result, Alibaba posted the slowest revenue growth in its history last quarter. Even the latest quarantine measures in Shanghai didn’t stop Alibaba from suffering a drop in online shopping across its two main Chinese platforms during the quarter ended March 31st. Weaker economic growth, disrupted supply chain and logistics have taken their toll on the company’s business.
The company’s total revenue increased by 9% in the last quarter compared to last year.
Therefore, investors hope that the results of 618 will exceed analysts’ expectations, signal an improvement in the trend and provide growth in the value of Alibaba shares, which have been trying to break the negative trend in the past few weeks.
There is nothing better than a virtual mall when you are locked up!
Many countries have abandoned strict pandemic rules in 2022, but China has doubled down on its zero-Covid policy since the start of the year.
While recent lockdown measures are easing, the risk of further lockdowns in China remains real and is putting imminent pressure on many retailers. In this sense, Web3 is an increasingly promising alternative in China, where companies can booster their sales, meet the demand of their consumers, and build and maintain relatively close relationships with their customers, even if physical stores remain closed or are threatened with closure.
As a result, Alibaba’s Taobao has no hesitation in making its name known in the metaverse. From the VR Shopping Buy+ program to TaoBao Life virtual avatars, this fully immersive metaverse mall is an exciting Web3 development for Chinese consumers.
We all have a concrete idea of what a mall in the Metaverse will look like. This is a giant virtual space where shoppers will be able to swipe their avatars around 3D stores and engage in multiple interactive activities using their smartphones.
We may only be half-satisfied with this idea, but the latest restrictive measures in Beijing and Shanghai will inevitably lead to increased interest in an activity that the Chinese consumer could do from the couch: 3D online shopping.
Thus, the announcement of Alibaba’s new virtual mall takes the Web3 concept to the next level in China, and appears to give Alibaba a chance to offset the drop in sales and accelerate growth.
And while Alibaba’s western competitors offer external devices and virtual reality headsets to provide their customers with a metaverse experience, Alibaba’s virtual mall does not require external devices.
Is it time to buy Alibaba?
Alibaba has lost almost two-thirds of its value since its peak at the end of 2020. The main reason for the fall of Alibaba was government repression. While U.S. tech stocks hit an all-time high amid a surge in online activity due to pandemic measures, Chinese tech stocks have been hit mostly by government pressure on their high-yielding businesses.
Today, the pressure seems to be easing, but the threat from the government remains omnipresent. Among them, changes in security regulations and the government’s drive to move data to state-backed entities are among the top threats to Alibaba’s most profitable advertising and cloud computing business.
What’s more, Chinese authorities last week dismissed rumors that ANT Group’s long-awaited IPO is resuming, warning that Alibaba’s fight with the government is not yet won.
However, more and more investors are looking for attractive opportunities to buy shares of Chinese technology companies.
While the contested management of the Covid pandemic remains a major risk to China’s growth and macro-sensitive sectors such as retail, an end to government crackdowns, increased economic and fiscal aid from Chinese authorities, and relentless improvement on the Chinese tech front. may finally bring the most innovation-hungry investors back into Chinese equities. If so, Alibaba will definitely headline to enjoy the much-awaited cashback.
NB: These are not investment recommendations.