Alibaba has reported that its third quarter revenue increased 54% to $7.76bn, compared to $5.3bn for the same period last year.
The Chinese e-commerce giant credited the revenue growth to its commerce retail business in China followed up by Alibaba Cloud and also the integration of its newly acquired businesses, especially Youku Tudou and Lazada.
Alibaba stated that the robust revenue growth in its Chinese commerce retail business was due to its persisting efforts to improve the social commerce platform by delivering better user experience driven by data technology.
Alibaba Group CEO Daniel Zhang said: “Our robust December quarter demonstrates the strength of the Chinese consumer and Alibaba’s ability to create value across our vast ecosystem.
“The 11.11 Shopping Festival featured Alibaba at its best, integrating commerce, entertainment and social engagement, all happening globally at record scale. We are driving the age of ‘New Retail,’ which leverages big data and innovation to provide a seamless online and offline experience for nearly half a billion mobile monthly active users.
“This retail transformation will make it even easier and more efficient for brands and retailers to engage with these consumers anywhere, anytime.”
The commerce retail business contributed revenue of RMB40.8bn ($5.9bn), an increase of 77% in comparison to what it earned in the same quarter in 2015.
From outside China, the retail business for Alibaba brought the group revenue of RMB2.4bn ($353m), surging at 288% in comparison to what was registered in Q4 2015.
The group’s cloud computing business brought revenue of RMB1.8bn ($254m), an increase by 115% compared to Q4 2015.
On the digital media and entertainment front, Alibaba made revenue of RMB4bn ($585m), surging by 273% to its corresponding revenue in the same quarter of 2015.
Following the results it has delivered for Q4 2016, Alibaba is expecting its revenue for fiscal year 2017 to increase 53% year-over-year.
Alibaba’s $2.6bn plan to take leading domestic department store Intime private underlines the dilemma being faced by the hoards of disrupters: how to blur the lines between online and offline shopping, and create a model that keeps the fun and feel of shopping, while letting retailers and brands collate the big data that enable them to sell more goods, more quickly and more profitably.
“Today we cannot just separate online and offline,” Daniel Zhang, Alibaba chief executive, told a panel at Davos last week. Even when people are shopping in malls, he pointed out, they are on their phones — literally on and offline simultaneously.
Alibaba, which already boasts investments in offline players such as retailer Suning and white goods manufacturer Haier, is not the only ecommerce name going back to bricks and mortar. Last month, Amazon launched its checkout-free Amazon Go store. Other crossover innovations are springing up. Panasonic is shopping its “intelligent baskets”, which will price items as they are placed inside.
“To say that bricks and mortar is dead is wrong,” says Tom Birtwhistle, senior manager in PwC’s digital strategy division in Hong Kong. “It just needs to evolve, into smaller-format stores, for example, and embrace in-store digital technology.”
It is a lesson start-ups are also learning. Luke Grana, who set up his eponymous Grana clothing company in 2014, was forced into a U-turn on his original ecommerce-only plan — introducing pop-up “fitting rooms”.
“We realised we needed offline presence to increase brand awareness and push people online,” he says. “And lots of people want to try before they buy to get the fit right.”
Customers can try on clothes in-store but still order online via iPads — “there are no cashier tills” — and have their purchases delivered. These partially offline purchases now account for 10 per cent of sales.
It is a sentiment echoed by Alain Bejjani, chief executive of mall, retail and leisure operator Majid Al Futtaim Holding, who talks about stores as showrooms. “It’s not just products and price,” he told the Davos panel. “It’s about the seamlessness of the journey, and total integration between online and offline.”
Alibaba, which represents more than one-tenth of China’s total retail sales and about 75 per cent of those made online, according to HSBC, takes that literally. Its apps enable shoppers to navigate China’s sprawling malls, some of which span more than 1m sq ft, and find where their cars are parked when they emerge hours later.
Amazon unveiled its checkout-free grocery store last month
But it is also rewriting the rules on the well-rehearsed “click and collect” model and corralling big data to loop back to retailers, allowing them to manage their inventory more efficiently.
“Alibaba and Amazon have the same two goals. Two billion customers and a reinvention of the retail model and experience,” says Michael Zakkour of Tompkins International.
“Much in the same way department stores, chain stores, malls, Big Boxes and ecommerce have reinvented retail in the past, Alibaba is using technology, big data and imagination to connect offline and online so that there is only a unichannel retail experience.”
Mr Zhang talks about collapsing the traditional vertical system that sees manufacturers pass goods to a handful of large distributors, who in turn pass them on to smaller ones, who sell to retailers before the goods finally reach the consumer.
Before, he says, a consumer could order a drink and have it delivered to their home. “Now you can order it and it’s delivered to your next stop.” That means inventory can no longer be managed by distributors, who lack the full picture, but requires the whole chain to be digitised and shops to become mini fulfilment centres.
This is where Alibaba takes integration a step further — or rather, a step back, into what founder Jack Ma has called “new manufacturing”, where data can be used to tell the makers in advance what consumers want to buy.
Manufacturers are also waking up to a flatter system and seeking ways to move closer to shoppers. Unilever, the Anglo-Dutch consumer goods manufacturer, last July paid $1bn for Dollar Shave, which sells razors and grooming products direct to consumers using home delivery.
This month Coty, maker of perfumes and lipsticks, bought a majority stake in Younique, an online cosmetics retailer. And the crossover between internet and manufacturers can also be spotted in personnel shifts: US toymaker Mattel tapped Google executive Margaret Georgiadis as its next chief executive.
Some question whether predictive data are enough to dictate fashion trends. “They’re not going to be on the back streets of South Korea looking at styles or pieces of fabric,” says one player.
Others point to conflicts. Alibaba prides itself on being a platform rather than an asset-heavy ecommerce player such as Amazon, yet the Intime acquisition will see it integrate a bricks-and-mortar business into its asset-light ecosystem.
Alicia Yap, analyst at Citigroup, is “cautious” about the future integration and about how Alibaba “would manage the potential conflicts between Intime vs other merchants and brands on its platform”, she writes in a research note.
Others note that China’s online/offline models differ from the west, where platforms are mainly owned by the retailer or brand. Instead, China ecommerce is dominated by third party platforms, be it Alibaba’s Tmall or JD.com.
“If customers are buying through a third party you are never going to get the same level of data granularity on the customer as if it was yours. That’s what all the big [multinational corporations] are beginning to grapple with,” says Mr Birtwhistle.
“So linking data between on and offline is difficult. Solving that problem is the multi-billion-dollar question. No one has really got an answer to that yet.”
Alibaba founder Jack Ma says business globalisation is good – but not yet good enough.
I believe globalisation needs to be improved,” Ma told an audience during the second day of the World Economic Forum annual meeting in Davos overnight. “Globalisation, I think, should be inclusive globalisation.”
Probed by interviewer New York Times columnist Andrew Ross Sorkin, Ma said his goal is to shift the balance of power in globalisation away from big companies and toward empowering small businesses. He said globalisation was largely controlled by 60,000 large businesses over the past three decades.
“What if, in the next 30 years, we can support 6 million businesses across the board?” he asked.
Ma’s appeal for more-equitable opportunities for success follow a commitment he made in a discussion with US President-elect Donald Trump earlier this month to facilitate creation of one million small business jobs in the US over the next five years.
The Alibaba founder touched on that talk with Trump during his interview with Sorkin, saying he found the President-elect “open-minded, and (he) listened to what I talked about.” The two discussed how to develop US small businesses, promote US agricultural products and more trade between the US and China.
“He was very happy about the results we had,” Ma said.
Asked by a member of the audience about some of Trump’s prior negative comments on China’s trade surplus with the US and whether it might lead to a damaging trade war, Ma urged people to “give President Donald Trump some time. He has an open mind.” More broadly, he said a trade war “would be a disaster for the two countries and the world.”
“I would do anything to stop it,” Ma said.
Sorkin asked how Amazon’s business model stacked up against Alibaba’s, specifically, whose model is right and whose is wrong.
“I hope both are right,” Ma said. “The world can never have one model. If you only have one correct model, it’s boring.”
He said the two companies’ differing business models derive from fundamentally different philosophies. Alibaba is about empowering sellers, services companies, logistics companies and others to build their businesses, rather than owning the entire sales chain and logistic network.
“Amazon is more like an empire,”he said. “Everything, they want to control by themselves. We want to be an ecosystem… Our philosophy is to empower others to sell, to service, to make sure others are more powerful than us.”
Ma said he’s looking forward to the day when 10 million small business sellers can compete with a giant like Microsoft and “we can make every company become Amazon.”
Ma again touted his company’s efforts at weeding out fakes on its platforms using big data. He said Alibaba has made great strides at detecting and taking down counterfeit products and worked with law enforcement to make cases against hundreds of sellers of counterfeiters last year. He said Alibaba spends about RMB1 billion a year on anti-counterfeiting efforts.
“People criticise us. We are happy about the progress we make,” Ma said.
Discussing Alibaba’s foray into Hollywood, Ma said the decision to go into movies came a couple of years ago during a periodic strategic review. He said Alibaba decided to enter show business as part of its so-called “2-H Strategy” – standing for happiness and health. He said movies are fun and enjoyable and that, as with all of its businesses, it’s taking a long-term view toward its success. Asked what he hoped to achieve through investment in entertainment, he compared and contrasted Chinese and American movies.
“In China movies, the heroes are always dead. In American movies, heroes never die. In my movies, I want to make the hero live,” Ma said, drawing laughter from the audience.
With ambitions to “scale rapidly”, US sneaker and apparel marketplace Stadium Goods has expanded into China through an exclusive partnership with Tmall Global, an extension of Alibaba Group’s B2C Tmall.com business.
Stadium Goods co-founder/MD Jed Stiller says the company had already had “tremendous growth” in China.“More importantly, we have helped legitimise the resale model by making it more relevant and accessible to all types of consumers.
“We’re thrilled to have found the perfect partners in Forerunner Ventures and The Chernin Group, among others, to build on our successes to date as we look to innovate and scale rapidly.”
Meanwhile, Stadium Goods has just raised more than $4.6 million in fresh equity funding. This will help fuel its expansion into the mainstream footwear market.
Founded by Still and John McPheters in late 2015, Stadium Goods unveiled StadiumGoods.com and its Soho retail location in New York City, offering sneaker consumers around the world a service-focussed approach to buying and selling collectible footwear, apparel and lifestyle goods.
“Stadium Goods has transcended a seemingly niche market, proving it can be a critical player in the larger global athletic footwear retail market,” says Forerunner Ventures founder Kristen Green. “There hasn’t been a company of its kind offering this level of aesthetic, product mix or services to date, so we’re very excited to partner with it.”
Alibaba Cloud the National University of Singapore (NUS), and EZ-Link, Singapore’s largest issuer of Contactless e-Purse Application (CEPAS) compliant cards, have teamed up to boost Singapore’s smart computing and data-driven capabilities.
The three organizations have signed a memorandum of understanding aimed at bolstering the University’s data science curriculum and paving the way for a pilot data analytics project with EZ-Link.
The collaboration is also aimed at helping build local IT skillsets, meet enterprise demands and support the research and development of advanced technologies in the big data era.
Ethan Yu, Vice President of Alibaba Group and General Manager of Alibaba Cloud Global said, “Singapore has been a pioneer in fostering innovation and technological disruption in Asia, and we are proud to contribute to the nation’s development through our partnership with NUS and EZ-Link.
By leveraging the expertise of academia, the government and enterprises, we intend to raise the bar in nurturing talent, business and communities to reach new frontiers of the digital economy.”
Alibaba Cloud will contribute $500,000 in cloud credits towards the use of its cloud platform and data centres by students and researchers from NUS for academic and research purposes. IT experts from Alibaba Cloud will also offer hands-on lessons on the use of Alibaba Cloud’s platform for NUS staff and students.
In addition, Alibaba Cloud and NUS will collaborate in the areas of cloud computing, big data analytics, artificial intelligence, cybersecurity, quantum computing, and interactive digital media, as well as identifying opportunities for joint research projects and information exchange.
“NUS contributes to Singapore’s vision of becoming a digital economy through our University’s strengths – creating value through fundamental and applied research, and training the next generation of digital talent,” NUS deputy president for research and technology Professor Ho Teck Hua said.
“By working with Alibaba Cloud, a global cloud leader, we can tap into its extensive ecosystem and technology capabilities for these efforts. The partnership with Alibaba Cloud and EZ-Link further demonstrates the close collaboration between academia and industry in solving real-world problems, and will help contribute towards a future, cashless Singapore.”
Alibaba Cloud and NUS are currently working with EZ-Link to analyze card usage patterns across the EZ-Link card schemes, service touch points, and customer segments to improve customer experience and create better services via real-time insights.
China’s government has issued an order for all app stores on the mainland to be registered.
In a notice on its website, the Cyberspace Administration of China says its offices should ensure that records are kept on the country’s many app stores.
“Many apps have been found to spread illegal information, violate user rights or contain security risks,” says the post.
Unlike in the west, China’s app store market is very fragmented with as many as 150 vying for customers, including market leaders Google Play and Apple’s App Store.
Registration is necessary, it says, to ensure it is clear who takes responsibility if apps, or app stores, are found to engage in illegal practices.
Three weeks ago, Apple removed the English- and Chinese-language news apps of The New York Times from its China app store. The US tech giant says the government had told it the apps violated local regulations.
Google’s store for apps using its Android operating system is blocked in China, with third-party stores taking its place. Most of China’s biggest app stores are controlled by internet and smartphone companies such as Alibaba, Baidu, Qihoo 360, Tencent and Xiaomi, as reported.
It says Chinese laws are often intentionally broad and open-ended to allow regulators discretion in enforcing them. Concrete steps like the new order for registrations can indicate how laws will be carried out in practice.
Chinese eCommerce giant Alibaba has teamed up with some of the world’s most-counterfeited brands to fight against copycats.
Collaborating with such global brands as Louis Vuitton, Samsung and Swarovski, Alibaba will provide its members with big data and other support to help them block, identify and even take down listings from its marketplaces such as Taobao and Tmall. Those two sites boast 1 billion product listings at any given time.
In return, the brands have committed to share their anti-counterfeiting data with Alibaba.
The move follows a lawsuit filed by the internet powerhouse against two vendors selling knock-off Swarovski watches from their online shopping bazaars on Taobao, claiming 1.4 million yuan (US$202,950) in losses. Taobao is the retail platform for smaller merchants.
“The most powerful weapon against counterfeiting today is data and analytics, and the only way we can win this war is to unite,” says Alibaba’s chief platform governance officer Jessie Zheng.
“Alibaba welcomes brands and other organisations to join us in what we believe is the world’s first ‘big-data anti-counterfeiting alliance’.”
Taobao was returned to the US government blacklist of “notorious markets” last month for hosting fake items, four years after Alibaba lobbied American trade officials to drop the platform from the list.
Listings removed
Alibaba says it is disappointed by the decision, noting it has “proactively removed more than double the number of infringing product listings than in 2015”. The company employs 2000 permanent staff and 5000 volunteers devoted to spotting fake goods.
According to the International Anti-Counterfeiting Coalition, a nonprofit watchdog overseeing piracy concerns, China is the biggest market for knockoffs globally with handbags, footwear, watches and iPhones topping the list of most-faked items.
Louis Vuitton, Nike, Ray Ban and Rolex are among the labels that seem to be more intensely targeted by counterfeiters, says a report by the Organisation for Economic Co-operation and Development (OECD).
Domestic brands also have fallen victim. Chinese liquor maker Kweichou Moutai has confiscated 300 tonnes of fake Moutai in a three-year drive against bootleggers, whose products can feature packaging identical to genuine products.
Chinese authorities have also stepped up efforts to root out people involved in marketing fake goods, staging raids and arresting thousands of suspected offenders.
Alibaba has announced a proposal to privatise the Intime Retail Group, an investment-holding company that manages department stores and shopping malls in China.
Alibaba Investment, a wholly owned subsidiary of Alibaba Group Holding, together with an entity wholly owned by Shen Guo Jun, the founder of Intime Retail, have asked the board of directors of Intime to put forward to shareholders a proposal to privatise the company by way of a scheme of arrangement.
Under the proposal, shares in Intime would be cancelled in exchange for a payment by the joint offerors at HK$10 (US$1.29) a share, representing a premium of about 53.59 per cent over the average closing price of Intime shares over the past 60 days, and 42.25 per cent over the closing price of HK$7.03 before trading was suspended on December 28.
Intime runs 29 department stores and 17 shopping malls, mainly in first- and second-tier cities in China. It has a particularly strong footprint in Zhejiang province, where Alibaba Group is headquartered. Alibaba owns about 28 per cent of the equity interests in Intime pursuant to an initial investment in July 2014 and a conversion into equity of convertible debt securities in June last.
Under the proposed transaction, Alibaba would become the controlling shareholder of Intime, and it is expected its shareholding in the company would increase to about 74 per cent. This reflects Alibaba Group’s strategy to transform conventional retail by leveraging its substantial consumer reach, rich data and technology.
Dynamic shift
The dynamic shift to mobile in China has enabled Alibaba Group to work with brick-and-mortar retailers to integrate online and offline customer data, enhance consumers’ in-store experiences as well as achieve improvements in inventory efficiency and sales turnover.
As of the quarter ended September, 78 per cent of the gross merchandise volume on Alibaba Group’s China retail marketplaces was generated from mobile, and monthly active mobile users reached 450 million in September.
“China’s total retail sector is a US$4.5 trillion economy and is growing at 10.7 per cent a year,” says Alibaba Group CEO Daniel Zhang. “Alibaba is working with offline retailers to transform conventional approach, create new consumer shopping experiences and use actions to embrace future opportunities under the new retail model.
“We don’t divide the world into real or virtual economies, only the old and the new. Those who cling on to the old ways of retailing will be disrupted, and brick-and-mortar businesses will be able to create value for consumers if they are integrated with the power of mobile reach, real-time consumer insights, and technology capability to improve operating efficiency. Our combination with Intime will enable us to tap into the long-term growth potential of a new form of retail in China powered by internet technology and data.”
Alibaba says the maximum amount of cash needed for the Intime proposal is expected to be about HK$19.8 billion. The two companies are financing the transaction through internal cash resources and/or external debt financing.
The proposed transaction is subject to customary closing conditions, including approval from Intime’s independent shareholders and the sanction of the Grand Court of the Cayman Islands where the company is registered.
Users of China mobile wallet app Alipay hit spending records last year both online and in stores.
Of the app’s 450 million users, most are in Shanghai, paying out an average US$20,400 last year, says the Alibaba spin-off company. This was 1.5 times more than they spent the previous year.
While the average middle-class wage in Shanghai is $35,000, this does not account for undisclosed income such as from rented property.
These figures have been released just weeks after the app hit a record 1 billion transactions in a single day.
Other highlights from Alipay’s year:
71 per cent of Alipay transactions were on mobile devices, up from 2015’s 65 per cent
Cash-strapped millennials, in China classified as those born in the 1990s, spent an average of $1080 through the app
Gen Y, those born in the 1990s, averaged $1590
The top 10 destinations outside China where Alipay was used for in-store shopping were South Korea, Hong Kong, Thailand, Macau, Taiwan, Japan, Australia, Singapore, New Zealand and Germany
Its single biggest overseas spender splurged $38,900.
Meanwhile, the company has been signing up airports, major malls and top restaurants so China’s record 133 million overseas tourists can still use the app.
About 2.3 billion Alipay transactions were chalked up using the built-in Ant Credit Pay, allowing for payment in installments, up 344 per cent from 2015.
Alipay’s small loans service, Jiebei, issued loans worth $43.4 billion to 12 million users.
The Alibaba Group has complained about the United States Trade Representative’s (USTR) inclusion of the Taobao marketplace in its latest “notorious markets” list.
The Chinese e-commerce giant said the inclusion ignores the action Alibaba has taken against counterfeiters in recent years.
“In 2016 alone, we proactively removed more than double the number of infringing product listings than in 2015. It is, therefore, unreasonable for the USTR to have concluded that Alibaba is less effective in anti-counterfeiting than when it reviewed our efforts in 2015 and when it removed us from its list four years ago,” the company said in a statement.
The findings of USTR’s special review into notorious markets highlights specific physical and online markets around the world that are reported to be engaging in and facilitating substantial copyright piracy and trademark counterfeiting.
“Tens of millions of American jobs and several trillion dollars of our gross domestic product rely on American creative and innovative industries,” said Ambassador Michael Froman in a news release. “The marketplaces, tactics, and schemes that undermine and threaten America’s creative industries change quickly and require our constant attention.”
He added that the 2016 List underscores the need for accountable governments everywhere to take on these forms of piracy and counterfeiting at every stage of the global supply chain to prevent final products that put health and safety of end-consumers at risk.
The USTR report flagged down Taobao “due to the large volume of allegedly counterfeit and pirated goods available and the challenges right holders experience in removing and preventing illicit sales and offers of such goods.”
The body did acknowledge that Taobao’s parent company, the Alibaba Group “has taken steps to address right holders concerns on Taobao,” such as establishing internal offices focused on IPR and appointing experienced officers to guide these efforts, as well as developing technology to prevent counterfeit sellers from re-opening storefronts.
“While recent steps set positive expectations for the future, current levels of reported counterfeiting and piracy are unacceptably high,” the report stated.
Alibaba said the report is inconsistent with the effective collaborative approach the company has taken with brands in the fight against counterfeiting.
“We are very proud of our highly robust anti-counterfeiting programs and believe we have dedicated far more personnel, financial resources and advanced technologies toward protecting intellectual property than any other e-commerce company,” it said. “Despite this counterproductive action by the USTR, we remain fully committed to protecting the IP of rights holders, both through significant proactive measures and working with brand owners, to combat counterfeiting online and offline.”
After securing dominance in its home market, China’s Alibaba Group Holding is racing to conquer the still nascent e-commerce market in Southeast Asia. Although the size of the market in Southeast Asia pales in comparison with China’s, it is expected to grow 32 percent on average each year through 2025, according to one industry executive.
US-based Amazon.com Inc also has its sights set on the region, making a face-off with Alibaba all but certain. Alibaba got to the Southeast Asian market first, but its victory is far from assured. Experts said there is no silver bullet for success, especially in an evolving e-commerce market facing difficulties of its own.
A 7-Eleven convenience store in Phuket, Thailand, that accepts Alipay.
Among the glossy, green trees in Phuket, the largest island in Thailand, the landscape is dotted by many 7-Eleven convenience stores that accept Alibaba Group Holding’s mobile payment application Alipay.
“Alipay is available in almost all 7-Eleven convenience stores here, and people are encouraged to use it with random discounts,” an employee at a 7-Eleven store on Thanon Patak Road in Phuket, who declined to be identified, told the Global Times on Saturday.
7-Eleven has added Alipay to its payment options at more than 9,000 outlets across Thailand since April.
Alibaba’s move to get Alipay into Thailand is widely perceived as a way to attract Thai smartphone users and technology-savvy consumers as it expands into Southeast Asia in 2016.
In April, the Chinese e-commerce giant acquired a controlling stake in Lazada, considered the Amazon of Southeast Asia, for $1 billion.
In November, Alibaba furthered its expansion by taking over the Singaporean online grocer RedMart via Lazada.
Alibaba’s CEO Zhang Yong said several times at press conferences in 2016 that the company’s next major goal is to help merchants on its platform enter the Southeast Asian e-commerce market.
However, expanding into Southeast Asia might be easier said than done. In the region, many people are familiar with the concept of e-commerce by name only and don’t have much of an inclination to try it.
A new frontier
A 20-something resident in Phuket surnamed Kung was surprised when she heard that Chinese shoppers spent 120.7 billion yuan ($17.4 billion) on online purchases via Alibaba’s bazaars on November 11 alone.
“My friends and I seldom shop online and do not really intend to do so because we can get whatever we need in the market or at nearby convenience stores,” Kung told the Global Times on Friday.
The woman’s biggest concern is quality. She dislikes that she can’t feel the texture of clothing sold online and worries about unwittingly buying knockoffs.
The poor reception for online shopping is reflected on the streets of Phuket, where few express deliverymen can been seen – unlike in China, where they are commonplace.
Lazada Thailand CEO Alessandro Piscini acknowledged on Thursday that Southeast Asia has a small e-commerce industry.
At a press conference with about 200 Chinese reporters in Phuket on Thursday, Piscini cited the region’s 3 percent online retail penetration rate (as of November 2015), which represented about $6 billion in sales. By comparison, China had an online retail penetration rate of 14 percent and online sales totaling $293 billion during the same period.
Still, Piscini was optimistic, saying that the small penetration rate shows that Southeast Asia has a large untapped market for e-commerce. He predicted that the region’s e-commerce market will grow by 32 percent annually to more than $200 billion by 2025, thanks to local government encouragement for the digital economy and urbanization, as well as the region’s rapidly growing middle class.
By 2020, Southeast Asia’s GDP is expected to grow by an average rate of 5.5 percent a year, Piscini said. Middle-class consumers around 35 years old will account for 60 percent of the region’s overall population, which will grow to 668 million from the current 644 million, according to latest estimates by the global statistical information provider Worldometers.
Looming rivalry
Amazon.com reportedly plans to launch in Southeast Asia in the first quarter of 2017, meaning that Alibaba and its US-based competitor will soon clash in the region.
Amazon’s entry into Southeast Asia will be done via Singapore, where “the level of customer spending and consumer culture is more closely aligned with Western markets,” TechCrunch reported in November, citing unnamed sources.
The grocery store business is shaping up to be the first battleground in the region between Amazon and Alibaba, according to the report. The rivalry between the two tech mammoths in the Southeast Asian market seems unavoidable as both have stepped up their international expansion.
“The two account for a huge amount of their home e-commerce markets, with Alibaba holding about 80 percent of online sales in China and Amazon controlling about 60 percent of the US market, so competing for new territory is a logical move,” Lu Zhenwang, founder of Shanghai Wanqing Commerce Consulting, told the Global Times on Sunday.
Alibaba should not be fazed by the potential threat of Amazon, experts said.
The Chinese company has an edge on the shopping side, but also got an early start with logistics and payments via acquisitions, experts noted.
In November, Alibaba’s financial arm Ant Financial signed an investment deal with Ascend Money, a leading online payment firm in Thailand, which also operates in Indonesia, the Philippines, Vietnam, Myanmar and Cambodia. It also snapped up a stake in Singapore’s Singpost, which is experienced at delivering parcels across Asia.
Dearth of development
Alibaba may have got to Southeast Asia ahead of Amazon, but being first doesn’t guarantee victory.
“Southeast Asia is a varied e-commerce market and full of challenges that need to be overcome,” said Liu Dingding, a Beijing-based independent analyst.
In addition to weak market reception, delivery is also perceived to be a tough issue.
Lazada Thailand CEO highlighted the complexity of delivery in Southeast Asia during Thursday press conference, citing the region’s underdeveloped infrastructure.
Liu agreed, noting that the underdeveloped infrastructure hindered the inter-city cargo or parcels delivery, which harmed users’ experiences.
According to Kung, residents in Phuket usually need to wait for one to two weeks to get their online purchases. In China, this usually takes about three days.
Against this backdrop, the e-commerce ecosystem in the region is still evolving, giving anyone a possibility to lead the market as long as it can find the right local partners, Liu said.
“Amazon, though a latecomer to Southeast Asia, still has the chance to win because it has more experience than Alibaba in expanding its business in the international marketplace,” Liu told the Global Times on Sunday.
From geopolitical disputes to debates over cultural appropriation, China tends to be a place where it’s easy for foreign brands to get embroiled in controversies no matter how hard they try to avoid it. That’s no different for the luxury industry, which saw its fair share of issues this year.
Below is Jing Daily’s list of 10 major controversies in China’s luxury industry over the course of 2016, in no particular order:
1. Lancôme’s canceled Denise Ho concert. Thanks to antagonism by the Global Times, what was supposed to be a lighthearted promotional pop concert sponsored by the French beauty brand turned into a flashpoint in the ongoing tensions between China and Hong Kong.
2. Jack Ma’s statement that fake luxury goods are “better quality” and made in the “same factories” as real ones. In a speech to investors in June, Jack Ma incited luxury executives’ anger when he made his declaration about “fake” goods, which he later clarified in a Wall Street Journal op-ed to mean off-brand items.
3. The mutiny over Alibaba at the International AntiCounterfeiting Coalition. In another controversy over fakes on Alibaba platforms stirred up this year, luxury brands revolted when the IACC admitted Alibaba in a special “general membership” category. AfterGucci, Michael Kors, and Tiffany & Co. quit the group in protest, Alibaba’s membership was suspended.
4. A Daimler executive’s racist rant in Beijing. A People’s Daily report stating that a Daimler executive in Beijing shouted a racist remark and used pepper spray over a parking dispute resulted in the man being promptly relieved from his position. That didn’t keep the controversy from going viral online and sparking anger, however.
5. Victoria’s Secret’s mix of dragons with lingerie at its annual fashion show. In a possible attempt to reach Chinese consumers, the brand featured several outfits with China-inspired designs for the Victoria’s Secret Fashion Show, but not all of China’s netizens were impressed.
6. The revelation of tensions in the 2015 Met Gala planning process. This one isn’t much of a “controversy” per se, but this year’s release of Met Gala documentary The First Monday in May showed the behind-the-scenes debates over the curation of the China-themed exhibition.
7. A ban from China for the actress Birkin handbags are named after. While Chinese buyers have been paying record prices for Birkin handbags at auction, 60s icon Jane Birkin has been using her namesake handbag to display political messages. When she wasn’t granted a visa to perform at a concert in Shanghai this summer, Chinese media mentioned her participation in 2008 Tibet protests in France and her use of the handbag to display a Tibetan flag.
8. China’s K-pop ban poses a problem for luxury brands. Long a source of major publicity for luxury brands in China, Korean pop stars have attracted investment from LVMH through its stake in Korean entertainment company YG Entertainment. But a recent reported ban on Korean TV shows on Chinese television and Korean pop stars entering China has the industry worried about the future.
9. Taiwan’s mainland tourist slump. Politics have been known to cause significant shifts in where mainland Chinese tourists decide to travel in Asia, and Taiwan learned that lesson the hard way this year. After cross-Strait relations soured following the presidential victory of Tsai Ing-wen, mainland visitor numbers plunged, with a 69 percent decrease during Golden Week.
10. Donald Trump’s China-related conflicts of interest. As Trump’s business interests around the world remain under scrutiny over conflict-of-interest issues, his China ties are receiving less scrutiny at the moment than links to Russia, but China plays no small role in his business. He’s personally bragged on the campaign trail about the multi-million-dollar luxury apartments he’s sold to elite Chinese buyers, while AFP reported that the Trump Hotel Collection negotiated a memorandum of understanding with China’s largest state-owned enterprise worth around $100 to $150 million.
Chinese top legislature is deliberating a draft law that will regulate and facilitate e-commerce in the country.
The draft law was tabled for review by legislators at the bimonthly session of the National People’s Congress (NPC) Standing Committee, which runs from Monday to Sunday. It is the first reading of the draft by the top legislature.
Explaining the draft to lawmakers on Monday morning, Lyu Zushan, deputy director with the NPC’s Financial and Economic Affairs Committee, said booming e-commerce in recent years had served to reveal loopholes in China’s legal system and commercial rules.
The draft law will facilitate e-commerce growth, help maintain market order and protect consumer rights.
The draft law said the nation should put online and offline commercial activities on an equal footing, and protect the safety of e-commerce transactions.
All e-commerce operators have an obligation to pay taxes and should acquire the necessary business certificates, under the draft.
Operators must also ensure personal information security for consumers. Those that fail will face fines up to 500,000 yuan ($72,000) and could have their business certificates revoked.
They must also work to protect intellectual property, the draft said.
The draft requires third-party e-commerce platforms to offer technical support for “law enforcement activities by relevant authorities.”
China is the world’s largest e-commerce market. According to Lyu, e-commerce trade amounted to over 20 trillion yuan ($2.87 trillion) in 2015, with online retail sales totaling 3.88 trillion yuan.
Last month, Chinese e-commerce giant Alibaba saw 120.7 billion yuan in gross merchandise volume during its 24 hour Singles’ Day event, an annual online shopping spree on November 11.
Using its strengths in marketplace, big data and logistics, Alibaba Group will help rural communities sell their products to cities dwellers so they can stock up on Spring Festival supplies and along the way help give rural economies a lift. At the same time, quality products from all over the world will be brought to Chinese consumers as they celebrate the most important festival on the Chinese calendar.
Highlights of this year’s upcomg Chinese New Year Shopping Festival include:
Promotion of two-way trade:
To promote trade between rural and urban regions, Tmall.com’s fresh food channel will introduce fresh fruit and meat produce from abroad, such as cherries from Australia, orange roughies from New Zealand and kurobuta pork from the US, to Chinese consumers. At the same time, poultry and meat from villages, including chicken from Qingyuan County of Guangdong Province, beef from the Horqin Grassland of Inner Mongolia, organic mutton from licorice-fed lambs in Gansu Province, yak meat from Aba of Sichuan-Tibet Plateau, and mutton from Yanchi County of Ningxia Hui Autonomous Region, will be brought to dining tables in the cities.
Live broadcasts about rural produce:
To give urban consumers peace of mind about rural produce, 12 “village celebrities” will conduct live broadcasts via Tmall and Taobao mobile apps and show urban consumers how some of the farm produce are harvested and processed before they end up as delicacies on the dining table.
Rural family reunion photo project:
For rural children whose parents have gone to cities to find work, Chinese New Year is often the only time when they get to see their parents when they return home. For communities where a family photo is often considered a luxury, Rural Taobao’s local services booking platform are mobilising its merchants to give away family portrait packages to 10,000 families across 20 counties as a first step that Alibaba says is to assist bring families closer together.
Rural employment platform:
A one-stop village employment platform will be launched by Rural Taobao in January to provide job information for workers returning to their home villages for the Chinese new year holidays. Through the project, it is hoped that some of them will be able to find work closer to home. As a part of the project, Rural Taobao representatives will assist job seekers in completing their résumés and entering their information on the platform.
New Year Eve’s banquet:
For the elderly and children who are left behind in villages, Rural Taobao is organising a Chinese new year’s eve banquet for 6,000 tables of guests so they can share in a moment of warmth and togetherness.
Sun Lijun, Vice President of Alibaba Group who oversees the company’s rural business division, said, “Alibaba strives to create closer connections between urban and rural areas in China, narrowing the wealth gap and improving the living standard of those who live in villages.”
Alibaba Group launched Rural Taobao in 2014, mainly as a platform to promote rural online trade. Alibaba Group Holding Limited is a Chinese e-commerce company that provides consumer-to-consumer, business-to-consumer and business-to-business sales services via web portals. It also provides electronic payment services, a shopping search engine and data-centric cloud computing services. The group began in 1999 when Jack Ma founded the website Alibaba.com, a business-to-business portal to connect Chinese manufacturers with overseas buyers.
Irish retailer Musgrave is to begin exporting SuperValu own brand products to China.
It will initially supply up to 40 own brand products – including SuperValu breakfast cereals, coffee, jam, biscuits and healthy snacks amongst a range of other goods.
Musgrave has agreed a partnership with Alibaba Group, and will use its Tmall Global ecommerce platform to sell directly to Chinese consumers.
Tmall Global is an overseas platform and an extension of Alibaba Group’s B2C Tmall business – which enables overseas merchants to enter China’s online retail market.
Musgrave will also open a flagship SuperValu e-commerce storefront on Tmall Global, making it the first Irish retailer with a presence there.
Musgrave say the storefront will be offered over time “as a potential route to market” for Irish food producers seeking to access China.
Alibaba’s logistics affiliate, Cainiao Network, will manage the distribution of products.
Musgrave CEO Chris Martin said: “Our core business in Ireland is performing well and our grocery retail and wholesale brands occupy leadership positions in their respective markets.
“We are exploring new opportunities to grow our business including export and we are excited by the opportunity to partner with Alibaba Group.
“In the past five years Chinese consumers are increasingly purchasing overseas through online shopping.
“We expect that the heritage of SuperValu and the provenance of our products will be attractive to Chinese consumers.”
David Lloyd, director of UK and Ireland for the Alibaba Group, added: “Chinese consumers have a desire to discover high quality brands from around the world that they can trust and enjoy.
“Because of Musgrave’s long history of providing quality food produce, we are delighted to be working with them to bring their high quality SuperValu range to Chinese consumers via our Tmall Global platform”
