21 Oct 2016

The future of e-commerce, according to Alibaba

From Jesse Mulligan, 1–4pm, 2:29 pm on 21 October 2016
Alibaba headquarters

Photo: flickr.com / leighklotz

Chinese billionaire and Alibaba founder, Jack Ma, has big dreams. He plans to create 100 million jobs, and transform the world of retail, globally. He penned a letter to his shareholders recently, predicting what the next 30 years of technological change will look like.

Scott Cendrowski is based in Beijing and writes for Fortune magazine.

Read an edited excerpt of the interview below:

Is there anything about China that makes it particularly suitable for the Alibaba model? Is there anything that would stop that model from taking off globally?

When Jack Ma comes out and says that e-commerce is like electricity and this is the big breakthrough and we’re going to experience 30 years of this breakthrough filtering through our markets, our economy, basically what he means is in China they are going to experience that. Because they didn’t really start with traditional retail here. China has only been opened up to the world for 40 years or so and they haven’t had time to expand malls, shopping centres and everything we take for granted outside of their relatively big cities, so Alibaba is basically working off of green-space enable to expand in a way that almost nowhere else in the world you can.

That said, what he is talking about is an idea that everyone is thinking about. In the US, it’s Amazon and Google. The idea is basically aligning e-commerce and regular shopping, together. So the consumers don’t think between the two. They just buy the pair of shoes that they are looking for and whether that is more convenient to do when they’re out watching a movie with a friend and they pick it up at a store, or Amazon delivers it to their doorstep via drone in eight hours, maybe they don’t care. It’s all about convenience. That is what Ma is getting towards.

He is projecting Alibaba’s future out in saying, ‘We are going to become your choice for whatever type of shopping you want to do and we are going to have our fingertip on it.’ The big question that you ask and everyone is trying to figure out now, is do they have a shot of doing that outside of China.

He’s also looking at strengthening and developing other aspects of retail; the cloud, and also big data. China is the biggest of big data of course. Is it still to be exploited properly in that country?

Yeah. All the Chinese tech companies are talking about harnessing big data and we don’t really hear what the end game is, but I think what they are going for is something that emulates the success of US tech companies in gathering data sets that you just wouldn’t be able to create if you didn’t have tens of millions of people using your apps and your stuff. This is the case with BaiDu. BaiDu is the Google of China and they have set out to build their own self-driving car. So how does BaiDu do it better than Google? Well they have something like 800-900 million people using their map app and they’re figuring out, people get in accidents at this intersection, but they don’t at this other one. We’ll put that into the data set, we’ll use that for another time. Ma has businesses that similarly has tonnes of users and they’re trying to use that so they can make predictions about use behaviour and future products so they can sell them.

What is the relationship like between Alibaba and the Chinese government? Are they just pleased to have such a successful business operating or is regulation and interference a threat?

In every country business and governments are pretty close, none more so than China. Jack Ma’s line has always been that he keeps the government close but he stays far away from politics. I think you just have to take that at his word. Alibaba hasn’t really relied on the government as much as other countries because they have basically done something that no one else has done in a non-threatening way. They just got a bunch of people from the small cities and the countryside to sell stuff online to the rich people on the coast in China. So it’s not as if Alibaba is coming in, expanding in South East Asia and across the globe, with the government behind it. That said, you better believe there is some pride in Alibaba being known across the world and from now on it is going to be a government priority to support them in all of the ways that you would expect a national champion like Alibaba to be supported.

I hear stories about Chinese people leaving the cities for these rural towns which are cheaper to live in and going back and producing products for Alibaba, so that must be a tremendous boost for the rural economy.

It’s true. These are places that have basically been forgotten in China’s modernisation. People have been leaving villages for 35 years because the only opportunities are in the cities. But now Alibaba’s pitch is, ‘No wait, you can live far away from the coastal areas where rent and housing prices are way out of your league and run your business selling… bicycles to Shanghai and that’s the opportunity we are going to give you with our platform.' China hasn’t had someone telling the countryside that in forever, because the opportunities haven’t been there. That is a big deal and that is one of the reasons why the government is going to be supportive of Alibaba going forward because Jack Ma is saying those things that align with its own interests.