Jack Ma, the man who turned Alibaba into China’s dominant e-commerce platform, now has his sights set on global domination.
Over the past year, Ma met business leaders and head of states in many countries to introduce his grand vision: small businesses from all corners of the world trading freely and securely on Alibaba’s platform. His goals are equally ambitious: Ma wants Alibaba to hit $1 trillion in gross merchandise value by 2020. By 2036, the company sees itself serving two billion customers, effectively becoming the world’s fifth largest economy, with sales eclipsed only by the GDP of the U.S., China, Japan and the EU.
But to sustain the near continuous 40% growth rate of Ma’s $300 billion empire, which centers on a marketplace connecting brands with buyers, globalization is seen as key. At home it faces heightened competition with the country’s second-largest shopping site, JD.com, which just posted record sales of $17.6 billion for its 6.18 shopping festival. Alibaba’s e-commerce dominance isn’t under threat but it nonetheless sees a “growth bottleneck” and feels “globalization is better done now than later,” said Teng Bingsheng, a professor of strategic management at the Cheung Kong Graduate School of Business in Beijing.
Alibaba’s global footprint has grown through investments in local partners. As part of a $21 billion-acquisition spree over the past two years, the company has stakes in India-based marketplaces Paytm and Snapdeal, as well as Southeast Asia’s top shopping site, Lazada, which it now holds a 83% stake after investing another $1 billion. Its financial affiliate Ant Financial has investments in payment platforms in Thailand, South Korea and the Philippines, and is expanding in further afield in South Africa.
Some analysts however question whether Ma might be painting an overly rosy picture for small business owners. While it is true that China has a growing appetite for niche brands from cosmetics to baby food, competition on Alibaba’s shopping sites is cutthroat.
Already thousands of brands are selling on Tmall and the number of foreign brands on Tmall Global grew 169% last year — while total sales only grew 30%, according to Mark Tanner, founder of Shanghai-based consultancy China Skinny.
This means another part of Alibaba’s strategy has brighter prospects. Outside the U.S., through the likes of Lazada, and its own cross-border commerce platform AliExpress, Alibaba wants to find fresh customers for Chinese manufacturers. On Lazada, for example, Taobao has opened a shop, offering a curated selection of Chinese-made clothes, gadgets and toys to tap Southeast Asia’s $22 billion e-commerce market.
Compared with facilitating exports to China, this strategy may ultimately take on more importance. Southeast Asia, for example, is an ideal market for Chinese products, whose price advantages can win over more customers, CKGSB’s Teng said.
What’s more, Alibaba will not only create more revenue streams by selling globally but fit itself nicely into Beijing’s vision. Through grandiose projects such as the One Belt, One Road initiative, Beijing wants to restore demand for Chinese goods along the ancient Silk Road trading route, which stretches all the way from its middle west provinces to Europe.
But it isn’t a smooth ride either. The Electronic World Trade Platform (eWTP), Ma’s version of the World Trade Organization and a web-based approach to lowering trade barriers for small businesses in the region, is moving slowly. One year after its announcement, only Malaysiajoined the initiative, establishing in March a trading hub near Kuala Lumpur International Airport— a reflection of how stalling trade talks worldwide might be affecting Alibaba.
That means, for now, international business remains a small part of Alibaba — contributing less than 10% of the group’s revenues in the last year. Evans said the company is on track to reaching its goal, eventually generating 40% of its revenues from international businesses over the next decade.
The company has identified its chance of success. Aside from e-commerce, Alibaba’s payment, entertainment and cloud computing units are also expanding globally. AliCloud, for example, is wooing international customers with a price 85% cheaper than Amazon Web Services, according to CSLA analyst Elinor Leung. And Ant Financial, despite recent hurdles such as opposition to its acquisition of U.S. payment company Moneygram, has installed its service at millions of retailers in the U.S. through a partnership with payment processor First Data.