In a recent blog post, Alibaba‘s Executive Vice Chairman Joe Tsai, stated that the company had crossed RMB 3 trillion (or $476 billion) in GMV (gross merchandise value) for the fiscal year 2016 (ending March 31, 2016), tripling its GMV of RMB 1 trillion in 2012. This represents a 23% growth rate over the prior year, a rate that was slower than the 46% growth rate in GMV generated in fiscal year 2015. The company expects to double its GMV in the next four years and reach RMB 6 trillion by 2020, (a CAGR of 19%) as the Chinese economy shifts towards consumption and services. According to our estimates, Alibaba’s marketing revenue is less than 2% of its GMV and commissions are less than 3% of Tmall’s GMV. Thus the company’s revenues are a very small percentage of its gross merchandise value. Given the slowing growth in transaction volume, we believe the company should now focus on increasing revenues as a percentage of GMV. It can leverage its e-commerce ecosystem which delivers marketing, brand engagement and customer acquisition value to merchants and brands.
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