Alibaba Breaks 3 Trillion RMB In Sales, But It’s Not All Smooth Sailing

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Alibaba said at an event on Monday that they have reached 3 trillion yuan in transaction value, but the company is gearing up for a bumpy ride, as growth slowed from previous years.

The company is hoping to reach 6 trillion yuan in gross merchandise value (GMV) per year by 2020, said CEO Daniel Zhang. However doubling the company’s GMV could prove tough in the economically challenging environment of modern China.

Alibaba’s yearly growth in GMV was 23%, down from 46% recorded in 2015. The figure, which represents the complete value of all goods traded on Alibaba platforms, is an indicator of consumer confidence, as well as Alibaba’s overall economic health.

While its expected that a platform the size of Alibaba will see lower growth as it enters maturity, there’s little doubt that market saturation and economic turmoil contributed to the company’s milder retail expansion.

2015 also saw smartphone sales in China reach a saturation point, leading to a sharp downturn in growth for mobile vendors. Sales on Alibaba’s platforms are very much tied to the expansion of mobile internet in China.

Alibaba executives have been open about the challenges facing the company’s growth in 2016. During Alibaba’s 2015 Singles Day sales event Chairman and Alibaba founder Jack Ma noted that 2016 would be a challenging year for the company.

“Growth is meaningless unless it is sustainable,” said Alibaba executive vice chairman Joe Tsai in a blog post on Monday. “Thus, we have turned our focus to quality growth and broadening domestic consumption.”

Alibaba’s focus on domestic consumption in 2016 involves reaching out to China’s untapped small cities and rural populations. In Mr. Tsai’s blog post he noted that the company had reached 12,000 of the the country’s 600,000 villages, with an aim to expand strongly. Alibaba also recently reached a partnership with the China Communist Youth League, deploying a million teenagers in rural areas to start e-commerce businesses.

The 3 trillion milestone is triple the GMV of 2012, meaning that if the company is aiming for 6 trillion by 2020 the company’s commerce platforms will see a much milder growth rate in the coming years.