In-Depth: With Rivals Closing In, Alibaba Retreats - Can It Stage a Comeback? (AI Translation)
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文｜财新周刊 包云红 孙嫣然 屈运栩
By Caixin Weekly's Bao Yunhong, Sun Yanran, Qu Yunxu
中国互联网巨头阿里巴巴一边反思，一边收缩业务格局，集中力量保卫核心主业。
China's internet titan, Alibaba, is reflecting on its strategy while scaling back its business scope to concentrate on defending its core operations.
4月10日上午，阿里巴巴（BABA.NYSE/09988.HK）创始人马云在公司内网以花名“风清扬”发文总结内部重组一周年，称阿里正重回健康成长的轨道，“不是去追赶KPI，而是认清自己”；他称赞了“蔡崇信+吴泳铭”的集团班子组合所实施的系列变革，并强调未来需要更大力度的改革。
On the morning of April 10th, Alibaba's (BABA.NYSE/09988.HK) founder Jack Ma, under his internal nickname "Feng Qingyang," published a post on the company's intranet to summarize the one-year anniversary of its internal restructuring. He stated that Alibaba is getting back on track for healthy growth, focusing on understanding itself rather than chasing KPIs. Ma praised the series of transformations implemented by the leadership team of "Joseph Tsai + Daniel Zhang" and emphasized the need for more significant reforms in the future.
在马云发言的一周前，阿里巴巴集团董事长蔡崇信在和挪威主权财富基金首席投资官Nicolai Tangen的访谈中，坦率反思阿里在近年的市场竞争中“落后了、做错了”“忘记了真正的客户是谁”。蔡崇信称，阿里内部在审视和反思后做两件事：一是承认没有关注用户体验；二是进行组织结构变革，使之与核心业务战略相适应。
A week before Jack Ma's speech, Alibaba Group Chairman Joe Tsai, in an interview with Nicolai Tangen, the Chief Investment Officer of Norway's Sovereign Wealth Fund, candidly reflected on how Alibaba had "fallen behind and made mistakes" in recent market competition and "forgot who the real customers are." Tsai stated that following internal review and reflection, Alibaba took two actions: first, admitting a lack of focus on user experience; second, undergoing organizational restructuring to align with its core business strategy.
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- Alibaba, under the leadership of founder Jack Ma and executives Daniel Zhang and Joseph Tsai, is refocusing on its core e-commerce and cloud computing businesses after a period of reflection and business contraction. This shift includes divesting non-core assets, such as traditional retail operations, to protect its main revenue streams amid challenges like the pandemic, competition, and regulatory fines.
- Alibaba's internal restructuring aims to improve user experience and organizational efficiency in response to past shortcomings in market competition. The company has initiated significant personnel changes, emphasizing AI-driven strategies and prioritizing customer satisfaction over chasing KPIs.
- Despite efforts to revitalize growth through strategic adjustments in e-commerce and cloud services, Alibaba faces intense competition both domestically and internationally. Its stock price has significantly declined from its peak in 2020, reflecting market skepticism about the effectiveness of these reforms. Meanwhile, Alibaba continues to explore opportunities for expansion in international markets through platforms like AliExpress (速卖通) and its B2B services.
Alibaba, a leading internet conglomerate in China, is undergoing significant strategic shifts and restructuring to focus on its core businesses amidst challenges such as competition, regulatory fines, and changing market dynamics. Jack Ma's return to China marked the beginning of Alibaba's most substantial transformation in its 25-year history, dividing its operations into a "1+6+N" structure to streamline management and enhance focus on key areas like e-commerce and cloud computing [para. 1][para. 3].
Under the leadership of CEO Wu Yongming, Alibaba has adopted a "customer-first" and "AI-driven" approach, emphasizing the importance of understanding customer needs and leveraging artificial intelligence for business growth. This shift comes after acknowledging past mistakes, including losing sight of customer priorities and falling behind in market competition [para. 2][para. 4]. The company has also initiated divestitures of non-core assets totaling $1.7 billion in nine months following 2023 to concentrate resources on strategic areas [para. 5].
Despite these efforts, Alibaba faces challenges in regaining market share and customer trust. Its stock price has seen significant fluctuations, with a nearly 80% loss in market value from its peak three years earlier. This decline reflects investor skepticism about Alibaba's ability to adapt to market changes and compete effectively against rivals like Pinduoduo and Douyin [para. 6][para. 7].
Alibaba's domestic e-commerce sector (Taotian Group) has experienced slowing revenue growth compared to explosive growth rates seen by competitors such as Pinduoduo. In response, Taotian has implemented strategies focusing on low-priced goods and enhancing user experience but faces difficulties in attracting new users due to perceived disadvantages in pricing competitiveness [para. 8][para. 9]. Meanwhile, Alibaba Cloud aims to reverse losses by discontinuing low-profit projects and engaging in price wars to reclaim market share in the public cloud arena [para. 10].
The company is also reconsidering its investments in new retail ventures like Freshippo (Hema) and RT-Mart due to profitability challenges. These assets have been rumored for sale as part of Alibaba's strategy to exit non-core businesses; however, achieving favorable deals under current market conditions remains difficult [para. 11][para. 12]. Additionally, local services division Ele.me faces stiff competition from platforms like Meituan and Douyin's e-commerce platform, complicating efforts to maintain market share without heavy subsidies [para. 13].
Internationally, Alibaba seeks growth through its digital commerce group AIDC by expanding AliExpress's reach with initiatives like Choice for full-service management. Despite facing intense competition from platforms like Temu backed by Pinduoduo, AIDC shows promising growth potential with efforts focused on improving logistics efficiency and expanding global presence through strategic partnerships [para. 14][para. 15].
In summary, Alibaba is navigating a period of significant transformation aimed at refocusing on core businesses while addressing competitive pressures both domestically and internationally. The company's future success will depend on its ability to innovate, improve customer experiences across platforms, efficiently manage resources amidst divestitures of non-core assets, and capitalize on international e-commerce opportunities [para. 16].
- Alibaba
阿里巴巴 - Summary： According to the article, Alibaba, a Chinese internet giant, is in a phase of introspection and business contraction, focusing its efforts on defending its core operations. The company's founder, Jack Ma (using his pseudonym "Feng Qingyang"), reflected on Alibaba's internal restructuring over the past year in an internal post, indicating that Alibaba is getting back on track for healthy growth by recognizing its true self rather than chasing KPIs. He praised the leadership combination of "Daniel Zhang + Joseph Tsai" for implementing significant changes and stressed the need for more substantial reforms.Alibaba's Chairman Daniel Zhang acknowledged in a conversation with Nicolai Tangen, CIO of Norway's Sovereign Wealth Fund, that Alibaba had fallen behind in market competition and had lost sight of who their real customers were. This led to two actions: admitting a lack of focus on user experience and undergoing organizational restructuring to align better with core business strategies.The company has faced challenges from the pandemic, competition, and hefty fines over the past three years, which have significantly impacted employee morale. In response to these challenges and as part of its largest transformation in 25 years initiated by Jack Ma upon his return to China in March 2023, Alibaba has restructured its complex business into a "1+6+N" sequence and brought back founding team members into management roles.Wu Yongming took over as CEO of Alibaba Group and emphasized a "user-first" approach driven by AI technology. He streamlined asset businesses with significant capital movements and personnel adjustments. The strategy towards non-core businesses became clearer under Daniel Zhang and Wu Yongming’s leadership: divestment or independent operation without relying on main business funds.Despite these strategic shifts aiming at refocusing on core operations like e-commerce (Taobao/Tmall) and cloud computing (Alibaba Cloud), there have been rumors about selling off parts of its retail operations like Hema Fresh or Ele.me due to continuous losses or lack of synergy effects. However, inside sources suggest that selling assets isn't easy given the current market conditions.By March 2024, another round of asset arrangements and personnel adjustments began across various business segments within Alibaba. These moves are part of an ongoing effort to clarify business priorities amid significant changes in both capital market environments and industry competition.Despite these efforts, there remains misalignment between the reform initiatives proposed by the founding team and their execution by the business teams. Challenges include engaging in price wars within core businesses to regain market share without immediately visible financial returns from new growth engines such as content e-commerce or AI applications
- Sun Art Retail Group
高鑫零售 - Summary： Sun Art Retail Group, referred to in the article as the parent company of 大润发 (Da Run Fa or RT-Mart), is a major player in China's hypermarket and supermarket sector. In 2017, Alibaba Group made a strategic move by investing in Sun Art Retail Group, marking its entry into the physical retail space as part of its "New Retail" strategy aimed at integrating online and offline shopping experiences. This investment was led by Daniel Zhang (张勇), who was keen on transforming traditional retail with digital technology.By 2020, Alibaba had increased its stake in Sun Art Retail Group, taking control with more than a 78% share through a deal that amounted to approximately 504 billion Hong Kong dollars. This acquisition underscored Alibaba's commitment to revolutionizing the retail industry by leveraging its technological prowess and e-commerce expertise.However, despite these ambitious efforts, Sun Art Retail Group faced challenges. The performance of Da Run Fa/RT-Mart under Alibaba's umbrella did not meet expectations, with revenues declining over time. The article mentions that by the fiscal year ending March 2022, Sun Art reported its first loss since going public in 2011. Additionally, the number of stores decreased from a peak of 602 in 2020 to 505 by September 2023.The struggles of Sun Art Retail Group reflect broader challenges within Alibaba's "New Retail" initiatives and highlight difficulties in achieving profitability and growth amidst intense competition and changing consumer behaviors in China's retail landscape.
- April 10, 2024：
- Jack Ma publishes a post on Alibaba's intranet summarizing the one-year anniversary of its internal restructuring.
- March 2023：
- Jack Ma returns to China, initiating significant transformations in Alibaba's 25-year history.
- December 2023：
- Dai Shan is transferred, Wu Yongming directly oversees Taotian Group and Alibaba Cloud.
- 2023：
- Alibaba exits $1.7 billion in non-core assets and plans to exit traditional physical retail businesses.
- March 2024：
- Alibaba undergoes another round of asset arrangements and personnel adjustments.
- April 11, 2024：
- Alibaba's stock price closes at $74.85/ADS.
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