Alibaba’s shopping mall across 25 countries

THE last decade was the golden decade for e-commerce – the next decade will be the diamond decade for cross-border e-commerce,  says Maggie Zhou, Director of the International B2C Division of Alibaba.
The group has just announced plans to invest US$1 billion in cloud computing globally . . .

IT WAS well and truly an ‘open sesame’ moment for the Chinese people when Jack Ma conceived his plan in 1999 to set up China’s first portal for e-commerce. He named it
Alibaba. Chinese consumers have not looked back. They now buy an increasing volume of products, including fresh foods, cosmetics, health supplements and baby products, from overseas.
According to the China E-Commerce Research Centre, China online shoppers’ overseas purchases reached RMB74.4 billion (US$12.5 billion) in 2013, up from RMB12 billion in 2010 and now estimated to reach RMB140 billion (US$22.68 billion) this year. The boom in imported purchases over the Internet runs in tandem with the rising affluence of the Chinese people. With more disposable income, they search for quality and new experiences on offer in the world outside  China.
China sprinted past the US to become the world’s largest online market in 2013.
Today, one in every RMB100 spent on retail goes to online retailers, and that proportion is rising rapidly as e-commerce spreads to rural China, aided by the increasing ubiquity of the mobile phone. (Some estimate that, by 2020, 23 per cent of Chinese retail will be done online.)
Market research firm Forrester forecasts a compound annual growth rate for China e-commerce of 19.9 per cent, reaching US$1 trillion by 2019.
Yet Ma’s original intent to establish a platform was not about the Chinese consumer.
“His original idea was to help Chinese SMEs sell their products to the world. He wanted small businesses to find treasures from the
Internet — Alibaba was to be their ‘open
sesame’,” says Maggie Zhou, Director, International B2C Division, at Alibaba.
At that time, recalls Zhou, the only window to the world for Chinese companies was through the Guangzhou Fair, the premier trade fair for Chinese products held annually in the southern capital city of Guangzhou.  But SMEs could not afford to have a stand at the fair.
“Alibaba turned dreams into reality for many SMEs, who jumped onboard to sell their products abroad,” Zhou told ATI.
 That success was best encapsulated in Ma’s own experience in a small tourist shop in the Maldives. “He asked the shopkeeper where the items in his shop came from and, to his astonishment, the shopkeeper said: ‘I purchased them on Alibaba’,” she says. “Even from the beginning, our model was different to e-commerce in the US, which served the big companies. In America they have great infrastructure, and e-commerce is like a dessert to them. But in China, e-commerce is our main course.”
Alibaba’s business model has evolved and expanded since the early days.
The story of Alibaba and its growth is oft-recounted folklore in the digital world. Today, the Chinese giant is facing off Amazon, the world’s first cross-border e-commerce platform, in a battle of two e-commerce titans as they muscle into the global market.
Briefly, and chronologically, the milestones in the Alibaba story are as follows:  Alibaba.com and its sister site, 1688.com, set up in 1999; Taobao Marketplace in 2003; Alipay in 2008; Tmall in 2009 and Tmall Global in 2014. Zhou says Alibaba.com and 1688.com are information platforms for B2B.  Alibaba then went into C2C business, creating Taobao, which is similar to EBay, opening the doors for many Chinese to trade on the Internet.
Zhou says the users are graduates, housewives and disabled people who are trapped in their own homes. Now, they have a marketplace for their handicrafts or paintings or anything else.
Alipay was launched to overcome the problem of trust, as many Chinese people do not have credit cards, she says. It acts as an escrow service.  Alipay handles 80 million transactions daily, 45 million of those on mobile devices. Today, 800 million users in China choose Alipay. They also use it to buy from US department stores like Macy’s, or to book air tickets from international websites.
Tmall.com created an online shopping mall for merchants so that they can showcase their brands, coming at a time when Chinese consumers had become more brand conscious.  Zhou says that when Alibaba came into operation its users were university students. “Five years on, they’d grown up and were demanding more.”
Today, Alibaba Group’s China retail marketplaces, including Taobao Marketplace, Tmall platforms and Juhuasuan, have 367 million
active users.
Inevitably, increasingly discerning Chinese consumers, who have started to travel and purchase high quality products overseas, want more. Last year, some 100 million Chinese went overseas as tourists, observes Zhou. So Tmall Global came into the picture.
It acts both to facilitate overseas merchants in their sales to Chinese consumers and
to make it easier for Chinese consumers to source foreign products. In fact, the Chinese Government is playing its role in creating
pilot zones which offer duty-free bonded
warehouses for overseas products landing
in China.
The penchant for overseas products is more than snobbery. It is about health and safety
issues. China has been plagued by reports of poor food safety. So those with the disposable income look for trustworthy, high quality and authentic products from abroad — from North America, the UK, Japan, Korea, Australia, New Zealand, Hong Kong and Taiwan.
Tmall Global currently features 5,400 brands from 25 countries.  The products cover mostly food and beverages, nutrition, mother and baby care and cosmetics.
Zhou says Chinese shoppers go for the specialties of the specific countries, such as
skincare products from Korea, organic food and produce from Australia, and luxury and high fashion from Europe.
The engine driving China’s e-commerce is its middle class. Zhou says the ranks of China’s 300 million middle class are tipped to swell to 500 million by 2020.
“Our transactions have already exceeded those of E-bay and Amazon combined globally.  In 2012 we achieved sales of RMB one trillion. This rose to RMB2.47 trillion for the year
ending March 2015. Our target is to have a turnover higher than Walmart globally,” she told ATI.
 The company is committed to invest US$160 million in coming years to build a network of
e-commerce centres across 1,000 counties and 100,000 villages in China — to help rural
consumers shop and sell online.
Zhou says the widespread use of mobile phones will bring online shopping to rural
areas. “There are 627 million Chinese still living in rural areas, where there are few supermarkets or big brand stores.”
Mobile transactions grew to RMB930 billion in 2014 — up 200 per cent over the previous year. “We did not expect to reach this level so soon. In our forecasts, we thought that would be achieved only by 2016, when mobile purchases would overtake transactions made on computers.”
The slowing of Chinese economic growth, says Zhou, will not put a dampener on online sales. “People shop online to stretch their money further. Why? Because there is more choice of products at better prices.”
Alibaba Group is harvesting information from its business over the past 16 years. Today, Big Data is being used to add value for both merchants and consumers. “We provide micro loans. We cater to SMEs because it is harder for them to get loans from banks. Alibaba has
recently introduced Sesame Credit for consumers,” says Zhou.
“We use Big Data to help merchants identify consumers and industry trends so that they are able to make better decisions and to develop better market strategies.”
 Alibaba Group does not run a logistics
operation, but its logistics affiliate, Cainiao, works with a network of partners to meet the logistics needs of merchants on its market-places. Cainiao has formed strategic partnerships with 15 delivery firms in China, which employ more than 1.5 million delivery personnel across the country.
In rural areas, Cainiao has also partnered with multiple regional last-mile delivery companies to deliver goods to the remote areas. In addition, it has established a network of more than 25,000 pick-up stations in more than 190 cities as part of its last-mile delivery solutions.     
Zhou explains that the group’s business
is premised on a triangle, anchored by
e-commerce on one side, payment on the other, with logistics and big data at the apex.
 She says part of its growth strategy is to
become the number one data-sharing company offering services to third parties.
 In July, Alibaba Group announced plans to invest US$1 billion in cloud computing globally, with the money to be spent on setting up data centres in the Middle East, Japan and Europe.
Alibaba’s cloud-computing arm, AliCloud, opened its first overseas data centre in Silicon Valley earlier this year, and plans to set up
another on the US eastern seaboard.
 Alibaba also intends to expand and support its network of technology and telecommunications partners, which currently include Intel Corp. and Singapore Telecommunications Ltd.  
Zhou says the group works with governments in the UK and France on cross-border trade issues.
 Having created some 14 million direct and indirect jobs in its eco system over the past 15 years, she says Jack Ma’s ultimate ambition is to create 100 million job opportunities in the world over the next decade.
 As a fellow alumina of an English language centre in their hometown of Hangzhou, Zhou is part of the original group of employees who have followed Ma’s journey with Alibaba from
Day One. “The last decade was the golden decade for e-commerce,” she says. “The next decade will be the diamond decade for
cross-border e-commerce.”