Alibaba Group Holding Ltd. (NYSE: BABA) has established a new digital tech firm within e-commerce outfit Taobao and Tmall Group (TTG) to further its goal of expanding its share of the global market: the Hangzhou Taobao and Tmall Digital Technology Company. The new technology company has a registered capital base of $1.4 million (10 million yuan) and will be involved in a variety of businesses. This includes outdoor products, food sales, export and import of products, household appliances, daily groceries and tech-related services such as technology transfer and software development.
The new technology company was registered on Aug. 23, 2024, shortly after Alibaba successfully showcased its artificial assistance (AI)-assisted cloud broadcasting technology at the Paris 2024 Olympic Games. The entity’s formation also comes after Alibaba shut down its cloud facilities in Australia to focus its attention on the South American and Asian markets.
Furthermore, Hangzhou Taobao and Tmall Digital Technology Co. was formed days after the State Administration for Market Regulation, China’s antitrust watchdog, ended its three-year regulatory audit of Alibaba. Although Alibaba Group’s e-commerce subsidiaries already cover most of these activities, Hangzhou Taobao and Tmall Digital Technology Co could provide Alibaba with opportunities to increase its focus on certain business pursuits or pursue additional expansion.
Beijing is currently scrambling to increase investor confidence in its private sector as a major slump in the property market coupled with reduced consumer spending threatens to prevent the country from reaching its 2024 economic growth target of 5%. Despite its dominance in the Chinese market, TTG has faced increasingly stiff competition from Chinese company JD.com and newer entrants into the e-commerce space including ByteDance’s Douyin and PDD Holdings-owned Pinduoduo.
A domestic price war broke out in July when both Douyin and TTG implemented policies that adjusted their business strategies to low-cost retail products, a recent report says. As one of the largest players in China’s e-commerce space through its subsidiaries Taobao and Tmall Group, pundits often see Alibaba’s revenue as a metric for measuring consumer spending and economic health in China.
Unfortunately, the group missed its fiscal topline growth projections for the first quarter by $1.33 billion while TTG’s revenue fell by 1% to $15.60 billion and the net income declined by 29% year-over-year to $3.34 billion. Alibaba’s stock has also decreased by more than 13% during the last year, thanks to the State Administration for Market Regulation’s three-year-long probe, increasing competition in the domestic market, and weak consumer spending.
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