Among the criticisms of flash sales, there is a wrong implicit premise: as if Alibaba could protect its profits and stock price by not fighting this battle.

$Alibaba (BABA.US)$

This week has been a real beating. Tencent dropped 7% after its earnings, and Alibaba also dropped 7% after its earnings.

To say it's far below expectations is actually an overstatement. Tencent has already started large-scale talent recruitment, organizational restructuring, and giving out red packets via Yuanbao since the beginning of this year. You didn't need to wait for the earnings call to know they would increase AI investment. Alibaba's performance was also clearly explained in the Preview. E-commerce, instant retail, cloud services—none of these businesses suddenly blew up. Even in the post-earnings communication, the news about cloud business and instant retail was more positive than expected.

But all of this has been drowned out by the sharp stock price decline. It seems the market just wants to fall, no matter what you say.

People are talking about profit margins, CMR, losses, and Capex, but what they really want to ask is: Is Alibaba spending so much money on flash sales actually creating incremental growth, or is it pure waste? If the answer is the former, the market will give it imagination. If the answer is the latter, the market will only give it a valuation discount.

But the fact is, if Alibaba didn't do flash sales, you wouldn't be satisfied either.

1. Why do you think the 1% CMR growth means flash sales and e-commerce have no synergy?

Is it possible that without flash sales, CMR would have declined significantly?

The biggest change in China's e-commerce market in recent years is not only the slowdown in the overall market size but also that the traffic structure, user time, and consumer decision paths have all changed. Douyin's massive growth didn't just take away some GMV; more importantly, it rewrote users' shopping habits. A lot of impulse purchases, fast-fashion apparel, and white-label hits that originally belonged to Taotian no longer start with search but with content.

Why has Alibaba talked less and less about GMV in recent years? Why has it been reluctant to disclose GMV for Double 11 and earnings reports since 2022? Is it possible that the change in market share is greater than outsiders imagine? Could the real pressure be uglier than the surface-level CMR growth rate suggests?

If so, and without flash sales, would that 1% CMR growth have turned into -3%, -5%, or even worse?

With flash sales, through high-frequency scenarios, users are pulled back into the Taobao ecosystem, leading to one more app open, one more stay, and one more payment. Even if it can't directly boost CMR in the short term, it could at least slow down the natural decline rate of the core e-commerce business.

2. What would Alibaba's situation be this year if it didn't do flash sales?

I think many people haven't seriously considered this question.

In another parallel universe without the food delivery war, it would likely be like this:

– Meituan's instant retail would continue to advance at its original pace, first strengthening its mindshare in high-frequency, essential categories like supermarkets, fresh produce, and convenience stores, then slowly penetrating more standardized categories. Today it's buying groceries and water, tomorrow it's daily necessities, maternal and child products, personal care, and later more light retail categories that can be delivered instantly.

– Taotian, without subsidies, high-frequency traffic backflow, or users re-establishing the perception that "Taobao can also order from supermarkets, order food delivery, and get it in half an hour," would see its market share eroded by Meituan after being contested by Pinduoduo and Douyin.

What would Alibaba's Taotian become? It would look more and more like Tencent Music today.

The platform would gradually lose its dominance over user time, leaving only a passive, stock demand entry point. You see yourself as still an industry giant, and revenue hasn't collapsed immediately, but your boundaries are being eroded inch by inch. By the time you truly feel the pain, it's too late.

That's why I've always felt that among the market's criticisms of Alibaba's flash sales, there is a wrong implicit premise: as if Alibaba could protect its profits and stock price by not fighting.

Not necessarily.

Look at Tencent Music. Profits are still there, but the stock price has already tumbled.

3. If you were part of Alibaba's e-commerce management, where would you look for a breakthrough?

Alibaba has very few choices for finding a breakthrough.

Apparel and fast-moving consumer goods? That's one of Douyin's strongest territories; content e-commerce is naturally suited for non-standard, impulse purchases. Home appliances and 3C? JD.com's self-operated model, logistics, service, and brand mindshare have built a deep moat.

So what's left? Only food, supermarkets, food delivery, and instant retail.

This sector has several key characteristics that happen to be exactly what Alibaba needs most right now: high-frequency and essential, an entry point to rebuild user relationships, and a sufficiently large incremental market. For a retail giant as large as Alibaba, there aren't many new incremental opportunities at the trillion-yuan level left.

You can never hold on by just defending; offense is the only choice.

So Alibaba will definitely fight the flash sales battle to the end.

Corporate governance logic and investment market logic are not the same thing. Investors want profits now, but for Alibaba, the priority is user stickiness and frequency, then wallet share, and only then commercialization revenue and profits. From this logic, expecting flash sales to immediately accelerate growth or even become profitable in the short term is unscientific from the start.

You may not like this earnings report, and you may not like the flash sales business, but the problem is—if Alibaba didn't do flash sales, you wouldn't be satisfied either.