What is the underlying logic behind Alibaba's launch of Taobao Flash Purchase?
By Wang Yi
On March 19, Alibaba released its financial report for the fourth quarter of 2025 (the third quarter of the 2026 fiscal year).
Similar to the previous quarter, the market still focuses on the progress of the flash shopping business and its boosting effect on the e-commerce business. The management revealed that flash shopping drove the annual active buyers of Taobao's physical e-commerce to increase by 100 million. However, combined with other dimensions of the financial report, there is no obvious effect on transaction conversion yet.
According to the data calculated by CICC, the EBITA (earnings before interest, taxes and amortization) of Taobao Flash Shopping in the third and fourth quarters of 2025 was -36.7 billion yuan and -21.1 billion yuan respectively. Considering that the revenue of Taobao Flash Shopping in the fourth quarter of 2025 was about 20.8 billion yuan, which did not drop significantly compared with the third quarter (22.9 billion yuan), the loss reduction of flash shopping is quite obvious.
Combining the calculation data of JPMorgan Chase and Analysys, the current instant retail market has basically shown a duopoly pattern. For the future, the management pointed out at the performance meeting that it will further expand the market scale of flash shopping, simultaneously promote the improvement of UE, and achieve the goal of instant retail transaction scale exceeding 1 trillion yuan in FY2028 and overall profitability in FY2029.
This means that Taobao Flash Shopping will still be in the investment state in the next two fiscal years. Recently, affected by factors such as fluctuations in the international environment and rising inflation expectations, the capital market's risk premium has risen, and its tolerance for short-term financial performance of enterprises has dropped significantly. Therefore, after the release of the financial report, Alibaba's stock prices in the US and Hong Kong stock markets both corrected to some extent.
The performance of the financial report has also sparked fierce debates in the market: Facing the current scale of losses, should Alibaba adjust its strategy and "stop losses in time" to release profits?
This further points to a core issue: What is the underlying logic for Alibaba to persist in promoting Taobao Flash Shopping? In-depth analysis shows that the strategic considerations behind it cannot be fully measured only by short-term financial data.
Pursue Growth from Instant Retail
At present, China's e-commerce industry has entered the era of stock competition. As the traffic dividend peaks, the overall growth rate of the industry continues to decline, and the corresponding business development logic has therefore undergone a fundamental transformation, that is, platforms and merchants have shifted from "competing for increment" to "competing for stock, share and repurchase". Against this background, the rapid rise of live streaming e-commerce continues to divert the traffic of traditional e-commerce, further deteriorating the industry competition pattern, which also leads to continuous pressure on Alibaba's core e-commerce business.
From the perspective of various categories, Alibaba's apparel category has long occupied a leading position. However, various live streaming e-commerce platforms, relying on the strategies of content-driven marketing, scenario-based display and precise algorithm recommendation, are more attractive to consumers and brands, and have squeezed Alibaba's basic market to a certain extent. In the home appliance category, self-operated e-commerce platforms, combined with their logistics systems, have obvious competitive advantages in consumer experience, performance and after-sales services.
And instant retail is one of the few tracks that still clearly have high growth potential at present. According to the forecast data of the Academy of the Ministry of Commerce, the market size of instant retail (excluding food delivery) will reach 1.24 trillion yuan and 2 trillion yuan in 2026 and 2030 respectively. Compared with China's online retail sales of physical goods of about 13 trillion yuan in 2025, instant retail will occupy an increasingly important position.
The core logic of the long-term prosperity of the instant retail market lies in: instant retail and food delivery business have the characteristics of high-frequency repurchase by users, rigid demand, and short consumption decision-making cycle, which not only fits the current consumption trend, but also has better user stickiness and conversion efficiency than traditional shelf e-commerce.
It is worth noting that the categories of supermarkets, daily necessities and food mainly covered by instant retail have a certain overlap with traditional shelf e-commerce, and with the continuous expansion of its market scale, the degree of this overlap will be further deepened.
Then, once the main competitors rely on their original layout in the local life sector to form a scale advantage in the instant retail field and monopolize user minds, which drives the migration of consumption habits, it will not only continue to divert users, but also gradually erode the hinterland of Alibaba's e-commerce business such as apparel and standard products.
It can be seen that Alibaba's efforts in instant retail and strong promotion of flash shopping business are both active attacks and defensive means. For Alibaba, it is currently a key stage for instant retail to seize the position. Developing flash shopping and striving for the incremental market not only opens a new growth curve, but also can revitalize the resources of offline supermarkets and fresh food stores through high-frequency and rigid demand scenarios, effectively hedge the pressure of diversion of its traditional advantageous categories, and is also the key to stabilizing the basic market of e-commerce.
User Mind Still Needs Continuous Strengthening
From the development logic of the instant retail industry, price, delivery efficiency and usage habits (mind) are the three core factors affecting users' choice of instant retail platforms. During the period of rapid industry expansion, price advantage and efficient delivery are effective means to cultivate user mind; after the industry enters a steady state, user mind becomes the decisive factor.
According to a research report data of Founder Securities in 2020, in a questionnaire survey of 300 people, only 23% of users will compare the prices of multiple platforms when ordering food, 54% of users do not know the differences in rider services among platforms, and 68% of users lack a clear comparative understanding of the overall price level.
However, with the development of the industry, a survey conducted by iResearch in December 2025 (with a sample of 2000 people) shows that 44.8% of users have changed from using only one platform before to comparing three platforms before placing an order; 29.5% of users have changed from only viewing/using one platform to comparing at least two platforms.
This indicates that current users are still in the dynamic stage of comparing prices across multiple platforms, and have not formed an absolute usage habit of a single platform. Since the market share and a large number of new users have been obtained, it is obviously not wise to give up the investment in instant retail for the sake of short-term loss reduction at this time, which will lead to the failure of the previously invested funds and achievements to be transformed into long-term advantages.
A safe path is to adjust subsidies gradually or dynamically, pay close attention to changes in user stickiness in a timely manner, and stop reducing subsidies appropriately until user stickiness is no longer sensitive to subsidies.
On the other hand, from the perspective of operational efficiency, high order volume is a necessary means to improve delivery efficiency and reduce the average delivery cost per order. The order volume determines the upper limit of the number of riders that can be accommodated, and the number of riders determines the average delivery time and delivery cost per order.
According to the statistical data of Founder Securities in 2019, a single rider on the food delivery platform serves more users per day on average, and the delivery fee per order is lower. Riders can obtain higher income through "high volume" with lower delivery fees. Therefore, for Taobao Flash Shopping, to optimize the UE model, in addition to the improvement of technology and operational capabilities, the scale effect brought by high order volume is also indispensable.
In addition, jumping out of the narrative of Taobao Flash Shopping itself, from the perspective of Alibaba's overall strategy, as mentioned earlier, Taobao Flash Shopping may be difficult to bring considerable direct revenue and book profits in the short term, but its core value lies in the moat effect on the basic market.
As a representative of high-frequency consumption scenarios, instant retail can effectively boost and stabilize users' opening frequency and platform stickiness.
For traditional e-commerce apps, at the moment when the traffic dividend peaks, user activity is a very key lifeline indicator. Flash Shopping can not only feed back the overall Taobao platform through the effect of "driving low-frequency consumption with high-frequency consumption", but also act as a defensive barrier to effectively delay the traffic decline trend faced by traditional e-commerce business and resist the risk of cross-border erosion of core e-commerce share from local life platforms or content e-commerce.
Therefore, no matter from which perspective, Taobao Flash Shopping should not judge whether to stop the investment only from the perspective of cash flow, but make reasonable plans based on user habits and the optimization degree of the UE model.
How to Price the Investment in Taobao Flash Shopping?
Returning to the perspective of the capital market, under the background of current fluctuations in the international macro environment, the risk aversion sentiment of capital has risen, and the requirements for the short-term financial performance of enterprises have become stricter. This also leads to a contradictory demand from the market for Alibaba: it not only requires it to advance triumphantly in the fiercely competitive instant retail market and seize share quickly, but also requires it to reduce losses significantly, and even hopes to see the immediate positive financial feedback of flash shopping on the basic e-commerce market immediately.
Obviously, Alibaba's current "heavy investment model" has a clear mismatch with the logic of the capital market's preference for "short-term returns". However, based on corporate governance and long-term considerations of going through cycles, this strategic investment is not only necessary but also forward-looking. From the perspective of long-term strategy, instant retail has evolved into the core of the next generation of retail infrastructure. It has irreplaceable dual values of both defense and offense for Alibaba to maintain the steady growth of its overall performance and build a moat to prevent its core e-commerce business from being "dimension reduction attacked".
In fact, an objective review of the "phased answer sheet" Alibaba has handed in at present shows that its strategy has achieved initial results: In less than a year, Flash Shopping has not only captured a considerable market share and reshaped the original pattern of the food delivery and instant delivery industry, but more importantly, it has brought hundreds of millions of new active users to the Taobao App, and the actual unit economic model (UE) of the business has shown a significant narrowing and improving trend.
Furthermore, even if we temporarily separate these strategic premiums and ecological synergies that are difficult to be accurately quantified, from the perspective of pure financial accounts, the current capital market's pricing of Alibaba is also overly pessimistic:
According to the traditional discounted cash flow model, enterprise value is equal to the discounted value of future cash flow. Therefore, to quantify the phased drag of flash shopping investment on Alibaba's market value is essentially to calculate the discounted value of cash outflow of flash shopping during the investment cycle.
First of all, it needs to be clear that although flash shopping has caused Alibaba's free cash flow to decline significantly year-on-year, this is not a permanent loss. According to the management's guidance to achieve profitability in FY2029, the cash outflow cycle of flash shopping is mainly from FY2026 to FY2028 (April 2025 - April 2028).
Therefore, under the absolutely conservative assumption — that is, without considering the boost of positive cash flow generated by flash shopping in the future to the company's market value, and only calculating the negative drag during its investment period, the maximum quantifiable market value loss is the total cash outflow of these three fiscal years (for the sake of simplifying calculation, the time value of money is not considered for the time being).
The cumulative EBITA outflow of Taobao Flash Shopping in the first three quarters of FY2026 is about 80 billion yuan. Assuming that the outflow of 20 billion yuan is maintained every quarter in the future, Taobao Flash Shopping will cause a cumulative cash outflow of about 260 billion yuan in three fiscal years.
It must be emphasized that this is only a "limit value" under the pessimistic assumption. To achieve the profitability target in FY2029, the subsidy intensity of flash shopping in FY2027 and FY2028 will inevitably show a marginal decreasing trend, so the actual cumulative cash outflow will be significantly lower than the calculated value of 260 billion yuan mentioned above.
Judging from the changes in Alibaba's market value on the day of the release of its financial report and afterwards, the capital market is actually in a state of overly pessimistic pricing. This overshoot is largely attributed to the sharp drop in capital risk preference under international geopolitical and macro fluctuations, rather than the overall deterioration of the company's fundamentals. For Alibaba in the future, the change of its stock price may depend more on the macro environment than the fundamentals. If the fluctuation of the overseas environment weakens and the liquidity expectation rises again, the company's stock price still has a chance to rebound.
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