Jack Ma talks of Alibaba difference at Investor Day

Speaking at eCommerce giant Alibaba Group’s first-ever Investor Day conference at its headquarters in Hangzhou, China, executive chairman and founder Jack Ma said that Chinese companies listed on US stock exchanges were always asked two things: “Can you explain your company in one sentence, and is there a similar business currently operating in the States?”

The answer to both those questions, said Ma, at least when discussing Alibaba, was “no”.

He was explaining to the very people who typically ask those questions how Alibaba is different than the US internet companies with which it is so often compared.

“The company has come to see that task as increasingly important since its 2014 IPO as it transitions from a pure eCommerce play to an internet company with a broad ecosystem of services including cloud computing and big data, online payments, logistics and marketing.

“Alibaba has also made big moves into the media and entertainment sectors, further expanding the ways it can engage consumers.”

Alibaba’s top executives at the conference offered insights and data points about the company — more than 10 hours of information, in fact. Here are six key takeaways from the conference…

  1. Global, rural, data first
    Alibaba has set a goal of  generating RMB 6 trillion (about US$1 trillion) in gross merchandise volume (GMV) by 2020, and wants, over the longer term, to ultimately serve 2 billion customers, Ma said during Investor Day. In March, Alibaba announced that GMV reached RMB 3 trillion for that fiscal year. Ma also said the company wants to become the world’s fifth-largest economy in 20 years.
    To close the gap, the company will focus on growth in three areas: expanding overseas, targeting China’s rural consumers, and leveraging its trove of shopping data to better serve its users and the merchants trying to reach them.
    For more information on globalisation, read comments from CEO Daniel Zhang here. The latest on Alibaba’s rural initiatives is here. And here’s a good take on how the company is putting its data to work for merchants and consumers.
    Watch the full webcast of Ma’s Investor’s Day talk here.

    2. Transparency and guidance
    CFO Maggie Wu spoke about the importance Alibaba places on transparency, making sure investors have what they need to understand the company and its businesses. To that end, she announced that the company will begin providing annual revenue guidance.

Fiscal year 2017 total revenue growth would come in at more than 48 per cent year-over-year, Wu said.

Revenue growth, excluding consolidated numbers from the recently acquired Youku Tudou video site and Southeast Asia eCommerce company Lazada, meanwhile, is projected to rise 36 per cent, compared with last year’s 33 per cent growth.

Wu also said Alibaba would begin segment reporting on its marketplace, cloud, mobile media and entertainment businesses starting next quarter. These reports will include revenue, operating income/losses, depreciation, amortisation, non-GAAP EBITDA and margins.

“This will help our investors better understand our core business results and development of our new businesses,” Wu said.

This emphasis on revenue is part of a broader recognition that the value Alibaba brings to merchants goes beyond simply generating online sales, but that doesn’t mean the company will stop reporting GMV figures. Alibaba is still aiming for the RMB 6 trillion GMV mark. But rather than disclosing the number on a quarterly basis, after the current June quarter it will be disclosed only in Alibaba’s annual report.

Watch Wu’s full webcast here.

3. More than a sales channel
Alibaba has been redefining itself as more than an online sales channel. The company now offers merchants increasingly sophisticated marketing tools for brand-building, customer acquisition and engagement, retail rollout planning and productivity planning, which allows for a more sophisticated shopping experience for consumers.

The company relies on the shopping data it has collected to help merchants deliver personalised web pages and product recommendations, targeted marketing campaigns and even after-market services to customers.

“Our business model as a platform brings more value to consumers and those who want to reach our consumers,” Wu said. “That is why you have seen in the past several quarters that our China retail marketplace revenues grew at a consistently faster rate than GMV.”

4. Investment strategy
Over the past two years, Alibaba has made several big-ticket investments. The company bought a 20 per cent stake in Chinese electronics retailer Suning last year for $4.63 billion and put $1 billion into local services provider Koubei.com. More recently, Alibaba invested $1.25 billion in food-delivery service Ele.me and $1 billion in Southeast Asian eCommerce marketplace Lazada Group.

During Investor Day, Alibaba Group executive vice-chairman Joe Tsai said Alibaba has a very specific way of valuing these investments, though it may not be obvious to investors and journalists.

They are intended to increase user acquisition and engagement, improve customer experience and expand the range of products and services Alibaba offers to its users, he said.

In that light, the investment into Suning can be seen as enhancing Alibaba’s competitiveness in the electronics space and in China’s growing omnichannel market. Investments in local service providers Koubei and Ele.me give Alibaba a leadership position in that burgeoning sector as well.

The Lazada deal—as well as an investment in Indian online payments provider PayTM—enable Alibaba to make inroads in promising markets outside China.

Even cash injections into related businesses, such as Cainiao, serve to boost the reach of Alibaba’s delivery services and shorten the time it takes to get goods to consumers.

When considering whether or not spending 10 per cent of Alibaba’s market cap for leadership positions in these sectors and markets, as well as buying back $5.1 billion worth of stock, was the right move for Alibaba, Tsai called it “an absolute no-brainer”.

Watch Tsai’s full webcast here.

5. The power of the Mobile Taobao app

Alibaba’s Mobile Taobao app is one of company’s latest success stories, the Investor Day was told. Mobile Taobao has 369 million monthly active users, while more than 150 million use the app every day. About three-quarters of Mobile Taobao users are younger than 35 years, and active users open the app an average of 7.2 times daily to view an average of 18.9 products.

Alibaba says Taobao Marketplace is also the world’s largest social commerce site. Five million product listings are shared with friends daily, while 20 million customer reviews are posted and 2 million customer responses are submitted to questions posed by other users.

6. Logistics

When describing the company’s logistics strategy, Tsai said it was more efficient for Alibaba to connect the existing logistics providers in China by forming a consortium—Cainiao Network—than to build and run its own in-house delivery network.

Cainiao, which has 1200 employees, now handles about 33 million packages a day, he said.

Rival JD.com runs an in-house delivery network that handles 3.4 million packages, and has 100,000 employees. To reach Alibaba’s delivery-to-employee ratio, JD would need 1 million employees, according to Cainiao CEO Judy Tong.

Amazon, on the other hand, delivers about 5 million packages a day, she said. And how many workers are needed to do that? About 230,000.

* Originally published by Alizila.com – the independent, but Alibaba Group-funded website of news about the Chinese eCommerce giant.

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