‘Embrace change’ Alibaba CEO tells retail, FMCG executives

“Embrace change,” Alibaba CEO Daniel Zhang told delegates to the Consumer Goods Forum Global Summit in Singapore this morning.

“The key thing is always to embrace the change. That is the core value of Alibaba. The world is changing so fast. Today we are saying that everybody is on the internet… tomorrow everything will be connected. The internet will change.”

Asked to predict what the next big change will be for Alibaba and the broader e-commerce industry, Zhang nominated a revolution in the payment process, through iris recognition.

“Tomorrow there will be no need for virtual wallets. Everybody – every eye – is a wallet. Can you imagine that? This day is coming soon.”

Data at the core

Zhang explained that while Alibaba is active in so many areas of the economy – creating what many retail observers describe as an “ecosystem” – each business division shares a single common factor.

“We are in many different areas, but we have a core. The key word is data. All we do is to capture the data from a real business situation.”

By capturing and analysing data from business units like its marketplaces, local services, payments, marketing, logistics and cloud computing, Alibaba can then feed it back into ecosystem.

“[Then] we can enable our partners to do a better job.

“There is no difference between online and offline. By using data we can improve the efficiency of the store operation. We can understand on a real time basis on the behaviour of the people … all around the store. We can know what they want and we can adjust our assortment on a real-time basis. The key thing is to enable the retailer to have a digital operation.”

Every day, Alibaba sells to some 600 million customers on its marketplaces; its sales volume is about US$760 billion a year. The company has succeeded by enabling its partners – SMEs, retailers and brands – to do their business better online, rather than buy goods from suppliers and then resell to consumers as many traditional e-commerce sites do.

“[The reason] we can reach such a high figure is the business model and the ecosystem we have built up.”

The trade spat

Zhang appeared unconcerned about the current trade spat between the US and China, saying China was open to imports from other countries.

“If you look at the big picture, the landscape of the Chinese economy, China has transformed from an investment-driven and industry-driven economy to a consumption economy. Early this year China’s government announced they would allow more imports – China will import US$8 trillion of goods during the next five years … and many of those will be consumer goods.

“China has always been an opportunity. Business people will come from all over the world to take advantage of this.”

Level playing field

Zhang also dismissed accusations that Alibaba is dominant because there isn’t a level playing field for e-commerce businesses in China.

“I don’t think so. Actually, we are in a new era which doesn’t have any unequal or forbidden access. In 2003, when we started our Taobao business, eBay was so successful in China it had more than 90 per cent market share.

“Why we started our own business is because we believed that … the pie was so small. We believed that in the future, when China had higher internet penetration, people would form a new habit: consuming online.”

Zhang says the opportunity was always there “but the key thing was to understand local needs and capture the opportunity using technology”.

“The model needed to be upgraded, the operation needed to be digitised. If we can digitise this assortment, the order, the payment the footprint of the customer in-store, then we can get a lot of data.”

One world

Zhang said Alibaba strongly believes online and offline are not two separate worlds, because the customers are the same people.

“We are sitting in a room today … everybody is online. People are always online, anytime and anywhere. So it is not like two separate worlds.”

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