Alibaba Wants Chinese Shoppers to Buy American (PDF)

Why Alibaba wants Chinese shoppers to buy American ================================================== Leena Rao / DECEMBER 29, 2015 / Fortune ======================================= - The e-commerce giant could use a boost from U.S. brands---and vice versa. Will the relationship pay off for both...

Why Alibaba wants Chinese shoppers to buy American ================================================== Leena Rao / DECEMBER 29, 2015 / Fortune ======================================= - The e-commerce giant could use a boost from U.S. brands---and vice versa. Will the relationship pay off for both sides? ======================================================================================================================= "Sniff, swirl, then swish." An Italian-born sommelier guides a crowd of tasters through generous pours of velvety Robert Mondavi reds. Some of the well-dressed guests listen intently. Others clutch their glasses as they wander among lush gardens or settle at upright wine-barrel tables to nibble on cheese and charcuterie. It's a scene straight from a Napa Valley tourism brochure---but it's taking place 6,200 miles away from that cradle of Cabernets. Beyond the gardens lies the industrial sprawl of Hangzhou, China; a thick cloud of urban smog hangs just a few feet above the party. And the California-style tasting area is a pop-up, built on the campus of e-commerce giant Alibaba as part of a campaign by Mondavi to tap Alibaba's enormous customer base. The guests are almost all Chinese and young, and some sniff and sip the wine warily, the way Americans might approach slivovitz or soju. Even basic instructions from the sommelier about how to hold a wineglass draw appreciative ahs. It's a scene of cross-cultural courtship---and a glimpse of a broader effort with high stakes for Alibaba and American companies alike. Alibaba is the hottest e-commerce company of the past five years, a fusion of eBay and Amazon whose 386 million active users accounted for \$394 billion in sales in fiscal 2015---six times the sales volume of its biggest Chinese competitor. The company created a huge marketplace and a sophisticated distribution network just in time to serve a generation of Chinese consumers attaining middle-class prosperity. "We are seeing Chinese consumers adopt new retail formats and online shopping faster than any of their global counterparts," says Jasmine Xu, president of e-commerce for Procter & Gamble Greater China. Those trends fueled a rise so impressive that even the mighty Amazon became an Alibaba partner, and the company's IPO was one of the business highlights of 2014. Today, however, Alibaba looks mortal. Its growth has slowed, hampered by China's ebbing economy and by competition from a growing crop of rivals like JD.com. Its stock has fallen 26% from its post-IPO highs, from \$115 to the mid \$80s. To reignite its growth, chairman and founder Jack Ma and CEO Daniel Zhang plan to lean on U.S. companies---brands that hold enormous appeal in China. "This is an incredibly important strategy for the future of Alibaba," Ma says. To woo these iconic companies---among them P&G, Estée Lauder, and Macy's ---Alibaba is pitching itself as a shortcut to the world's most populous market. Alibaba is helping foreign companies with marketing, data analytics, and shipping. And more recently it has sweetened the pot with a newer service, Tmall Global, that lets U.S. brands sidestep many of the taxes, regulatory hurdles, and logistics hassles that trip up foreign companies in China. All this comes from the company that turned the obscure Singles Day holiday into a lucrative shopping phenomenon. Alibaba's \$14.3 billion in Singles Day sales in 2015 were double the U.S. e-commerce total from Thanksgiving, Black Friday, and Cyber Monday combined. If all goes as Ma and Zhang hope, Alibaba and American companies could reap enormous rewards. Alibaba earns money by charging fees of 2% to 5% on transactions on its sites, and in fiscal 2015 it took in \$12 billion in revenue. Bob Peck, analyst at investment firm SunTrust Robinson Humphrey, estimates that U.S. and European goods could generate \$30 billion to \$40 billion in annual sales on Alibaba by 2017. That could add as much as \$2 billion a year to Alibaba's top line. And while many of the goods sold by international brands are, ironically, made in China, an Alibaba bump of that size could still generate a double-digit percentage increase in U.S. exports to China, which totaled about \$120 billion in 2014. That's the best-case scenario. As Zhang admits, "What sells in the U.S. doesn't necessarily sell in China." For Alibaba there's the risk that U.S. brands will use it to "showroom" goods---and then abandon it for other sales channels, says Ben Cavender, an analyst with China Market Research Group. Still, it's a relationship with tremendous potential, and *Fortune* recently took a closer look at its rapid evolution. Alibaba's flagship website, Taobao, which launched in 2003, is essentially China's eBay. It's an eclectic virtual bazaar dominated by small businesses and individuals selling to one another, where shoppers can find oddball collectibles from mom-and-pop retailers, jeweled iPhone cases, and live scorpions. In its early years Taobao also became a market for counterfeits of foreign brands---a problem that persists today, though Alibaba has taken steps to curb it. Alibaba's other site, Tmall, went live in 2008 with a business model sharply distinct from Taobao's. Tmall is Zhang's brainchild. He positioned it as a marketplace for higher-quality clothing, food, and electronics, with a focus on luxury brands. This is where visitors browse and buy everything from Olay face creams to Burberry coats. It's also the site on which Alibaba has staked its growth. Taobao is still the bigger platform, generating \$69 billion in gross sales for the quarter ended Sept. 30, compared with \$43 billion for Tmall. But Tmall's gross sales grew 56% year over year that quarter, four times as fast as Taobao's. Tmall owes its growth to China's rapidly expanding, brand-conscious middle class. Currently there are 109 million Chinese people with a net worth between \$50,000 and \$500,000, according to Credit Suisse, which estimates that those ranks could surpass 500 million by 2022. It's a demographic that's very comfortable with e-commerce: 40% of Chinese consumers buy groceries online, for example, compared with only 10% of Americans. What many aspirational Chinese want most is goods from abroad. Foreign brands often carry a better reputation than their Chinese equivalents; recent crises involving toxic chemicals in Chinese-made food and cosmetics have fueled that sentiment. Min Su, a fortysomething professional driver in Hangzhou, underscores the point. "I'm addicted to buying beauty products on Tmall," she says. But she trusts only brands like Kiehl's and Lancôme, saying they're safe to put on her skin. "I don't buy in stores," she says; she doesn't trust them either. Tmall offers U.S. companies a portal to consumers like Min. But selling on the site is only half the battle. "It's incredibly difficult to set up operations \[in China\], even if you are a large brand," says Cavender, the analyst. Like all foreign companies, Tmall partners must establish a Chinese-licensed business unit and a Chinese bank account. Paperwork to obtain licenses and permits must be filed in person, often with multiple agencies. Even opening a bank account can take months. Consequently, big U.S. companies that had already invested in China infrastructure---Nike , P&G, Gap, and, yes, Amazon are prominent examples---have taken advantage of Tmall. But for others the bureaucracy remains daunting. Zhang attacked this problem by creating Tmall Global, which debuted in 2014. It's a "cross-border" marketplace that creates a huge, helpful regulatory loophole. Foreign companies that sell only through Tmall Global don't need to set up Chinese subsidiaries or bank accounts; in practice, they can start selling to Chinese consumers in a matter of days. Alibaba's payment spin-off, Ant Financial, handles transaction processing with the brands' home-country banks. Alibaba takes care of shipping and inventory through Cainiao, its network of logistics partners, a service for which Tmall customers pay extra. Perhaps most appealing: Companies that import through Tmall Global can pay lower taxes. Alibaba has worked with China's government to create "bonded" warehouses in four cities. Goods shipped through these points aren't subject to standard import duties. Some aren't taxed at all; others are taxed at discounted rates of 10%, and only after shoppers purchase them. This compares with the 30% to 40% wholesale tax rates standard for such brands, says Cavender. It's a deal the Chinese government was willing to offer, Alibaba officials say, because it meant consumers would spend more money at home. In his stark office in Hangzhou, Zhang describes Tmall Global as the missing link between American companies and "digital China." Zhang, 43, is a Jack Ma protégé and finance guy who joined Alibaba in 2007 after a career that included a stint at PricewaterhouseCoopers. He speaks so softly you have to lean in to hear him, and his simple navy suit hangs baggily on his slender frame. His message, though, is confident. "You have nothing to lose," he says, addressing an imagined American executive. "Tmall Global gives these companies the ability to learn the Chinese market and understand the Chinese consumer without a massive investment." So far that pitch has proved alluring. Costco has used Tmall Global to make an impressive China debut. Department store stalwart Macy's tried and failed earlier this decade to establish its own e-commerce presence in China; now it has a "storefront" on Tmall Global. And some companies that already sell widely in China, including P&G, are using Tmall Global because it lets them bring new products to market faster. The big question is whether the brands now dipping a toe in these waters will commit further and dive in. On Alibaba's headquarters campus, young employees cluster, laughing and messaging on mobile phones. Many ride Alibaba-branded tandem bikes from one building to another. Silicon Valley--style perks, such as lactation rooms and Ping-Pong tables, dot every floor. Still, a visitor sees plenty of reminders that she's in Hangzhou, not Menlo Park. Rows and rows of bamboo plants punctuate the massive office floors; there's one placed on each desk for good luck, and the tall reeds make open desks look like forest clearings. For all the campus's high-tech trappings, most of its toilets are essentially just holes in the floor, and each bathroom includes a bucket where employees dump their tea leaves. Tucked among these buildings, employees are building up Alibaba's infrastructure for foreign brands. In 2014, when Costco decided to start selling food in China, it shipped several tons of nuts via freighter to a bonded warehouse in Ningbo. It didn't have to handle any logistics beyond that, thanks to Cainiao. Alibaba's shipping network isn't always China's fastest: JD.com, for example, boasts same-day delivery in 40 cities, compared with only six cities for Alibaba. But its reach is tremendous. According to Cainiao executive Wan Lin, it ships to every district in China and can ship overnight to 200 cities. Cainiao will quintuple the warehouse space it leases, to 54 million square feet, over the next year---setting aside a space bigger than New York City's Central Park, largely to accommodate foreign goods. Alibaba also helps companies figure out which products might fare best in China. For Tmall Global, the company helped Macy's focus its selection on accessories, shoes, towels, and sheets---the kind of "touch the skin" categories where China's shoppers covet foreign brands. In the food world, Alibaba's cultural translation is particularly vital. To most Chinese, for example, lobster may as well have come from Mars. Alvin Liu, general manager of Tmall Global, says the site has helped U.S. fishermen develop instructional videos to teach consumers how to cook the crustacean. Campbell's quickly learned that its soups were prized---not as freestanding dishes, but as sauces for other meals. The company hired a Chinese chef to create recipes for Tmall; one explains how to make a traditional sweet-and-sour sauce out of a tomato-based soup. Bernie Chou, the general manager for Robert Mondavi in China, says many Chinese shoppers hesitated to buy a full-size, 750-milliliter bottle of wine that they might not like or finish. Mondavi, a division of U.S. conglomerate Constellation Brands, responded with 187-milliliter bottles, each a quarter the size of a normal bottle, so that drinkers could try Chardonnay, Cabernet Sauvignon, and Merlot without a big investment. Alibaba puts plenty of promotional muscle behind its U.S. partners. It can tap its huge well of purchasing data to target their marketing, reasoning that someone who buys, say, Alaskan black cod is more likely to splurge on other American delicacies. If a consumer has bought diapers from any manufacturer, Tmall will pitch the person offers for P&G's diapers, wipes, and other baby products. The American origin of these brands, meanwhile, is emphasized at every turn. Tmall web pages for their products often feature the phrase "Made in USA" in a massive font, in red type. Last spring the Washington Apple Commission held a promotion on Tmall Global. It generated only about \$100,000 in sales, but Rebecca Lyons, a marketing manager for the association, was impressed by its reach: 18.4 million Chinese consumers clicked on the promotion, and the apples' American cachet was a big draw. Thanks to that publicity, Washington apples have now penetrated Sam's Club and other retailers in China. Those sold on Tmall have an additional benefit: a QR code that lets purchasers use their smartphones to verify the fruit's origin. While U.S. brands are generally upbeat about the exposure they're getting from Alibaba, almost everyone involved is mum about how much they're actually selling. Alibaba declines to disclose total sales for international products, and Zhang acknowledges that goods from the U.S. still represent a small percentage of sales volume. Of the 10 American companies *Fortune* spoke with, all declined to reveal their sales totals from Tmall and Tmall Global. "It's still early days for our business in China," said a Campbell's spokesperson in a typical response. P&G, which sells everything from Pampers to Gillette razors through Tmall, was more openly bullish but not much more specific. It says its China e-commerce business, which includes but is not limited to Tmall, is now the company's largest online retail operation, surpassing those in the U.S. and Europe. P&G declined to reveal e-commerce's share of its \$7 billion in annual China revenue but said its value had grown 100-fold during the past four years. Heavily publicized promotions generate a lot of the buzz and dollars for foreign brands on Alibaba. During one six-day Tmall promotion in September, Estée Lauder registered \$1.3 million in sales; during a two-day sale in April it sold \$600,000 worth of La Mer face cream. Retail experts note that items often sell at steep discounts during such promotions. But it all might be worth it if it helps brands get a foothold on Singles Day. That, too, is a creation of Daniel Zhang, who latched on to a day celebrated ironically by romantically unattached Chinese college students and turned it into a behemoth e-shopping event. "You better believe U.S. retailers will jump on any event that drives this level of commerce," says Gil Luria, retail analyst and managing director at Wedbush Securities. New sellers at the 2015 blowout included Apple, Estée Lauder, Robert Mondavi, and Macy's. To accommodate an anticipated surge in American sales, Cainiao chartered 200 transport planes---traditional commercial plane "belly cargo" wasn't going to be enough to ship everything, Wan Lin explains. In the first eight minutes of the big day, Nov. 11, Alibaba sold \$1 billion; by day's end the total was \$14.3 billion. (JD.com and other Chinese e-commerce sites also held Singles Day sales, though at nowhere near the same scale.) How did international brands do? On that topic, Alibaba is boosterish but fuzzy. Alibaba would not break out dollar values but says that 33% of its Singles Day shoppers, 30 million in all, made at least one purchase from international brands or merchants. Costco was the top international seller, Alibaba said. The bulk retailer enticed Chinese consumers to buy underwear, kitchen supplies, and a host of food items---including 245 tons of mixed nuts, about \$4.1 million worth by *Fortune*'s back-of-the-envelope calculations. (Costco did not reply to multiple requests for comment.) Evidence of success? It's far too early to tell. Still, Bob Peck, the SunTrust analyst, thinks Singles Day 2015 delivered on its international promise. Based on Alibaba's 30-million-customer count and his analysis of Tmall spending patterns, Peck estimates that international brands sold \$2 billion worth of goods on Singles Day, with about half of that going to American brands. That would mean international sales accounted for 14% of revenue that day---in line with the share Peck thinks they'll eventually post year-round. P&G says that it saw record sales on Singles Day 2015, surpassing 2014's total in a matter of three hours. And even the soft-spoken Zhang is willing to take a cautious verbal victory lap: "This day demonstrates the power of domestic China consumption," he tells. **Is There an Alibaba Model?** Adam Minter / OCT 17, 2016 / Bloomberg Alibaba's Jack Ma has big dreams. Having transformed Chinese retail, he's now determined to reinvigorate globalization. The way to do so, according to his annual shareholder letter released last week, is for other countries to use or replicate Alibaba's "commerce infrastructure," which includes everything from sales portals to payment systems. Ma hopes to see similar systems applied on a "global scale to lift up small and medium businesses and ordinary consumers around the world." For big developing nations such as India and Indonesia, facing a future where automation and shrinking global demand are denting the prospects for manufacturing employment, the idea of creating millions of jobs through e-tailing is irresistible. And Ma has numbers on his side: A Chinese government study from 2014 determined that more than 10 million Chinese are directly employed in e-commerce, many of them selling goods on Alibaba platforms. In just the last month, the Indonesian government has made Ma an adviser to its special committee for promoting e-commerce, while a United Nations trade body appointed him to serve as special adviser on youth entrepreneurship and small business. Yet simply importing the Alibaba platform or model is unlikely to work outside China. Unless other countries recognize and can somehow recreate the unique circumstances that helped produce the mainland's world-leading e-commerce sector, they're unlikely to have anywhere near the same degree of success. While e-commerce is thriving in Chinese cities \-- it accounts for 82.6 percent of all retail sales in Beijing, for instance \-- it's really taken off because of rising prosperity in the Chinese countryside. There, bricks-and-mortar retail never fully developed because of poverty and terrible logistics. Supermarkets and retail outlets lacked much choice and were oftentimes stocked with poorly-made imitations of well-known brands ranging from Sharpie pens to Oreo cookies. When the Oreos were real, I found, they were usually expired. In recent years, though, the growth rate of Chinese rural incomes has outpaced that of urban incomes. E-commerce has sprung up to serve those new shoppers. In 2015, online purchases in rural areas were up 96 percent, to \$55 billion. As important as demand is supply. After 30 years of wild growth, China is now home to much of the global supply chain for making just about anything. Many skilled factory workers are looking for ways to move back to and make a living in the more affordable countryside. By connecting buyers and sellers, Alibaba's Taobao Marketplace has enabled these workers to set up small-scale manufacturing or farming businesses that can reach customers across China and beyond. According to the Chinese government, 90 percent of China's retail e-commerce shops are owned by individuals. Those shops, in turn, employ around 6 million people. In addition, as far back as 2009, Alibaba started noticing entire villages taking up production of goods for sale on Taobao. For example, the village of Junpu in China's Guangdong province became a well-known online hub for clothing after factory workers \-- who had worked in nearby apparel plants \-- returned home and started setting up businesses. As of 2015, there were 780 so-called "Taobao Villages" where at least 10 percent of the population was engaged in e-commerce or had opened 100 Taobao shops, and annual transaction volume topped \$1.5 million. The range of goods produced by these villages is as vast as a department store, ranging from produce to outdoor gear such as tents and backpacks. The Chinese government has actively supported this emerging e-tailing universe. For example, authorities have allocated \$300 million to warehouses and online training programs to spur Alibaba's rural initiatives in 200 counties. In March, Alibaba reached an agreement with China's Communist Youth League to train 1 million entrepreneurial teenagers in rural areas on the finer points of e-commerce. Meanwhile, the government continues to build out broadband, highways and other infrastructure essential to making the system run efficiently, including the "cold chain" logistical system needed to transport refrigerated food products from rural to urban areas. Other nations, which don't have China's extensive supply chains, are going to have to make massive investments in infrastructure and human capital if they want to achieve anything like China's success. That means promoting rural broadband and training rural workers in emerging manufacturing technologies such as 3-D printing that would allow them to make a range of products. Programs targeting farm produce and rural handicrafts may be one place to start. But the truth is that e-commerce is unlikely to create jobs on a grand scale outside of China anytime soon. Alibaba, which envisions itself as facilitating a future boom, might be doing other developing countries (and its shareholders) a favor by suggesting they don't get their hopes up. The Thinking Behind Alibaba's Expansion ======================================= Executive Vice Chairman Joseph Tsai says the company can compete with all the tech giants. ------------------------------------------------------------------------------------------ Oct. 23, 2017 / Wall Street Journal ----------------------------------- The Wall Street Journal's global technology editor, Jason Dean, discussed Alibaba's strategy with Joseph Tsai, the company's executive vice chairman. Here are edited excerpts. ###### What now, what next? MR. DEAN: *Let's talk about your ambition. You started off in e-commerce. You're now directly or indirectly in cloud computing, media and entertainment, logistics, payments and others as well. Your vision is that customers will meet, work and live at Alibaba, which is pretty much everything. Where does the ambition end, and what's the unifying vision?* MR. TSAI: Since 1999, we started the company with a mission to make it easy to do business anywhere. We want to make sure we help businesses, companies, especially small companies, to be able to reach their markets and reach consumers. Today, we run the largest retail platform in China. There are over 500 million consumers on that platform. And most of them are mobile. So whenever we think about expanding into a new space, we ask ourselves, "Is that consistent with our mission? Are we staying true to that mission?" MR. DEAN: *You've been called the Amazon of China. You've competed in China against them and won. But increasingly, you're competing head-to-head globally, particularly in the cloud business. What is the strategy there? Are you trying to take them on outside China, as well as Microsoft and Google in the cloud?* MR. TSAI: If you look at Amazon and Alibaba, the two companies grew up in very different environments. We grew up in China. Amazon grew up in the United States. We started as e-commerce companies. You can say that we're from the same genus but grew up as two different species because we have our own environment. China is a developing economy. It's an environment where the economy is shifting from investment and exports to consumption. If you look at China today, it exhibits a lot of the developing-economy characteristics, whereas Amazon is in a very well-developed economy. E-commerce is actually very, very tough. It's not about just doing an app or launching a website. It's about figuring out the entire supply chain. We have to worry about putting merchants together. We have to worry about logistics. We have to worry about payment. There is going to be some competition at the fringe. But in China today, the cloud market is probably what the U.S. was like maybe seven, eight years ago. It's about to take off. We're very excited by it. We're very happy to continue to grow our business in China. Our international expansion really focuses on our customers, who are doing business in China, as they expand abroad. We help them expand. We also have an effort in, for example, Southeast Asia, outside of China, where a lot of Southeast Asian companies are looking at cloud solutions. So that's where we are. ###### The push for AI MR. DEAN: *In that world, you have to be going up against them head-to-head, at least in some cases. And you're targeting multinationals as well, you're advertising in the U.S. What's your competitive advantage against Amazon when you go head-to-head with them?* MR. TSAI: In the cloud you really compete on technology and products. And we have areas we feel we are excellent in. We're very good in database, we're very good in middleware as well as security. We're not just competing with Amazon, we're competing with Google, we're competing with Microsoft, great, great technology companies. But we feel like we have both the wherewithal and the technology and the people to compete. MR. DEAN: *You announced last week you're ramping up R&D spending to a total of \$15 billion over the next three years. What's driving that?* MR. TSAI: As a percentage of revenue, historically, we've been spending roughly around 10%, 11% of our revenues on R&D. So with this effort, \$15 billion over three years, roughly on average about \$5 billion a year, you're looking at midteens revenue percentage spending. I don't think that's a huge stretch. This just shows our commitment to put more resources into the talent as well as the technology development as we see the future. With this effort we're going to be focused a lot on very advanced areas like quantum computing, machine learning, computer vision, voice recognition, natural-language processing. MR. DEAN: *Several of those categories that you mentioned fall under the rubric of artificial intelligence. It's hard to separate the hype from the reality. Where do you have an advantage in AI technology?* MR. TSAI: I have a cigar theory on AI; you look at Cuba, C-U-B-A. Those are the four important elements. C stands for cloud computing, which means low-cost computing to train the machines and manage massive amounts of data. U means use case. We serve hundreds of millions of consumers every day. We're seeing their behavior. We have fresh data every day. B means big data. A is algorithm. You need to have smart people, the scientists, the mathematicians, to develop the good algorithms. We are one of the top companies that have all those elements in place. ###### A question of trust MR. DEAN: *You and Google and Facebook have an enormous amount of data on people. Why should people trust the big tech companies to treat that data responsibly?* MR. TSAI: It's because it's good for business to be a responsible custodian of consumer data. If you lose that trust, why would anybody want to use your service the next day? That's the basic principle there. It's very, very important that those that preside over these large troves of data, the companies, are very mindful of that consumer trust, the difference between the trust and nontrust is a very thin wall. So, we feel like we're treading on thin ice all the time. MR. DEAN: *Alibaba founder Jack Ma told President Trump in January that Alibaba would create a million jobs in the U.S. over five years. That pledge was met with some skepticism. Can you tell us what you're doing to make that a reality?* MR. TSAI: We take our China experience. There are over 10 million small merchants that are selling on our platform. Whenever you try to help a merchant to sell more, grow their business, it creates jobs. We have studies that show that the Alibaba platform has created over 30 million jobs in China just from merchants hiring people. The logistics industry is hiring a lot of people. We believe that we can bring the same idea, create a platform here to let American companies, especially small businesses, sell to Chinese consumers. Remember, we have access to 500 million consumers in China. That is a huge job-creation opportunity. **The World Expected a Chinese Tech Takeover. Alibaba Can't Even Conquer Vietnam.** The Chinese juggernaut handles more business than any other company. Yet like many of its compatriots, it has struggled to expand into new markets. Phred Dvorak and Stu Woo / 2019.09.09 / The Wall Street Journal Last year, Alibaba's Vietnam operation put together a plan to win big in toilet paper. In the company's home base of China, toilet paper is a popular online purchase and volumes are typically huge. Staff bought hundreds of thousands of dollars' worth and offered it online at low prices, say people familiar with what happened. But Vietnam's nascent e-commerce market wasn't like China's. Shoppers didn't rush to buy as much as projected, and Alibaba's local subsidiary, Lazada, sold a fraction of the original targets, the people say. Alibaba Group Holding Ltd. has long ruled the world's biggest online shopping market in China---and many expected it to have conquered other markets by now. Instead, Alibaba, like many Chinese tech giants, has found how hard it is to translate domestic domination into international success. Alibaba handles more business on its shopping sites than any other company in the world. In its most recent fiscal year, ending March, its 654 million Chinese customers bought \$853 billion of goods---more than Amazon.com Inc. and eBay Inc. sell annually on their platforms combined. The company had \$56.2 billion in revenue in its last fiscal year, with \$36.9 billion, or 66%, of that coming from its Chinese retail business. The company made globalization a priority after going public in 2014, in the world's largest initial public offering. Despite investing more than \$5 billion in places such as Singapore and India, it has struggled to gain traction. It got \$2.9 billion, or 5% of its revenue, from its international retail business last fiscal year. This is becoming a crucial issue for Daniel Zhang, who is taking the reins from founder Jack Ma as executive chairman on Tuesday. Mr. Zhang, Alibaba's chief executive since 2015, has personally overseen many of the company's international businesses. Unlike the flamboyant Mr. Ma, who relishes public speaking and radical ideas, Alibaba employees describe Mr. Zhang as a quieter leader who steeps himself in the details of company operations. Mr. Ma told investors in 2016 that Alibaba needed another at least 1.2 billion people outside China to reach its goal of serving two billion customers. Some initiatives have shown promise, such as the performance of Alibaba's global shopping site AliExpress in Russia and Brazil, both large markets with price-conscious customers. Yet its bigger bets, including in Southeast Asia, have lagged behind competitors in growth or size, while bleeding money. Alibaba has had trouble navigating workforces and markets different from its own, at times employing a hard-charging, top-down management style that worked in China but not as well in other markets, say people familiar with the business. An Alibaba spokesman said the company is committed to becoming a global player. "Southeast Asia is a market of high potential, and unlike our rivals, who focus on short-term, slash-and-burn gains, we play the long game," he said. Alibaba's challenges abroad reflect the hurdles China's giants face in competing with Amazon, Google and other Western rivals globally. Many Chinese tech companies thrived at home with the help of staff willing to work punishing hours. Government policies have also limited foreign competition---an advantage companies can't count on overseas. Chinese tech companies including Tencent Holdings Ltd., JD.com Inc. and Baidu Inc. have led \$85 billion of deals overseas since 2014, according to data tracker Dealogic. There have been a few hits, such as Bytedance Ltd.'s TikTok app, which has caught fire in the U.S. Many others are designed as long-term plays, making it too early to gauge their success. So far none have managed to reach the scale and clout of their Western counterparts. Often, Chinese executives assume smaller markets will be a snap, only to learn otherwise, said James Chan, a Singaporean entrepreneur and investor who has worked with Chinese businesses in Southeast Asia. "It tends to be 'my way or the highway,' " said Mr. Chan of Chinese executives' management style. "The general consensus of Chinese companies in this part of the world is they'll just bulldoze their way through." Alibaba remains heavily focused on China, where it says it is targeting 500 million people in less-developed cities who are expected to spend more online over the next decade. It doesn't feel pressure to win in all its international markets now and is laying the groundwork to reach a goal of two billion customers by 2036, a person familiar with company said. Analysts say that with its deep purse, technological edge and hard-driving culture, Alibaba may yet win in many overseas markets. Last year, it acquired an e-commerce company in Pakistan and bought a stake in another in Turkey. Since 2015, Alibaba and its financial-services affiliate Ant Financial have invested hundreds of millions of dollars in Indian online payments company Paytm and its e-commerce arm. The payments business has made significant inroads but the e-commerce business is far behind sites run by Amazon and Walmart Inc. unit Flipkart. Southeast Asia seemed like a logical step for Alibaba when it bought a controlling stake in Singapore-based Lazada, at the time the region's largest e-commerce firm, for \$1 billion in 2016. It added another \$1 billion the next year and \$2 billion more in 2018. E-commerce in the region, with 650 million people, was growing quickly, doubling in size to \$23 billion last year, a study by Google and Singaporean state investment fund Temasek found. Many countries there are culturally and economically close to China. Three and a half years later, Lazada has lost share in key markets, and its No. 1 spot regionwide is being challenged by Shopee, a unit of Singapore-based Sea Group, according to data from app tracker App Annie and people familiar with the companies' sales. In Indonesia, the region's biggest market, Lazada last year ranked fourth among e-commerce companies, behind global unknowns Shopee, Tokopedia and Bukalapak. A Lazada spokesperson said e-commerce is at an early stage in Southeast Asia, adding that the company has the "strategic confidence and perseverance to do this as Alibaba Group's flagship e-commerce platform in this region." Initially, Lazada's executives---mostly Europeans brought in by the company's founder, Rocket Internet of Germany---were delighted by the Alibaba purchase, according to people close to the company. They admired the Chinese giant's Silicon Valley-like campus in Hangzhou, where employees zoom around on bikes and workers typically toil from 9 a.m. to 9 p.m., six days a week---the infamous "996" schedule of Chinese internet businesses. As Alibaba solidified control, it took steps to remake Lazada, often in its own image. It built Lazada a new technology platform in Hangzhou and shifted Lazada's business from focusing heavily on selling its own products to operating more like a giant marketplace, like Alibaba's sites in China or eBay in the U.S. It encouraged more Chinese merchants to sell on Lazada and tried to reduce costly spending on discounts or advertising to attract customers. It sent veterans from Hangzhou, some of whom didn't speak much English, to help run Lazada's operations. Some Lazada executives felt overrun, even when they agreed with the changes. "They move very fast, very violently, which causes a significant rift" with the local team, said one former Lazada executive. Alibaba executives told Lazada managers to focus on long-term strategy rather than short-term market share, people familiar with the matter say. Lazada has publicly cited strong order growth as a sign its business is improving there. In Thailand, one of Lazada's strongest markets, shoppers have grown suspicious of new Chinese merchants on the site offering inexpensive goods alongside descriptions that seemed translated by machine into the local language. The product descriptions are "not what Thai people say," said 26-year-old customer-service employee Chanapa Kamawithee, who has shopped on Lazada for years and started noticing the change a few months ago. Ms. Chanapa said she now shops more on rival Shopee. By the end of 2018, nearly all the senior executives from Lazada's pre-Alibaba days had gone---many replaced by Alibaba managers. One of them was Max Zhang, who was sent to run Lazada Vietnam last year. He had been a deputy of Alibaba CEO Daniel Zhang (no relation), who hired him after he built one of the top-selling fashion brands on Alibaba in China. Mr. Zhang, the new Vietnam chief, had never lived abroad or spent significant time in Vietnam, and was far more comfortable chatting with compatriots in Chinese than with local managers in English, said people close to the company's operations. He was a relatively raw manager with little experience leading a company, say people who knew him. At one early town hall, Mr. Zhang said how lucky Vietnam was to have him, remarking that he was more famous in China than Lazada's then-CEO. Mr. Zhang had a top-down management style that frustrated employees used to Lazada's flatter, more Western style of operating, people close to the business say. He seldom explained decisions and expected to be obeyed without question, they said. Mr. Zhang wanted to wean Lazada Vietnam off discounts and other spending it had been using to boost results, the people said. He would often criticize the local team, saying, "You guys spend money like stupid," one of them recalls. He abruptly halted most free shipping---a move that pummeled sales as customers moved to other platforms like Shopee that were still subsidizing. The move upset merchants in Vietnam, who were already perplexed by elements of Lazada's tech overhaul, and many moved to rival sites, said a person familiar with what happened. Mr. Zhang tried to bring in customers by buying items---such as toilet paper---in bulk and bargaining for a good price. But Vietnam's relatively small online-shopping market didn't have enough buyers to purchase the goods. When Mr. Zhang or his deputies from Hangzhou were questioned about their strategy, they referred back to their experiences at Tmall and Taobao, Alibaba's Chinese online marketplaces. "The answer we got for every single question started with 'In Tmall/Taobao, we did...' or 'In China, this is how it happens,' " said one letter sent by several Vietnamese managers last year to Lucy Peng, an Alibaba executive sent to lead Lazada in Southeast Asia. "Unfortunately, we are neither Tmall/Taobao or in China." Ms. Peng gave a speech to Chinese managers sent by Alibaba, urging them to respect local staff and cultures, which was translated into English and distributed in Lazada, according to people who received the message. Alibaba and Lazada declined to make Ms. Peng and Mr. Zhang available for comment. A Lazada spokesman said, "Integrating two distinct companies is a work in progress, and we are on a good track." Mr. Zhang's efforts did cut down on customer subsidies and make Lazada's Vietnam unit healthier financially, said a person familiar with the operations. But sales and traffic sagged, and it ceded its No. 1 spot to Shopee. By June 2019, Mr. Zhang had returned to China and the CEO of Lazada's Thai operations took over Vietnam as well. Two months later, Alibaba CEO Daniel Zhang made a visit to a town hall in Ho Chi Minh City. One message, posted on Lazada's Vietnam recruitment page on Facebook : "It's not about Taobao, it's not about Tmall. We need our own Lazada, in Vietnam, in Thailand, in Asean markets. We have to localize our business." https://www.wsj.com/articles/for-chinas-tech-giants-success-stops-at-the-border-11568043193 **Alibaba undercuts Amazon in Europe to woo wary brands** Sonya Dowsett, Sophie Yu / 2020.01.08 / Reuters MADRID/HANGZHOU, China (Reuters) - After years of reconnaissance, China's retail king Alibaba is finally making its move on Europe. It is undercutting Amazon sellers' fees to attract vendors but has had mixed results, six sources with direct knowledge of the matter said. A flood of small businesses have joined its European platform, AliExpress, in recent months but some larger brands are holding back, according to the sources. AliExpress has approached well-known brands including Mango, Benetton and Spanish fashion group Tendam, owner of Cortefiel, to appear on the site with limited success, according to five sources involved in the approaches who declined to be named because the discussions were confidential. Some of the brands did not feel the site, whose fashion offerings include an imitation leather miniskirt for about \$18 and an acrylic batwing sweater for \$14, was the right showcase for their products, sources said. A senior executive at one large fashion company, which turned down AliExpress's approaches in Europe, said its brand needed to be in an "aspirational environment". Another described the AliExpress platform as "a work in progress". However the head of AliExpress, Wang Mingqiang, told Reuters in an interview at Alibaba's headquarters in Hangzhou, that foreign brands needed time to understand the platform. With space to design their own stores within the platform, brands can build their own homepage, with pictures and video, to create the feel they want, he added. Both Benetton and Tendam declined to comment officially on whether they were approached. Neither brand sells on AliExpress but they do sell on Amazon. Mango said it did not sell on AliExpress with no further comment. It does not sell on Amazon (AMZN.O). An AliExpress spokeswoman did not comment on whether the company had approached these brands or others. "We are continuously exploring opportunities to work with different partners and committed to acting as a trusted partner for both consumers and sellers," the company said. Alibaba has hitherto focused on selling inexpensive Chinese products overseas through its AliExpress platform, such as \$3 USB cables and \$2 crystal earrings, curbing its appeal to a wider audience. But in the past six months it has started a drive to open up the platform to local vendors and brands as its seeks to replicate a highly profitable model of virtual malls that has seen it swallow more than half of online sales in China. "Overseas sellers have a better understanding of local users, their products have better designs as they are closer to local users," said Wang. MONTHLY FEES WAIVED The company is initially targeting Spain and Italy, plus the Europe-Asia gateway nations of Russia and Turkey, among its top markets under the previous, first-phase business model launched in 2010. Spain, a big Western country with strong local brands, is the kind of market Alibaba needs to win over if it is to meet CEO Daniel Zhang's target to more than double its customer base to 2 billion by 2036 despite a stuttering Chinese economy. Its progress there illustrates its strategy, and the obstacles it could encounter, as it plots global expansion. AliExpress has waived monthly rates for sellers in Spain to attract their business while commissions for goods sold are set at 5% to 8%, according to a senior source close to the company. By comparison, it costs 39 euros per month plus sales tax to sell on Amazon, plus a commission for every object sold of 7% to 15%, with some items like jewelry and Amazon device accessories commanding higher rates, an Amazon spokeswoman said. Amazon declined to comment on AliExpress's move to open its platform to local sellers. The U.S. company is the largest online shopping marketplace in its five main European markets: Britain, France, Germany, Italy and Spain, according to e-commerce analyst Marketplace Pulse. Thousands of small businesses have signed up to register on AliExpress in Spain since it was opened up to local sellers in 2019, an AliExpress spokeswoman said. She declined to be more specific, but that would compare favorably with established Amazon, which said more than 8,000 small Spanish businesses sold on its platform in 2018. In one of AliExpress's most high-profile signings so far, Spanish department store El Corte Ingles said in June it would boost its presence on the platform to seven fashion lines. Spanish cosmetics start-up Le Tout started to sell on AliExpress in 2019 when the platform opened to local sellers. The company sells around 12 times more in volume on Amazon than AliExpress, said Managing Director Alvaro Dominguez. "I think that AliExpress has been associated for a long time with Chinese products - it's a question of time but I think they are doing all that is possible to get traffic and visibility." [[https://www.reuters.com/article/us-alibaba-expansion-europe-focus/alibaba-undercuts-amazon-in-europe-to-woo-wary-brands-idUSKBN1Z7045]](https://www.reuters.com/article/us-alibaba-expansion-europe-focus/alibaba-undercuts-amazon-in-europe-to-woo-wary-brands-idUSKBN1Z7045) **China\'s crackdown on Alibaba goes beyond teaching Jack Ma a lesson** S&P Global / Jan 19, 2021 China's antitrust probe into Alibaba Group Holding Ltd., the country's largest and most high-profile internet company, is more about sending a message to the tech industry than targeting the group and its founder Jack Ma, industry observers said. Beijing's series of actions relating to Alibaba, which include an investigation into alleged forced exclusive deals with merchants and the blocking of its affiliate Ant Group Co. Ltd.'s IPO, is intended to show the country's thriving internet sector that no one is above state rules, and that any violation will be dealt with swiftly and severely. Influential internet companies such as Tencent Holdings Ltd., Meituan and Pinduoduo Inc. may find themselves subject to similar levels of scrutiny in 2021, they said. Their views echoed that of state-backed newspaper China Daily, which in a Dec. 24, 2020, editorial hinted that the Xi Jinping government is looking to put the brakes on the unchecked expansion of internet companies into different sectors. The editorial, however, added that the aim is not to strangle these companies. The country's top leadership emphasized several times in December 2020 the importance of antitrust enforcement. "The honeymoon period for Chinese tech companies is over," said Wong Kok Hoi, founder and Chief Investment Officer at APS Asset Management. "For many years, the e-commerce companies were allowed to do what they like with almost no regulation \[or\] very light regulation. Therefore, the light regulation has led to anti-competitive behaviors, \[such as\] choose one from two and 'wash sales' \[fake online orders\]," Wong said. **China vs. Jack Ma** So far, regulators have chiefly focused on Alibaba and its affiliates, with its founder Jack Ma\'s Oct. 24, 2020, speech criticizing regulators and banks seen as the inflection point. Within two months of the speech, Chinese regulators halted fintech company Ant Group\'s IPO, released new draft rules targeting monopolistic practices by online platforms, fined an Alibaba group affiliate, along with those of Tencent and logistics company S.F. Holding Co. Ltd., 500,000 yuan for failures to disclose past mergers, and launched an antitrust probe against the e-commerce company. Alibaba\'s U.S.-listed shares plunged a record 13.4% on the announcement of the antitrust probe, wiping \$100 billion off its market cap. Alibaba has long faced complaints of forcing merchants into exclusive deals. Rival JD.com Inc. filed a lawsuit claiming such in 2017, while microwave-oven maker Guangdong Galanz Group Co. Ltd. sued Alibaba in 2019, stating that traffic to its Tmall online store fell and sales dropped by a third after it began to sell its wares on rival Pinduoduo. Alibaba did not respond to S&P Global Market Intelligence\'s requests for comment. The State Administration for Market Regulation, or SAMR, said Alibaba \"actively cooperated\" during its investigation, according to South China Morning Post. If found guilty, Alibaba could face a fine of up to 10% of its revenue in the preceding year, which could amount to nearly \$7.2 billion, and be forced to take remedial actions. \"High fines put the antitrust agencies in the media spotlight, increasing their profile and visibility, as well as helping them achieve greater political merits,\" said Angela Zhang, director at the Center for Chinese Law at the University of Hong Kong and author of the book Chinese Antitrust Exceptionalism. However, the crackdown has put a dent in China\'s efforts to promote its soft power globally. The increased oversight from Beijing prompted the U.S. State Department to mull a ban of U.S. investments into Alibaba, along with Tencent, although the plan was later nixed. The state\'s propaganda arm issued a directive in December prohibiting local news outlets from publishing anything beyond the official line on the investigation, Bloomberg News reported, citing people who asked not to be identified as the order has not been made public. The restrictions also apply to Ma, who has not been seen in public since he made the speech, the people told the publication. **Beyond Alibaba** Industry observers reasoned that the focus of the enforcement is much larger than the Alibaba founder and, regardless of what prompted the crackdown, the Chinese Politburo, the decision-making body of the Chinese Communist Party, is unlikely to limit the action to Alibaba or even the e-commerce sector. \"We believe platform economy will be merely one of the enforcement focuses,\" said Michael Gu, partner at Beijing-based Anjie Law Firm. The SAMR has indicated that the so-called livelihood industries, including healthcare, finance, automobile and consumer products, will also be subject to strict antitrust scrutiny, he said. \"I don\'t subscribe to the views \[of Ma being targeted\],\" said Wong. \"For exclusive deals with merchants, if Alibaba is prohibited from adopting such anti-competitive behaviors, then I am sure Pinduoduo or JD.com Inc. also can\'t do it,\" he said. The situation is not unique to China nor Alibaba, as regulators in the U.S. have also tried to rein in their domestic technology leaders such as Amazon.com Inc., Facebook Inc., and Alphabet Inc., they said. \"What you are seeing is the Chinese authorities moving quicker than the U.S. authorities in this case and Alibaba is clearly one of the targets,\" said Chris Leahy, co-founder and managing director of risk advisory firm Blackpeak. However, it is unlikely that brands will jump ship and abandon bigger platforms like Alibaba once they are free to sell on other platform, analysts said. User traffic, marketing returns, and quality of service are factors that ensure loyalty, and bigger companies have their track record to fall back on in their relationship with the merchants. \"If you are free to work with the big and small players under the same conditions, it will be likely that you will lean towards the bigger platforms,\" said Danny Law, an analyst at Guotai Junan Securities. \"It just means that merchants will have more options.\" The price war among e-commerce operators is another major concern, and the heavy subsidies offered by major platforms, which can squeeze out mom-and-pop retailers that do not have access to the same level of trade capital, could be next on the competition watchdog\'s crosshairs, analysts said. Such action would put Pinduoduo at a disadvantage, which has grown rapidly thanks to heavy discounting. It would also likely keep customers at Alibaba and JD.com, which offer better services, said Guotai Junan\'s Law. Furthermore, Pinduoduo has its own share of regulatory issues, the most recent being an investigation launched Jan. 4 into working conditions at the company following the death of a worker. \"It will need to act fast to create a better environment for brands. This will necessitate a crackdown on counterfeits and unauthorized distributors selling branded products on the platform,\" said Michael Norris, research and strategy manager at e-commerce consultancy AgencyChina. [[https://www.spglobal.com/marketintelligence/en/news-insights/blog/domestic-box-office-plummets-80-in-2020]](https://www.spglobal.com/marketintelligence/en/news-insights/blog/domestic-box-office-plummets-80-in-2020) **Alibaba is ramping up in Europe, and is already ahead of Amazon in one region** By Evelyn Cheng / 2021.10.28 / CNBC - - - - BEIJING --- Alibaba is investing further in Europe for Singles Day this year, as the Chinese tech giant competes with Amazon for the European Union's exploding e-commerce market. Alibaba remained among the top three online sellers of consumer goods in eastern Europe last year, according to Euromonitor International. Amazon wasn't on the top 10 list for the region, which includes countries like Poland and the Czech Republic. Amazon is by far the top seller in western Europe, which includes France and Spain, according to Euromonitor. But the U.S. e-commerce giant's market share in the region did not grow during the pandemic, remaining at about 19.3% in 2020. In contrast, Alibaba's market share increased to 2.9% in 2020, up from 2% the prior year, the data showed. Alibaba held first place in eastern Europe e-commerce in 2019, according to Euromonitor International. But Polish online shopping site Allegro took first place in 2020 during the pandemic, while Russian rival Wildberries took second, according to the data. That pushed Alibaba down to third place last year. The competition for Europe comes as online shopping in the region got another lift this year. Stay-home policies and other social distancing measures have remained in place for many months amid a prolonged fight to control multiple waves of Covid-19 outbreaks. "It's time for the next stage of e-commerce growth in Europe," NielsenIQ said in a report in June. For "fast-moving consumer goods" --- a category that includes food, beverages, personal care and home care --- the report said e-commerce sales growth doubled in Italy and Spain in the first quarter of this year, compared with the same period in 2020. Updated figures weren't available as of the publication of this article. **Subsidizing delivery costs** AliExpress plans to double its subsidies for international logistics support this Singles Day from last year. That's a slowdown in pace from the company's claims last year that it spent five times as much on subsidies as it did in 2019. AliExpress claimed, during a period of global shipping congestion, that it did not raise costs for customers and hasn't seen any major delivery delays because of its reliance on charter flights. Most goods sold through AliExpress are also small consumer products and don't need to be transported by ship. For Singles Day, AliExpress said weekly overseas charter flights will increase to 100 a week from Nov. 11 and 30, up from 80 a week. Once the packages leave China, they can be distributed at logistics arm Cainiao's sorting centers, six in Europe and one in Russia, according to the company. The shopping festival has also sped up investment in package lockers, which allow couriers to deliver many packages to one neighborhood's residents at once. In early September, Cainiao announced it had installed a network of 170 lockers in Madrid and Barcelona in Spain, and more than 80 in Paris, France. The logistics unit said it planned to install a total of 5,000 lockers globally before Singles Day, especially in Russia, Poland, Spain and France. Cainiao and international commerce retail revenue both grew by at least 50% in the quarter that ended June 30 compared to a year ago, with the business segments each accounting for about 5% of Alibaba's overall revenue. **Building up local customers** Not only does AliExpress want to sell to consumers in Europe, it also wants local merchants to sign onto its platform, where they can take advantage of subsidies, said Li, the head of AliExpress Supply Chain. However, he said many businesses prefer to work with multiple e-commerce sites, instead of just with AliExpress alone. Small and medium-sized merchants would also like to build their own brands on those platforms and on their own websites, Li said, noting that in those cases, AliExpress plays more of third-party role by selling logistics and store management services. "In general I think there's lots of learning from China in terms of, how do you think about e-commerce," Jonathan Cheng, partner at Bain & Company and leader of the firm's Greater China Retail practice, said on a call with reporters Wednesday. "We would argue that China's absolutely at the forefront in terms of customer operations, and in marketing and in effectiveness and all that." "Double 11 is going to be a great way for a lot of these companies as they start to grow. It's a great way for you to go acquire customers," Cheng said, declining to comment specifically on Europe. "Amazon basically did a very similar thing." But he noted that after years of rapid growth in the number of customers, companies will need to think about how to retain users and earn profits. https://www.cnbc.com/2021/10/29/eu-ecommerce-alibaba-competes-with-amazon-in-europe-for-singles-day-.html **Alibaba challenged as TikTok generation starts shopping on short video apps** Douyin, TikTok's sister app, and Kuaishou take on China's leading online shopping giant By Eleanor Olcott / 2021.12.03 / Financial Times Increasingly, Chinese users of the video app find live shopping broadcasts from internet celebrities such as Dong sandwiched between cat videos and new dance crazes --- a version of television shopping for the mobile generation. Now the live-streaming shopping market, which was first pioneered by China's online shopping giant Alibaba in 2016, is disrupting Alibaba's main businesses, Taobao and the more upmarket Tianmao. The value of goods sold through livestreams will double this year to Rmb2tn (\$313bn), according to analysts at PingAn Securities, while more traditional online shopping grows at 15 per cent. Leading the way, alongside Alibaba's own efforts, are China's two biggest and fastest growing video-sharing apps, Kuaishou and Douyin, which is owned by ByteDance. Their growth is coming as Alibaba faces attempts by antitrust regulators to break up its iron grip on China's 782m online shoppers and as Alibaba warned that its growth was being hit by "softer market conditions". "It's not as fun to spend time on Taobao as Kuaishou and Douyin," says Jessy Zhang, an ecommerce analyst at the Chinese market analysis company Daxue Consulting. For Douyin and Kuaishou, which have 600m and 320m people scrolling through their videos each day, respectively, converting a small number of those people to buying customers quickly adds up. The gross value of all the goods sold on Kuaishou in the third quarter grew by 86 per cent to Rmb175.8bn in the third quarter, year on year. Some of the livestreaming merchants pay fees to Douyin and Kuaishou to boost their reach, but if their content is engaging enough, it will automatically be pushed out more widely by the app's algorithms. Meanwhile, merchants using Taobao have to spend an average of Rmb187 on advertising and paying for higher search listings for every new consumer they acquire, according to research by Founders Securities. Alibaba is still the largest ecommerce company in China, but its market share is slipping as rival platforms take advantage of the break-up of its monopoly. Antitrust regulators hit Alibaba with a record \$2.8bn fine in April after finding that it had hindered fair competition in online retailing by forcing merchants to sell on its platforms exclusively. Taobao and Tmall's share of the overall gross merchandise value --- the total value of everything sold on the site --- declined after they were forced to halt practices that enabled it to fiercely guard its leading position. In the first half of 2021, Taobao and Tmall collectively accounted for 48 per cent of China's overall ecommerce GMV, down from 62 per cent a year earlier, according to research by Daxue Consulting. The livestreaming model is geared towards high volume. "Shoppers love it because you can find so many special deals on bulk purchases and discounts," said one 20-something shopper in the southern province of Guangdong, adding that the format is particularly loved by students, who have free time to scroll through videos. But the sort of goods that are particularly popular with livestreamers are also some of Alibaba's biggest earners: skincare, women's fashion, cosmetics and perfume. "Livestreaming is particularly conducive to beauty and apparel, which happens to be Taobao and Tmall's strengths," where they collect the highest commissions from merchants, said Michael Norris, senior research analyst at Shanghai-based consultancy AgencyChina. Shifting further into commerce could also prove dangerous for the disrupters. "They risk diluting the entertainment value of their apps if the user's individual feed becomes endless livestreams of people promoting their products," said Norris. Less engagement from users could hit display advertising, still the primary source of revenue for Douyin and Kuaishou. Meanwhile, Alibaba has the advantage of the years it spent building a reliable and trusted platform, and of managing complex supply chains and logistics. Sellers on Douyin, including Dong, have come under fire for false promotions and refusing to accept returns. Alibaba faced the same criticism in the early days of its move into ecommerce but has since invested money in bolstering consumer protections against merchants that sell fake and faulty products. Douyin is trying to gain consumer trust with a protection fund that settles disputes between the vendor and shopper and by taking down problematic products from its app. "I don't trust live-streaming shopping," said the Beijing shopper. "The products don't come with any guarantees. Some of the live-streamers on Douyin have had an amazing performance, but still, it is difficult to shake Taobao and Tianmao from their commanding position." https://www.ft.com/content/43f58eda-05c0-40c9-bf5c-cafb8f24c0b0 **Alibaba Has a Much Bigger Problem Than the Tech Crackdown** Common prosperity and regulatory enforcement collide with even stronger headwinds: There are no new customers left. ByTim Culpan / 2022.02.25 / Bloomberg Alibaba Group Holding Ltd.'s slowest quarter on record comes amid a prolonged crackdown on China's major technology companies. It's easy to conflate the two. But the increased regulatory burden is overshadowed by even harsher problems. Chief among them: peak customer. It's a reminder that the country's burgeoning middle class is no longer easy pickings for high-flying companies with ubiquitous platforms. "We believe we have substantially captured all consumers with purchasing power in China," Chief Executive Officer Daniel Zhang told investors late Thursday. "We'll focus on a shift from new-user acquisition to user retention and \[average revenue per user\] growth." The new approach comes as overall consumption growth falters in China, forcing the company to look overseas for new customers. Alibaba's struggle is borne out in the numbers. Revenue for the three months to December climbed just 10%, compared with 29% growth the prior period. Sales at its core commerce unit --- which comprises 71% of the overall business --- rose a mere 7%. Those numbers cap a year in which Chinese President Xi Jinping sought to curb the power of internet titans and pivot the country toward "common prosperity," where wealth and income is shared more evenly. For companies like Alibaba, social media player Tencent Holdings Ltd., and deliveries provider Meituan, the result has been a push to break up perceived monopolies and soften their competitive advantage. Exclusive listings, leveraging user data to sell services, and excessive subsidies were all in regulators' sights, forcing companies to sacrifice earnings margins and rethink their business models. Alibaba executives in August pledged to plow "excess profits" back into parts of its e-commerce business in the form of merchant support, a second-hand marketplace and streaming commerce. At the time, this looked like a reaction to the crackdown, and came just months after the company was slapped with a record \$2.8 billion anti-monopoly fine, equal to 4% of its 2019 domestic revenue. In reality, it was also a response not just to a tougher competitive landscape, but an acknowledgement that the high-growth days are over. Chinese retail sales growth dropped to 1.7% in December, less than half the rate estimated for the period. November, a period when it enjoys a boost from its annual Singles Day sales, was also weaker. Other areas of the economy are likewise looking shaky. Property investment in December dropped 14% from a year earlier (and 17% from the prior month), while home sales along with real-estate financing both plunged almost 20%. By the December period, the reality of those macroeconomic challenges was even more evident in China's data. Gross domestic product climbed 4% in the quarter, slower than the prior three months. That spurred the People's Bank of China to cut a key interest rate to juice growth, at a time when central bankers around the world are preparing to raise lending costs. Making that task even harder is Beijing's insistence on stamping out Covid clusters, while external shocks, like Russia's invasion of Ukraine, remain an ever-present risk. This means that a sustained rebound in spending has been, and will continue to be, on shaky ground. That not only affects the revenue of businesses on its platforms, but risks creating a vicious cycle of dampened sentiment among consumers unsure of their own economic future. This level of weakness tends to lead to price wars, or increased rebates, even without guidance from a government forcing them to cut fees or boost competition. To offset the challenge, Alibaba has started a renewed push to get more customers in overseas markets, but success is not assured. It's not easy to distinguish whether common prosperity or broader economic softness is spurring the company to leave more money in the hands of merchants and consumers, and return less to shareholders. The ongoing tech crackdown doesn't help the company battle these economic headwinds, but those challenges were already on the horizon before common prosperity came along. [[https://www.bloomberg.com/opinion/articles/2022-02-25/alibaba-has-a-much-bigger-problem-than-the-tech-crackdown]](https://www.bloomberg.com/opinion/articles/2022-02-25/alibaba-has-a-much-bigger-problem-than-the-tech-crackdown) **Alibaba Group FY2022 Results -- 7 Points You Need To Know** May 29, 2022 Here are 7 things you need to know about Alibaba's FY2022 performances before deciding to buy, hold or sell the stock. **1. Core commerce contributes to 77% of its FY 2022 revenue** Many shareholders might be seeing Alibaba following **Amazon.com**'s blueprint to pivot into a cloud-centric company. But as of FY 2022, by revenue size, Alibaba is still very much an e-commerce company. Core commerce contributes to 77% of its topline. Cloud computing is second in place with a contribution of 8.7%, followed by Cainiao, its logistic arm. Alibaba's commerce business might have started online. But over the years, it has grown and now covers brick and mortar shops as well. Its China retail commerce counts Taobao, and Tmall as its main revenue contributor. It has also integrated live streaming functions for key opinion leaders to demonstrate and sell products on its apps. Recently, Alibaba put more focus on its brick and mortar businesses. It launched Freshippo and bought over Sun Art Retail Group in an attempt to also integrate its online e-commerce business with offline outlets. Their China Commerce grew at a YoY rate of 18%, while International Commerce grew 25% YoY, contributed by stronger growth by Lazada. **2. Alibaba's Commerce EBITA dropped YoY** Despite a decent topline growth of 18% YoY for its core commerce revenue, EBITA for its core commerce slumped. China's commerce Adjusted EBITA dropped by 15% YoY. But it is due to increased investment in Taocaicai and Taobao Deals, which is a counter-attack measure against its competitors. This is on top of the continuous impact of COVID-19 as well. Even though Lazada might still be growing well, the same could not be said for Trendyol, Alibaba's Turkey e-commerce platform. Thus, its China and International commerce EBITA have been dragged down. **3. Cainiao grew by 24% YoY** Previously, Jack Ma previously proclaimed that his vision for Alibaba is to stay asset-light versus what Amazon was doing. But as time goes on, it became inevitable for e-commerce companies to eventually dip their toes into logistics. The China commerce retail businesses, such as Tmall, Taobao and Taobao Deals have offset some of the international orders affected by the Russia Ukraine war. YoY quarterly wise, Cainiao grew by 16%, still a bit behind JD Logistic's growth of 22% YoY. **4. Alibaba Cloud only grew by 23% YoY annually** One of the more disappointing verticals of Alibaba is surprisingly its cloud business. In the same period of time where US cloud companies are doing [around 30-40% growth per annum](https://www.datacenterdynamics.com/en/news/amazon-web-services-grows-revenue-40-percent-microsoft-azure-increases-share-google-cloud-still-loses-840m/). That said, with the current geopolitics happening, the world is split into 2 factions. It might not be fair and conclusive to compare the cloud growth of Alibaba against its US counterparts. The silver lining, however, is that the EBITA for cloud finally turned positive. **MyKayaPlus Verdict** Alibaba could still be a great company to invest in. Although total revenue-wise it is lagging behind JD.com, in terms of free cash flow, it is still the most superior e-commerce company. Of course, the tech crackdown has spooked investors all around the world. Even [the legendary Charlie Munger halved his Alibaba position in April](https://www.forbes.com/sites/gurufocus/2022/04/15/charlie-mungers-daily-journal-halves-alibaba-position/?sh=76be58b03631). But that does not spell any fundamental shift in Alibaba's business. However, due to the pessimism and slowing Chinese economy, share prices can stay at a deep value discount for prolonged times. Time will tell whether Alibaba is currently trading at the best-discounted price or the biggest value trap of all time. [[https://www.mykayaplus.com/alibaba-group-fy2022-results-7-points-you-need-to-know/]](https://www.mykayaplus.com/alibaba-group-fy2022-results-7-points-you-need-to-know/) **Alibaba to Split into Six Groups and Explore IPOs in a Departure From Jack Ma Era** Chinese tech giant makes announcement just after its co-founder reappeared in China after months overseas WSJ / Mar 28, 2023 / Raffaele Huang and Clarence Leong Chinese e-commerce giant Alibaba Group Holding Ltd. said it plans to split itself into six independently run companies that could seek separate IPOs, effectively dismantling a business empire built over two decades by charismatic entrepreneur Jack Ma just as the tycoon reappeared in China. The reorganization of one of China's largest private-sector companies, once valued at more than \$800 billion but now worth about a quarter of that, comes after Chinese authorities signaled in recent months they were winding down a sweeping regulatory clampdown aimed at reining in the country's powerful tech sector. Mr. Ma, a co-founder who built Alibaba into one of the world's biggest e-commerce companies on China's rising affluence, was once known for his outspoken views. But since China embarked on its campaign to tame internet companies, the billionaire has largely kept a low profile and remained abroad. He returned to mainland China in recent days for the first known time in almost a year, visiting a school in the eastern city of Hangzhou where Alibaba is based. Alibaba's restructuring culminates a yearslong shift inside the company to make it more nimble after Mr. Ma stepped back from the company's helm in 2019. It reverses a centralization drive he embarked upon before his departure in which he sought to bring the company's subsidiaries and affiliates into closer alignment, part of the so-called Alibaba Economy. The power of tech titans such as Mr. Ma and their influence over society caused unease in Beijing: Companies such as Alibaba have a grip on data of more than a billion users and investments across a range of companies in China. Beijing has in the past criticized the "disorderly expansion" of the country's biggest internet companies. "If you don't change yourself, you will be defeated by the times," Alibaba Chairman and Chief Executive Daniel Zhang said in a letter to employees reviewed by The Wall Street Journal. He added that Alibaba's various businesses are facing different challenges and market conditions. 텍스트, 스크린샷, 디자인이(가) 표시된 사진 자동 생성된 설명 Under the restructuring, Alibaba's various businesses will be split up into six major areas: cloud computing, Chinese e-commerce, global e-commerce, digital mapping and food delivery, logistics, and media and entertainment, the company said Tuesday. Each business group would have its own CEO reporting to a board of directors and be fully responsible for the group's performance. Alibaba Group is set to become a holding company overseen by Mr. Zhang. Those business groups will be allowed to raise external capital and seek initial public offerings when they are ready, Alibaba said. Its domestic commerce business will remain a wholly owned unit of Alibaba, it added. Mr. Ma, 58 years old, was listed as a committee member of Alibaba Partnership, a strategy-making body of senior executives, in the company's latest annual report published last July. He held less than 5% in Alibaba Group at the time. Mr. Zhang in February said he saw 2023 as a year of progress for Alibaba. In videotaped remarks published by Chinese business publication Yicai on Tuesday, he said the reorganization was a big step forward. He explained the main reason to reorganize is to improve the sprawling business empire's organizational efficiency. He said splitting the businesses would make each area more agile to better compete with rivals. Alibaba has been weighed down by fierce competition in its bread-and-butter domestic e-commerce business in the past few years. Rivals JD.com Inc. and PDD Holdings Inc.'s Pinduoduo have continued to bite into Alibaba's market share. In addition, short-video platforms including ByteDance Ltd.'s Douyin, the Chinese version of TikTok, and Kuaishou Technology increasingly pose a challenge. Alibaba's revenue growth in the past two quarters performed below the overall growth in China's e-commerce sales of physical goods. Mr. Zhang has acknowledged competition and said the company would explore innovative ways to better engage with customers, such as live streaming and smart recommendations. Growth momentum of the company's cloud business also slowed in the past year as clients tightened their belts in a sluggish economy. Last year, Alibaba focused on cutting costs, shedding 7.5% of its workforce. In 2021, the Journal reported that Mr. Zhang had been delegating more power to the heads of Alibaba's various business units, which had the potential to open the way for spinoffs and independent fundraisings. The move echoes previous sweeping reorganizations by Western tech giants such as Google, which created Alphabet Inc. as a holding company while separating its growing cast of businesses. Still, the holding-company structure isn't common for Chinese tech giants. In 2021, ByteDance reorganized its operations, formerly divided by functions, into six business units that now focus on different product lines. Alibaba's split comes after Mr. Ma reappeared in China and at a time when Beijing is seeking to revive entrepreneurs' confidence following more than two years of regulatory clampdowns and Covid-19 restrictions. The announcement wasn't related to his return, people inside the company said. The listing status of Alibaba's shares in New York and Hong Kong won't be affected, people familiar with the matter said. Alibaba's American depositary receipts climbed more than 9% in early trading on Tuesday in New York. Beijing started to crack down on the Chinese tech sector in late 2020, calling off Ant Group Co.'s blockbuster IPOs. The cancellations came after Mr. Ma's speech at a financial forum drew the ire of regulators by criticizing their work as anachronistic. Regulators subsequently launched a probe into Alibaba for alleged anticompetitive behavior on its e-commerce platform and later hit the company with a record \$2.8 billion fine. Regulators also slapped hefty fines on other tech giants over issues including antitrust and data-security breaches, erasing more than \$1 trillion in market value from China's largest publicly listed tech companies. Hopes that regulatory headwinds may be easing began to build as the country's top brass sounded more conciliatory toward private businesses. But tighter oversight has become the new normal, and in January, Chinese authorities acquired a stake in a subsidiary of Alibaba. The sudden disappearance of star investment banker Fan Bao recently sent shivers through China's business community. Like many large tech companies that are burgeoning conglomerates, Alibaba has expanded its ecosystem by offering consumers and businesses multifaceted services, from shopping and travel to payments and logistics. Since 2020, Alibaba has been establishing subsidiaries based on business functions. Apart from the six companies, other businesses could be regrouped as similar independent entities in the future while teams such as research, data management, finance and human resources will be spread across subsidiaries, Mr. Zhang said in his letter to employees. "This transformation will empower all our businesses to become more agile, enhance decision-making and enable faster responses to market changes," he said. Mr. Zhang is set to continue to lead the cloud-computing division, as the company gears up to grow its business into global markets and in the artificial-intelligence arena. [[https://www.wsj.com/articles/alibaba-to-split-into-six-separate-groups-in-biggest-shake-up-9ce2201f?mod=Searchresults\_pos3&page=2]](https://www.wsj.com/articles/alibaba-to-split-into-six-separate-groups-in-biggest-shake-up-9ce2201f?mod=Searchresults_pos3&page=2) **Alibaba Group\'s Strong Financial Performance in Fiscal Year 2023: A Comprehensive Analysis** AI Trader / May 20, 2023 Alibaba Group operates in multiple business segments, each contributing to its overall growth and success: a\. China Commerce Segment: The China commerce segment encompasses Alibaba\'s retail businesses in China, including Taobao, Tmall, Taobao Deals, Taocaicai, Freshippo, Tmall Supermarket, Sun Art, Tmall Global, and Alibaba Health. It also includes wholesale businesses such as 1688.com. This segment forms the core of Alibaba\'s e-commerce ecosystem, driving significant revenue and user engagement. b\. Alibaba International Digital Commerce Group: This segment comprises a range of international digital commerce businesses, including Lazada, AliExpress, Trendyol, Daraz, Alibaba.com, and others. With a global footprint, this segment allows Alibaba Group to tap into international markets and cater to a diverse customer base. c\. Local Consumer Services: Alibaba\'s local consumer services segment focuses on providing various on-demand services to consumers in China. Key businesses in this segment include Ele.me, a leading food delivery platform, and Amap, a popular mapping and navigation service. **Financial Highlights**: In fiscal year 2023, Alibaba Group achieved impressive financial results, highlighting its strong performance: a\. China Commerce Segment: Revenue from the China commerce segment experienced steady growth, driven by increased consumer spending and user engagement. The segment\'s revenue for fiscal year 2023 reached RMB50,112 million (US\$7,297 million), reflecting a notable 12% increase compared to the previous year. This growth was primarily attributed to the higher average order value of Ele.me and strong order growth of Amap. b\. Alibaba International Digital Commerce Group: The international commerce segment demonstrated improved performance, with reduced losses compared to the previous fiscal year. The adjusted EBITA loss for fiscal year 2023 was RMB5,620 million (US\$818 million), a significant decrease from the loss of RMB8,991 million in fiscal year 2022. This positive trend was driven by reduced losses from Trendyol and Lazada, resulting from revenue growth and enhanced operating efficiency. c\. Local Consumer Services: The local consumer services segment showed progress in narrowing its losses. In the quarter ended March 31, 2023, the adjusted EBITA loss was RMB4,153 million (US\$605 million), a reduction from the loss of RMB5,568 million in the same quarter of 2022. This improvement was primarily attributed to Ele.me\'s improved unit economics per order, resulting from increased average order value and reduced delivery costs per order. **Operational Highlights and Key Initiatives**: Alibaba Group has undertaken various strategic initiatives to drive growth and enhance its core businesses: a\. E-commerce Growth: The core e-commerce business in China experienced strong growth, fueled by increased user engagement and consumer spending. Alibaba\'s China retail marketplaces added 50 million annual active consumers, reaching a total of 912 million. Additionally, mobile monthly active users on the China retail marketplaces grew to 925 million, underscoring the significance of mobile commerce in Alibaba\'s ecosystem. b\. Cloud Computing: Alibaba Cloud, the cloud computing arm of Alibaba Group, witnessed substantial growth in fiscal year 2023. The segment\'s revenue increased by 34% year-over-year, reaching RMB60,129 million (US\$8,757 million). This growth was driven by the expansion of cloud services and the addition of new customers. Alibaba Cloud continues to invest in research and development to enhance its technological capabilities and meet the increasing demand for cloud services. c\. Digital Entertainment: Alibaba\'s digital entertainment segment, comprising platforms like Youku and Alibaba Pictures, has focused on content creation, distribution, and monetization. The company has been actively acquiring and producing high-quality content to attract and engage users. Leveraging data-driven insights, Alibaba aims to enhance user experience and optimize content offerings. d\. New Retail and Community Commerce: Alibaba is driving the integration of online and offline retail through its \"New Retail\" concept. By leveraging technology and data analytics, the company aims to provide a seamless shopping experience for consumers. Alibaba is also expanding its community commerce initiatives, enabling individuals and small businesses to participate in the e-commerce ecosystem and reach a broader customer base. **Future Outlook and Plans**: Alibaba Group remains committed to its long-term strategic goals and aims to capitalize on key growth drivers: a\. User Experience and Engagement: The company will continue to invest in technology and innovation to enhance user experience across its platforms. Alibaba aims to expand its customer base and drive higher user engagement through personalized services, efficient logistics, and innovative marketing initiatives. b\. Market Expansion: Alibaba Group intends to deepen its presence in lower-tier cities and rural areas in China, recognizing the immense growth potential of these markets. The company will leverage its expertise in serving diverse consumer segments and further tap into the rising purchasing power of these regions. c\. International Expansion: Alibaba Group will actively explore international expansion opportunities to diversify its revenue streams and expand its global presence. Leveraging its technological expertise and cross-border capabilities, Alibaba aims to enter new markets and cater to the evolving needs of global consumers. **Conclusion:** Alibaba Group\'s financial results for the quarter and fiscal year ended March 31, 2023, highlight its strong performance and strategic initiatives. The company\'s core e-commerce business, cloud computing services, and investments in new growth areas have been instrumental in driving its growth trajectory. Alibaba Group\'s commitment to enhancing user experience, expanding its customer base, and exploring international opportunities positions it well for sustained success in the dynamic digital economy. [[https://www.linkedin.com/pulse/alibaba-groups-strong-financial-performance-fiscal-year-ai-trader/]](https://www.linkedin.com/pulse/alibaba-groups-strong-financial-performance-fiscal-year-ai-trader/) **Jack Ma Ally Joe Tsai to Take Helm of Alibaba** Brooklyn Nets owner Tsai to become chairman in shake-up at the top of e-commerce giant as it moves to reboot growth WSJ / June 20, 2023 / Raffaele Huang SINGAPORE---Alibaba Group named Brooklyn Nets owner Joe Tsai to be its chairman, putting the close ally of fellow co-founder Jack Ma atop the Chinese e-commerce giant as it seeks a revival from sluggish growth amid fierce competition. Tsai, 59, is seen by company insiders and analysts as being close to Ma, the company's largest shareholder who stepped down as executive chairman in 2019 and has kept a low profile after he appeared to have a fallout with Beijing amid a regulatory crackdown on the tech industry. Their relationship could give Tsai more heft than the departing chairman Daniel Zhang to push along the company's plans to reorganize itself into multiple independent companies and get its e-commerce business back on a growth track. Zhang will also be replaced as chief executive officer by Eddie Wu, another of Ma's co-founders who currently heads up the Taobao and Tmall domestic e-commerce business. The changes will be effective on Sept. 10. Taiwan-born and U.S.-educated Tsai was a practicing lawyer and private-equity investor after graduating from Yale. He co-founded Alibaba with Ma in 1999, served as its chief financial officer, and became executive vice chairman in 2013. He and Ma are the only permanent members of Alibaba Partnership, the top decision-making body for the e-commerce giant and its affiliates. Tsai's strong U.S. ties are rare these days among captains of Chinese industry, although he has faced criticism in America for parroting Beijing's standpoint on some controversial issues. He played high-school football at the Lawrenceville School in New Jersey, played lacrosse at Yale University and bought the Nets basketball team in 2018. He also owns the San Diego Seals, a professional lacrosse team, and the New York Liberty women's professional basketball team. He is eligible for a passport in Hong Kong and Canada, via his parents. The shake-up could maintain the influence of Ma, who engineered the breakup of the e-commerce empire from afar while he traveled overseas for most of the year before the plan was unveiled. On Saturday, he was in his hometown of Hangzhou, where Alibaba is based, to attend an annual global mathematics competition he started in 2018 and chatted with the finalists. Last month, Ma met executives of Alibaba's Chinese commerce division to discuss the intensified competition it is facing, people familiar with the talks said. He urged the unit to adjust business strategies and governance as he warned that the methods that Alibaba relied on to succeed in the past might not be applicable anymore, the people said. Ma remains the biggest shareholder of Alibaba and still cares very much about the company, Michael Evans, president of Alibaba, said at a technology event in Paris last week.  The reshuffle indicates that Ma is returning "to exercise more direct control," said Charlie Chai, a tech-focused analyst at equity research firm 86Research. Beijing might welcome Ma's continued influence, given that Alibaba's dominance is facing strong challenges from competitors and its revival could help boost the country's consumption and speed up development of artificial intelligence, he said. In Alibaba's early days, Tsai helped it win investments from Goldman Sachs and SoftBank and built its in-house venture investment team from scratch. Tsai is well-liked by investors and his appointment should be seen as good news, said Vey-Sern Ling, a senior adviser for Asia technology stocks at Union Bancaire Privée. But the move is unlikely to boost Alibaba's stock price, which is suffering as a result of geopolitical issues and concerns over China's economy rather than any questions about management, Ling added. Alibaba's market capitalization topped \$850 billion at its peak in late 2020, but had plummeted to roughly \$238 billion before the leadership change was announced. The company's New York-listed American depositary receipts were down 2% in U.S. premarket trading on Tuesday. Alibaba's incoming CEO, Wu, led the company's strategy to develop and give priority to its smartphone shopping sites as consumers shifted to using the mobile internet. A graduate in computer science, he was previously chief technology officer of several Alibaba business units including Taobao and digital-payment platform Alipay. The emergence of Wu, who has a lower profile among Alibaba executives, could contribute to Alibaba's plans to leverage technology, including AI, to revive its stalled e-commerce business, people familiar with the plan said. Zhang will continue to head up Alibaba's cloud-computing unit, the second-largest business by revenue after its domestic e-commerce unit, as the group bets on it for growth. Alibaba said in May that it planned to fully spin off the business and complete its public listing in the next 12 months. A former PricewaterhouseCoopers financial consultant, Zhang joined Alibaba in 2007 to lead Taobao's finance and operations and became the group's chairman in 2019. He was referred to by senior colleagues as "a man of action," but was less comfortable navigating the group's powerful veterans, people familiar with the matter said. "My appointment as CEO and chairman of Alibaba Group was beyond my imagination," Zhang said in a letter to staff, seen by The Wall Street Journal. He said the cloud unit is full speed ahead on its spinoff plans. Alibaba's restructuring culminates a yearslong shift inside the company to make it more nimble. Alibaba's various businesses will be split up into six major areas: cloud computing, Chinese e-commerce, global e-commerce, digital mapping and food delivery, logistics, and media and entertainment. Alibaba has been grappling with sluggish growth, facing a cooling domestic economy and rising competition from homegrown upstarts such as PDD Holdings' Pinduoduo e-commerce platform and ByteDance's short-video app Douyin. In the January-March quarter, Alibaba posted one of the slowest revenue expansions since it went public in 2014. [[https://www.wsj.com/articles/alibaba-says-joseph-tsai-to-take-over-as-chairman-succeeding-daniel-zhang-3bdf7a9?mod=Searchresults\_pos20&page=1]](https://www.wsj.com/articles/alibaba-says-joseph-tsai-to-take-over-as-chairman-succeeding-daniel-zhang-3bdf7a9?mod=Searchresults_pos20&page=1) - - - - Lazada layoffs: An outcome of a sobering reality check for the Southeast Asian e-commerce company KRASIA/ Jan 10 2024 Life at Lazada appeared to be on an upswing. Shopee, its fiercest rival, opted to ease off its growth acceleration in favor of a more stable approach toward profitability. TikTok Shop, the newly emerged competitor, [faced setbacks in Indonesia](https://kr-asia.com/reg-31-2023-the-regulation-behind-tiktok-shops-closure-in-indonesia/) for months until it recently found a breakthrough by [allying with GoTo Group's Tokopedia](https://kr-asia.com/tiktok-invests-usd-1-5-billion-in-gotos-tokopedia-to-restart-e-commerce-business-in-indonesia/). Lazada's order numbers have also been growing while gradually reducing its losses each quarter. Lazada, Alibaba Group's primary e-commerce platform in Southeast Asia, seemed poised to maintain its stronghold in the region for what appeared to be a promising 2024. However, as first reported by The Edge, the company suddenly [laid off over 100 employees](https://www.theedgesingapore.com/news/digital-economy/lazada-lets-go-c-suites-ex-staff-five-lazadas-six-markets-sharing-cvs-online) on January 3, with observers stating that [up to 30% of its entire regional workforce could be let go](https://www.techinasia.com/lazada-expected-layoff-30-staff-sources), including even senior management in countries like Singapore and Malaysia. How do we rationalize this unexpected move? The reality, unpleasant as it may be, is that this may have been a long time coming. Established in Singapore in 2012, Lazada experienced a meteoric rise despite the nascency of both the company and industry at that time. The company's [gross merchandise value (GMV) exceeded USD 1.3 billion in less than three years](https://kr-asia.com/heres-how-lazada-lost-its-lead-to-shopee-in-southeast-asia-part-1-of-2/), making it the then-largest e-commerce platform in Southeast Asia. Its stellar performance drew the interest of Alibaba, which [acquired a controlling stake](https://www.reuters.com/article/idUSKCN0X90HT/) in the company for USD 1 billion in 2016. Alibaba made the acquisition with high hopes for what Lazada could achieve in Southeast Asia, often touting its potential in reports and performance release calls---its name mentioned alongside other international e-commerce businesses under its banner, including the likes of [Trendyol](https://kr-asia.com/alibaba-backed-trendyol-becomes-turkeys-first-decacorn-raises-usd-1-5-billion-at-usd-16-5-billion-valuation/) for Turkey and Daraz for South Asia. International digital commerce is viewed favorably among the senior ranks of Alibaba---its importance is embodied by its distinction as one of the organization's six major business groups following the ["1+6+N" restructuring exercise](https://www.alizila.com/alibaba-reorganizes-to-unlock-value/) announced in March 2023. Alibaba has invested heavily into Lazada to fulfill its ambitions. Including the 2016 acquisition outlay, the Chinese internet conglomerate has injected approximately USD 7.47 billion into the Southeast Asian e-commerce company, including a recent infusion of USD 634 million in December 2023. That averages out to slightly less than USD 1 billion per year. 텍스트, 도표, 그래프, 라인이(가) 표시된 사진 자동 생성된 설명 While Alibaba's financing has provided a safety net allowing for patience in Lazada's pursuit of profitability, the crux of the issue arises from the latter hitherto lacking a formula for sustainable success in the region. Lazada has been consistently overshadowed by incumbent market leader Shopee even before the turn of the new decade, despite [having a headstart](https://kr-asia.com/for-singapores-shopee-being-late-to-the-e-commerce-game-has-helped-its-rise-in-southeast-asia/) early on. According to Momentum Works, Lazada holds a smaller market share than Shopee across Southeast Asia's six major economies, including Singapore, Malaysia, Indonesia, Thailand, Vietnam, and the Philippines. Shopee's total GMV in Southeast Asia was USD 47.9 billion in 2022, nearly half of the region's total e-commerce GMV (USD 99.5 billion) and more than double of Lazada's (USD 20.1 billion). Domestic e-commerce marketplaces, such as Bukalapak and Blibli in Indonesia, pose additional challenges it must contend with.  It is no secret that Alibaba has, on several occasions at least, been fazed by the cutthroat competition Lazada faces. Since it gained control of the company, leadership rotations have become a staple at Lazada, with the CEO position [shuffled multiple times](https://36kr.com/p/2568879110594434) in pursuit of new solutions. In 2022, the company named James Dong (also known as Dong Zheng), its former Thailand and Vietnam head, as the replacement of Chun Li, who took over the reins from Pierre Poignant, a co-founder of Lazada, in mid-2020. Poignant had served as Lazada's COO since its establishment before he succeeded Lucy Peng (also known as Peng Lei) as the company's CEO in December 2018, when Peng became chairman. There is little indication how these leadership changes, or the adjustments that ensued, have benefited Lazada. If anything, they offer insight into how Alibaba's involvement might have complicated progress following the acquisition. For one, save for Poignant, every other individual who has served as CEO of Lazada appeared to be nominated by Alibaba, destined to execute its directives. This notably went against Alibaba's [initial promise](https://kr-asia.com/heres-how-lazada-lost-its-lead-to-shopee-in-southeast-asia-part-1-of-2/) that Lazada would be able to retain a certain level of autonomy post-acquisition. Even during the period when Poignant was serving as CEO, Daniel Zhang (also known as Zhang Yong), the then-CEO of Alibaba, reportedly held significant control over proceedings at Lazada and traveled inbound regularly to oversee the business personally. Alibaba's intimate involv