Alibaba’s US$2.8 Billion Fine Isn’t its Only Problem

Chinese regulators recently slapped a US$2.8 billion fine on Alibaba. But the company actually has a larger problem: maintaining its lead over the competition.

The Chinese e-commerce giant reported an operating loss of $1.2 billion for the quarter ending in March. The loss was mostly because Alibaba booked the $2.8 billion fine for anticompetitive behaviour in that quarter. Excluding the fine, Alibaba’s operating profit would have risen 48% from a year earlier. Regulators say the company forced merchants to sell goods exclusively on its platform instead of those of its rivals, in a practice called er xuan yi, meaning “choose one out of two.”

It was a difficult year for Alibaba regulator-wise—its finance affiliate Ant Group saw its initial public offering derailed—but it has been a great year for business. Alibaba’s e-commerce and cloud businesses benefited from the pandemic. Revenue last quarter grew 64% from a year earlier. Partly that was due to the addition of Sun Art, a supermarket chain Alibaba acquired last year, but even excluding that, its sales grew 40%.

But the company needs to invest more to fend off the competition. With the latest regulatory scrutiny, it might also need to spend more to keep merchants happy. The company’s adjusted earnings before interest, taxes, depreciation and amortization, which excludes the one-off fine, grew only 18% year-over-year—implying shrinking margins. Alibaba has been putting money into food delivery and grocery e-commerce. The latter in particular faces strong competition from others as all Chinese tech giants see this as a chance to get their hands on relatively untapped rural areas. The business is unlikely to be profitable in the near future.

Apart from usual rivals JD.com and Pinduoduo, Alibaba could face competition from Tencent. Tencent’s WeChat has increasingly become a platform for shopping through its mini-programs, basically apps within the chat app. Merchants and even e-commerce platforms like JD.com can do their businesses through these mini-programs. Tencent said in January gross merchandise sales for physical goods on mini-programs last year grew 154% from a year earlier, without indicating the actual amount.

Live-streaming e-commerce is another area that is growing fast. Kuaishou and Douyin, the Chinese version of TikTok, have seen strong growth in this area, even though they are still much smaller than Alibaba.

Alibaba has managed to come out of an eventful year in a good shape. There are, however, still plenty of challenges ahead: Both regulators and the competition are hot on its tail.

A new investment fund targeting celebrity-founded consumer brands has secured US$40 million in commitments and is rapidly approaching its US$50 million fundraising target, signalling growing investor appetite for alternative opportunities beyond traditional asset classes.

The Global Talent Fund, which has a maximum raise of US$100 million, focuses on building and investing in consumer businesses alongside celebrities, athletes, and influential personalities who play an active role as co-founders rather than simply endorsing products.

The strategy is based on the belief that changes in consumer behaviour, particularly the rise of social media and digital engagement, have fundamentally altered how brands are built and scaled.

GTF founding partner Jeremy Hunt, who is helping lead the fund’s strategy, said consumers increasingly feel connected to personalities they follow online and are more willing to support products developed by those individuals.

“Consumers are searching for content to engage with, and when a celebrity they like or follow takes them on the journey of creating a product or brand, they genuinely feel part of that process,” he said.

The fund is targeting high-growth consumer sectors including wellness, hydration, beauty and recovery, areas Hunt believes continue to benefit from strong global demand and ongoing innovation.

Rather than backing celebrity endorsement deals, the fund is seeking businesses where talent is deeply involved in product development, brand creation and long-term growth.

According to Hunt, authenticity remains one of the biggest differentiators between successful celebrity-backed brands and those that fail.

“The consumer can see clearly if someone is simply being paid to promote a product,” he said. “The winners are typically the brands where the celebrity has genuinely helped build the business from the ground up.”

The model has attracted support from several prominent Australian investors and business families, reflecting broader interest in alternative investments with global growth potential.

Hunt said consumer brands offered a level of tangibility that many investors found appealing.

“Consumer brands are what we touch, feel, smell and taste every day,” he said. “Our investors understand the growth potential in the model, but they also want to be part of the journey.”

The fund’s rapid progress towards its fundraising target comes amid growing recognition that celebrity influence, when combined with strong commercial execution and scalable business models, can create significant enterprise value.

With several high-profile celebrity-founded businesses generating billion-dollar exits in recent years, supporters of the strategy believe the opportunity remains in its early stages.

Alibaba’s US$2.8 Billion Fine Isn’t its Only Problem

Chinese e-commerce company has competition hot on its heels.

With US$40 million already committed, the Global Talent Fund is attracting investor attention with a strategy focused on building globally scalable consumer brands alongside high-profile talent.