Alibaba reportedly planning to hike service fees for merchants, shares climb

Shares in Alibaba Group (NYSE:) rose higher Monday on reports that the Chinese e-commerce and technology giant announced plans to hike service fees from merchants.

The company’s stock in Hong Kong jumped 5% while its US-listed shares added 3% in premarket trading.

According to Bloomberg News, Alibaba will begin charging a basic software service fee of 0.6% on confirmed transactions for vendors on both Tmall and Taobao platforms. The report said this policy change was communicated to merchants on Friday, though the company may waive the fee for small merchants.

Analysts at Jefferies believe this new measure will boost Alibaba’s core merchant revenue and serve as an additional catalyst for the stock.

The company primarily earns its Taobao and Tmall revenue through customer management fees paid by merchants to advertise products or improve 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,” analysts at Jefferies said in a note on Sunday.

This shift to a percentage-based fee structure, initially reported by local media LatePost, positions Alibaba as the last major e-commerce platform to adopt such a model.

Alibaba currently charges a fixed annual fee to Tmall merchants, which will be waived once the new policy is implemented on September 1. Moreover, Alibaba will provide vendors with other support measures, including adjustments in traffic allocation criteria and free refund policies.

Alibaba stock was the strongest performer on the benchmark Hang Seng Index, which was up 1.3% at the time of writing. Still, the stock gained just around 1.2% since the start of the year.