Alibaba Sees Large Potential of User Growth for Taobao, WeChat Integration

TMTPOST -- On an earnings call last Friday, Alibaba Group Eddie Wu saw significant potential of user growth for the recent integration that allows users to pay on the company’s major e-commerce marketplaces using Tencent’s WeChat Pay.

Credit：Alibaba

"We see a very large potential there for user growth going forward. In particular, we expect to see a large noticeable increase in monthly active consumers, MACs, but it will take time to fully realize this potential," Wu replied to a question about interoperability with WeChat Pay and the ability that gives Alibab to develop new users. Wu added it is complementary with the measures Alibaba is taking to drive user growth, while the goal is to get them on the platform and stay on the platform over time, continue to drive incremental gross merchandise value (GMV) growth.

Taobao and Tmall Group announced in September it was going to provide new payment option through access to WeChat Pay, and the adjustment will be applicable for all the merchants on these platforms. This is the first time for WeChat and Taobao to achieve meaningful "interconnection" since being blocked from each other 11 years ago. Taobao and Tmall’s adjustment marks leading Chinese tech firms are accelerating teardown of their “walled gardens”.

The latest financial results showed Alibaba’s top line fell short of Wall Street expectation for a second straight quarter. Revenue for the second quarter of the company’s fiscal year 2025 ended September 30, 2024 recorded RMB236.5 billion (US$32.7 billion), missing analysts’ estimate of RMB239.4 billion. Alibaba’s bread and butter Taobao and Tmall Group, which includes two major online marketplaces, brought RMB99.00 billion for the September quarter. That represented a 1% YoY increase, reversing a surprisingly 1% YoY fall from April to June.

While the quarter ended September is a traditional lull in Chinese consumption between major shopping festivals in June and November, the Chinese government in August rolled out an expansive trade-in policy across multiple sectors, ranging from automobiles and home appliances to real estate, to boost consumption. Alibaba’s e-commerce performance in the quarter echoed the sluggish growth as its domestic rival JD.com showcased earlier this week. JD also missed revenue projection, according to FactSet.

During the September quarter, online GMV of the Taobao and Tmall was supported by double-digit order growth year-over-year, mainly driven by the increase in purchase frequency, partly offset by the decline in average order value, Alibaba said. It underscored a “successful” 11.11 Global Shopping Festival this month, during which Taobao and Tmall achieved robust growth in GMV and a record number of purchasers.

Wu told analysts that for Taobao and Tmall, Alibaba's current strategy is to be investing in strengthening its abilities, its competences, investing in the user experience and also investing on the merchant side. That involves several different kinds of investments: investing in developing more extensive, more diversified supply; investing in developing price competitive supply; and also investing in new product and promising new brands. And the company is also investing in technology, not only in those products, but also in the computing power that's needed to run these AI products.

Wu said interopeartbility with WeChat Pay is part of Alibaba's long-term investments to enhance user experience and to enhance supply on the merchant side. "I would say we have quite high expectations for the ability that gives us to acquire new users," Wu commented. He pointed out Taobao and Tmall is currently very much in the investment stage.