Alibaba Shares Jump on Plans to Boost Service Fee for Merchants
(Bloomberg) -- Alibaba Group Holding Ltd. shares rose the most in two months as investors cheered the e-commerce company’s plan to earn more service fees from merchants.
Most Read from Bloomberg
Kamala Harris Wipes Out Trump’s Swing-State Lead in Election Dead Heat
Intel to Cut Thousands of Jobs to Reduce Costs, Fund Rebound
Luxury Heir Alleges His $13 Billion Hermès Fortune Has Vanished
Hamas Says Israel Killed Political Leader With Airstrike in Iran
The stock gained as much as 5.8% in Hong Kong on news that Alibaba will start charging a basic software service fee of 0.6% on confirmed transactions for vendors on both the Tmall and Taobao platforms. The policy change was relayed to merchants on Friday, according to a person familiar with the matter. But Alibaba may waive the new policy for small merchants, the person said.
The new measure will boost Alibaba’s core merchant revenue and add to multiple catalysts for the stock, according to Jefferies Financial Group Inc. The company earns the majority of its Taobao and Tmall revenue through customer management fees, which merchants pay to advertise products or better tailor their offerings.
“We view the 0.6% software service fees starting in September as positive to core merchant revenue considering the new arrangement applies to both Taobao and Tmall,” Jefferies analysts led by Thomas Chong wrote in a research note on Sunday.
The shift to a percentage-based fee structure, first reported by local media LatePost, makes Alibaba the last major e-commerce platform to do so. PDD Holdings Inc. started charging merchants a technical service fee of about 0.6%-1% of gross merchandise value since 2020, while JD.com Inc. and ByteDance both levied a 0.6% fee rate last year.
Alibaba currently charges a fixed annual amount to Tmall merchants, which will be waived once the new policy takes effect from September 1. Alibaba will also offer vendors other support measures including an adjustment in criteria for traffic allocation and free refund policies.
The stock is the biggest gainer on the benchmark Hang Seng Index, which is up as much as 2%.
--With assistance from Debby Wu and Zheping Huang.
Most Read from Bloomberg Businessweek
Inside GunTube, the YouTube Subculture Linked to the Trump Shooter
Scammers Target Middle East Influencers With Meta’s Own Tools
©2024 Bloomberg L.P.