Alibaba’s Xianyu Goes Physical
Alibaba’s BABA online second-hand goods trading platform, Xianyu, is gearing up to make a profound shift from the digital realm to the physical world. The platform is all set to open its very first offline “all-category” bricks-and-mortar store in the Gongshu district of Hangzhou. This groundbreaking move marks a significant departure from the conventional e-commerce model, as Xianyu Recycle Shop introduces a consignment-based system. This change will enable customers to participate in both selling and buying pre-owned items across a diverse range of categories.
The Physical Store Experience
Once operational, the Xianyu Recycle Shop will offer an extensive array of used goods, including shoes, apparel, accessories, and even luxury items. However, the store’s policy prohibits the trading of gold, jewelry, food, pets, and plants. In a bid to enhance customer convenience, the physical store aims to provide a hassle-free experience, eliminating the need for users to continuously check and respond to buyer inquiries via the app.
Strengthening Taobao and Tmall Group Segment
This strategic move aligns with Alibaba’s concerted efforts to fortify its Taobao and Tmall Group segment’s offerings. Notably, the company introduced new experiences during the Tmall Double 11 Global Carnival Season. The initiatives included the AI smart assistant “Taobao Ask” Q, offering ten free tools to aid merchant productivity and curtail content production costs. Furthermore, Taobao PLUS, a new border services brand, expanded its services in various regions, offering reduced free shipping thresholds, local refund options, and exclusive customer service.
Additionally, the “Hangzhou Asian Games Official Flagship Store” expanded its product categories with almost 400 Hangzhou Asian Games licensed products, including plush toys, mascot keychains, and commemorative badges, along with 3D experience halls, commemorative tops, and backpacks.
The Financial Outlook
Alibaba’s proactive measures to bolster the Taobao and Tmall Group segments are projected to significantly enhance the company’s overall financial performance in the near term. The Zacks Consensus Estimate for BABA’s fiscal 2024 revenues stands at $132.68 billion, indicating an impressive year-over-year growth of 5.3%. Moreover, the consensus mark for earnings is pegged at $8.86 per share, signaling a substantial year-over-year growth of 11.6%.
Concerns and Rankings
Notwithstanding the positive strides, Alibaba is not without its challenges, as weakening market conditions in China, softness in its China Commerce business, and sluggishness in online physical goods’ gross merchandise volume at Taobao and Tmall marketplaces remain areas of concern. Its shares have exhibited a 38% loss over the past year, underperforming the Zacks Retail-Wholesale sector’s return of 18.4%.
Currently, Alibaba carries a Zacks Rank #5 (Strong Sell). Despite this, there are some better-ranked stocks in the same sector, such as The Gap GPS, Darden Restaurants DRI, and Fastenal FAST. The Gap currently sports a Zacks Rank #1 (Strong Buy), while Darden Restaurants and Fastenal each carry a Zacks Rank #2 (Buy) at present.
Looking at the performance, The Gap has gained 86.7% over the past year, with a long-term earnings growth rate of 12%. Darden Restaurants’ shares have risen 75.9% over the past year, boasting a long-term earnings growth rate of 7.96%. Fastenal’s shares have rallied 75.9% over the past year, with a long-term earnings growth rate of 9%.