Chinese Giant Alibaba Braces for Coronavirus’ Supply Chain Impact

Date: Thursday, February 20, 2020
Source: Sourcing Journal

The China-born virus that has crippled supply chains in recent weeks has taken an especially notable toll on one of the world’s largest online retail companies—and it’s pulling out all the stops to mitigate the damage.

In an earnings call Thursday, Alibaba executives didn’t mince words about the dire state of the Chinese company’s supply chain, and its potentially catastrophic impact on March earnings results.

Calling the spread of the deadly coronavirus a “Black Swan event,” Alibaba CEO Daniel Zhang said the outbreak is having a significant impact on China’s economy, and may potentially affect the global economy, too.

He went on to say the health crisis will “present near-term challenges to the development of Alibaba’s business across the board,” but, in an attempt to reassure, said he believes the company will also see “opportunities created by the forces of change.”

Aside from providing humanitarian aid to those affected by the spread of the disease, Alibaba will also work to help the network of small-to-medium-sized businesses (SMBs) that call its array of platforms home.

The “comprehensive relief measures” being taken by the company at this time include a reduction in business operation costs, financial support in the form of waiving or lowering interest rates, subsidies for delivery personnel, provisions for flexibility in job operations to guarantee income, additional tech tools to accelerate digitization, and remote working management for enterprises on the sites.

“The epidemic has negatively impacted the overall China economy, especially the retail and service sectors,” Alibaba’s chief financial officer, Maggie Wu, said on the call. “While demand for goods and services is there, the means of production has been hampered by delayed reopening of offices, factories and stores…”

“We, like other businesses are not immune to this imbalance of supply and demand,” she added.

Still, she hedged, the company is only halfway through it’s March quarter and is “still uncertain” about developments. Wu said she was unable to give an accurate estimation of the virus’ total financial impact, but said that “overall revenue growth rate will be negatively impacted for the March quarter.”

“Some of our businesses that rely on physical means of production on the supply side will even show negative revenue growth for the quarter, such as China retail marketplace and local consumer services,” she added.

Those two sectors of the business accounted for more than half of the company’s December revenue. Those figures, tallied before the impact of the coronavirus was felt, showed overall revenue growth of 38 percent year over year. The company’s cloud computing arm also grew by 62 percent from the year prior, Wu said.

 

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