Under the ongoing uncertainties in the global market, a trio of Chinese tech giants have lost significant value. This article lists the three stocks that, once titans of innovation and market dominance, face adversity. Yet, amidst the chaos, these giants have quietly laid the groundwork for a phoenix-like resurgence.
The first one, a commerce behemoth, has reimagined its supply chain, making it a force to be reckoned with across borders. The second, a customer-centric e-commerce platform, has fine-tuned its strategy, turning challenges into opportunities for growth. Finally, the third, a search engine titan, has harnessed the power of AI to transform industries and user experiences.
Here, I delve into the recent development of their strategies that could fuel a triumphant return. From localized global expansion to marketplace prowess and the AI-infused revolution, a common thread emerges the innovative use of technology to adapt and thrive.
Alibaba (BABA)
Alibaba’s (NYSE:BABA) user-focused strategy has yielded positive user base growth and engagement results. The average number of daily active users (DAUs) on the Taobao app has consistently increased. It shows a growth rate of over 6% year-over-year (YoY) and more than 7% in the most recent month. Moreover, it demonstrates the effectiveness of Alibaba’s attracting and retaining users.
One of Alibaba’s key advantages is its consolidated, integrated supply chain model, which leverages its Chinese supply base. Alibaba’s focus on localization, understanding the cultural nuances and retail landscapes of different markets, ensures it can create real value for customers in destination countries.
Also, there is a synergy between different business groups within Alibaba, as exemplified by the relationship between Tongyi and Alibaba International Digital Commerce (AIDC). It demonstrates the company’s ability to create value through its integrated ecosystem. Improved logistics, service experiences, and strong performance in the registered network have led to the growth of AIDC.
Further, the value for money battle, launched by Alibaba, led to increased merchant growth on Taobao and Tmall platforms. New merchants have quickly contributed to this initiative, increasing merchant confidence and spending. Merchant spending on advertising has grown by over 20%, showcasing the platform’s attractiveness to businesses. The focus on value for money also aligns with merchant and user needs, driving business scale and stability.
Fundamentally, Alibaba’s focus on integrating AI tools for merchants has enhanced efficiency in various business aspects. It includes store management and marketing campaigns, ultimately leading to an improved shopping experience.
Finally, the success of the 618 Taobao and Tmall Shopping Festival further demonstrates the company’s ability to drive user scale and purchasing power. Growth in the number of paid orders and average order size contributed equally to gross merchandise volume (GMV) growth, highlighting the balance achieved in these crucial metrics.
JD.com (JD)
JD.com’s (NASDAQ:JD) dedication to a superior customer experience is evident in its efforts to improve selection, speed, quality and value. The company’s third-party (3P) marketplace business has grown significantly, doubling the number of 3P merchants YoY, resulting in accelerated 3P marketplace GMV growth.
Notably, JD’s focus on value also resonates with customers, as demonstrated by the success of its RMB 10 billion discount program, leveraging its robust supply chain to provide both low prices and extra value.
The growth of JD’s open platform ecosystem is a pivotal driver. Merchant and product expansion and a surge in 3P GMV signify the platform’s vibrancy. Supporting policies for new merchants, such as reduced service fees, have contributed to the outpacing of 3P revenue growth over 1P (first-party) sales.
Fundamentally, the company’s robust supply chain capabilities enable it to offer competitive prices while maintaining high-quality services. Core categories like electronics and home appliances have gained market share. That is due to JD’s efficient supply chain, which ensures steady supply at low prices.
The company’s success in key categories is evident. In-home appliances, JD outperformed the industry, gaining market share due to its user mindshare and strong shopping experience facilitated by a competent supply chain.
The 3C (computers, communications and consumer electronics) categories also excelled. Based on competitive pricing, user engagement, and convenience services, 3C is leading to double-digit growth in mobile phone sales that has surpassed industry norms.
Long-term, the company’s vision, the 35711 Vision, outlines ambitious goals for the next 20 years. It includes substantial revenue and profit growth, market cap milestones and positive social impact. Finally, JD’s commitment to its vision underscores its confidence in China’s economic development and its ability to innovate and drive growth.
Baidu (BIDU)
Baidu’s (NASDAQ:BIDU) utilization of ERNIE and ERNIE Bot for business transformation presents numerous avenues for growth. Baidu aims to revolutionize industries by harnessing foundational models by enhancing productivity, democratizing AI innovation and improving user experiences. With generative AI reaching fruition after years of dedicated work, Baidu is entering a pivotal period that promises to drive its prospects.
Regarding products and services, Baidu’s integration of ERNIE and ERNIE Bot enhances its offerings. This technology empowers Baidu Search to provide satisfactory responses and answer complex queries, improving user engagement and satisfaction. Innovations like Baidu Wenku’s AI assistant feature and generative AI-driven marketing products highlight the potential for increased user retention, attracting paying customers and expanding Baidu’s market reach.
Additionally, Baidu’s online marketing sector reaps the benefits of generative AI, automating ad creation, optimizing conversion rates and enhancing ad targeting. Integrating generative AI into Baidu’s auction system leads to improved matching of ads to search intent. It is driving revenue growth and increasing the effectiveness of advertising campaigns.
Furthermore, the AI-optimized Baidu AI Cloud highlights the company’s focus on improving AI infrastructure. This solidifies Baidu’s position as a leading platform for training and serving foundation models. As a result, this attracts more enterprises to utilize Baidu’s cloud infrastructure, bolstering its revenue streams.
In collaboration with industry partners, Baidu expands its ecosystem by building industry-specific models and solutions. It enhances ERNIE’s application across banking, software development and healthcare sectors. Recognizing Baidu’s foundation models by the Chinese government reinforces its leading position and potential for growth.
Finally, through consistent innovation, including ERNIE 3.5 and initiatives like the Baidu ERNIE Cup Innovation Challenge, Baidu seeks to foster a vibrant ecosystem. Therefore, this may lead to engaging developers and startups to contribute to advancing foundation models.
As of this writing, Yiannis Zourmpanos held a long position in BABA and JD. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
