November 12, 2020

Talk with Alibaba president on Singles' Day

Alibaba logo (photo: screenshot from Alibaba Group's newsroom Alizila)
Alibaba in Guanggun Jie (Singles' Day) look
For better or for worse, everyone knows Amazon. But Alibaba? China's leading e-commerce player is still relatively unknown in the West. For many consumers the name probably still conjures up 40 thieves rather than an online retailer with global ambitions.

Our readers, of course, know that Alibaba is a digital giant and a bit like Amazon, PayPal and Twitter all rolled into one. The Hangzhou-based company founded by legendary entrepreneur Jack Ma in 1999 is also growing like a supernova. According to Edge Retail Analysis, it still ranks only number 22 among Europe's top retailers by sales, but these jumped 24.5 per cent last year, outpacing even Amazon.

The corporate boilerplate is certainly ambitious: "Our mission is to make it easy to do business anywhere. We aim to build the future infrastructure of commerce. We envision that our customers will meet, work and live at Alibaba, and that it will be a company that lasts at least 102 years."

Why, though, 102* years and not 91 or 203 years? Perhaps Alibaba president Mike Evans will enlighten us...

Guanggun Jie (Singles' Day)

The 63-year-old Canadian — and a former Olympic gold medallist for rowing — has every reason to be gung-ho. His Chinese employer generated more than €74bn in gross merchandise volume (GMV) via its local and global online marketplaces during the eleven-day run-up to Guanggun Jie (Singles' Day) this Wednesday.

Bricks & mortar retailers everywhere should savour this figure carefully. GMV from the 11.11 Global Shopping Festival already considerably exceeds the annual turnover of Edeka, Germany's largest retailer.

In reflecting on this achievement, Mike Evans makes a valuable point: "Companies today need both a China strategy and a digital strategy if they want to be successful, especially in view of the challenges posed by the pandemic."

Meanwhile, top retail managers will doubtless also note with some trepidation how Alibaba is following in Amazon's footsteps and increasingly investing in physical retailing. The latest instance of this was seen only in October when Alibaba gained a controlling stake in leading Chinese hypermarket operator Sun Art.

Chinese superlatives

As per the business year to March 2020, Alibaba Group posted external revenues of 7.1 trillion Yuan or €900bn in sales. These obviously include all GMV running via its, Tmall and Tmall Global platforms. Its own revenues from usage and advertising fees were considerably less at around €65bn.

The company boasts 780m customers in the People's Republic, which accounts for more than half of China's online retail segment. Alibaba claims to reach 840m of China's 940m online users via numerous subsidiaries including Taobao, the country's largest search machine, food delivery service Eleme, and travel platform Fliggy.

Alibaba also has 150m international customers who essentially order via the AliExpress portal. Cloud business continues to boom, but is still relatively small with around €5bn in annual sales.

Small wonder, then, that its share price has more than quadrupled since its debut on the New York Stock Exchange in 2014.

Podcast microphone (photo: Gerhard Seybert-Fotolia)
Gerhard Seybert-Fotolia

Podcast. Click arrow to listen to an audio version of the text:

"The future is New Retail"  

Mike Evans, President, Alibaba Group (photo: Alibaba Group)
Alibaba Group
Mike Evans, President, Alibaba Group
Mr Evans, online retailers have emerged as the big winners of the Covid crisis. How has Alibaba profited from this phenomenon?
Of course, you've seen our recent numbers whereby our revenue has risen by 30 per cent over the last quarter. But we don't think about this development in terms of how we profited from the Covid crisis. Instead, we consider how we enabled small businesses and brands, in China and internationally, to take advantage of opportunities on our local market. We help them to reach out to their customers in new and innovative ways.

Take this year's Singles' Day, for example, the world’s biggest shopping event. There were wholly new, innovative ways for brands and merchants to connect with their customers. Historically, they followed a two-dimensional approach driven by text and pictures on our platforms. But now we offer them a multi-dimensional approach, including livestreaming, chats and gamification.

How useful is that, really?
Cosnova, the German cosmetics manufacturer, is a good example of this. They make great use of livestreaming, one of our digital tools, to engage customers with their brands. 97 per cent of the orders they received during one particular livestreaming campaign were placed by first-time customers. This is an excellent way to attract new customers and to keep in contact with your existing customer base.

Are German products still attractive for Chinese online shoppers?

The demand for German fmcg products is still very high in China. It has even risen during the Covid crisis. The label 'Made in Germany' simply appeals to Chinese customers. For them, it is synonymous with great quality and safety at good prices. 

Is that true for food, too?
It's true for cosmetics, for sure, and for German engineering, which is a benchmark all over the world. But it’s also true for all other products, including food.

Why should German manufacturers use Alibaba to export to China
Because we position them on our platforms in the best possible way. As the biggest online player in China, we help them reach out to hundreds of millions of customers. We are the gateway to China for brands and retailers from Germany.

What about the rest of the world?

We have been expanding internationally during the last five years, but with a different focus from the one that you might expect from a European perspective. We expanded in South-East Asia, Russia, and Turkey. And we are in Europe, too. We have had offices in the UK, Italy, France, Spain and, of course, Germany for several years. Covid may have slowed us down a bit with everyone staying at home, but we are moving forward.

What does that mean in concrete terms?
At the moment, we are building local platforms in Spain and France. In Germany, Alibaba is hardly present in the B2C segment, whereas Amazon is really strong. How could you expand here?

Well, we don't have a local platform in Germany, so you can't compare us to Amazon who has been around for quite a while. At the moment, we concentrate on delivering great German brands to Chinese consumers.

Alibaba HQ in Hangzhou (photo: Mathias Himberg)
Mathias Himberg
China's online powerhouse: Alibaba HQ in Hangzhou Mathias Himberg
And later? When will you open up a local retail platform here?
I can't say when. 

What about Amazon? They're very well established in Germany. Why should retailers and manufacturers choose you instead of them?
Because we give them the opportunity to engage very closely with their customers. 

We won’t get any comment on Amazon from you, will we?
I'm only interested in Alibaba.

What else does Alibaba have in store for Europe?
We announced last Friday that French luxury supplier Farfetch will launch luxury shopping channels on our Tmall Luxury Pavilion and our cross-border marketplace Tmall Global.

What's the use of that?
We are joining forces with Farfetch to provide luxury brands with better access to China and to speed up the digitization of the global luxury industry. It's another milestone in our strategy to meet the growing demand for luxury products in China. We want to develop 'New Retail' for luxury goods, too.  

Ah, New Retail, Jack Ma's dream of merging online and offline retail! Can that really work? German retailers are highly sceptic when it comes to delivery costs?
We think New Retail is the future for two reasons. Firstly, look at the potential of online retail. It’s massive. In China about 24 per cent of all retail is taking place online. That means, on the other hand, that 76 per cent are still offline. In other countries, including Germany, the percentage of online retail is still lower. But it’s growing, too.

And your second reason?
Nowadays, customers are used to doing all kinds of things online – not only buying, but also chatting, socializing, entertaining themselves, and much more. When it comes to shopping, they want to determine for themselves whether they want to buy a certain item on- or offline. Therefore, the retailer has to give them the opportunity to do so in a shopping experience that is as seamless as possible. 

Many German retailers claim that multichannel works much better in densely populated Chinese cities than in the rural areas of Germany…
I'd say that New Retail is going to be the future all over the world. Our CEO Daniel Zhang said in a discussion during our investors’ day at the end of September that digitalization was the biggest opportunity of our time. I agree.

* N.B. For those striving for enlightenment: As Alibaba was founded in 1999, the company will have spanned three centuries if it lasts for 102 years. Very clever these Chinese!

Lebensmittel Zeitung with digital sister (photo: LZ)
Our German retail B2B newspaper, Lebensmittel Zeitung, in print & digital
Read in German: 'Das Potenzial ist gewaltig' by features editor Mathias Himberg on pages 21 & 22 of Lebensmittel Zeitung, no. 46, 13.11.2020

German Retail Blog

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