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The Alibaba Playbook: A Guide to How the
World’s Best eCommerce Company Thinks
Author: Ken Leaver Date: March 2018
Sections
● Why is Alibaba the world’s largest marketplace?
● eCommerce in China
● About me
● The Marketplace Mindset
1. In...
Who is Alibaba?
● Founded by Jack Ma in 1999
● Market cap of $490bn in
January 2018 (top 10 most
valuable companies in the...
Just how big are they?
2017 GMV (General
Merchandise Volume)
$547bn
$136bn
310m users
3m sellers
340,000 employees
493m us...
Alibaba’s GMV growth
● Partially from riding the tidal
wave of China growth
● However platforms like
Alibaba.com and
Aliex...
The operating footprint
Source: https://www.cbinsights.com/research/amazon-alibaba-international-expansion/
Alibaba’s companies
The “Core” The “Investments” (50+ deals)
How they’ve fared against competition
After investing many billions in China,
Amazon has now been divesting its
warehouses...
Sections
● Why is Alibaba the world’s largest marketplace?
● eCommerce in China
● About me
● The Marketplace Mindset
1. In...
Internet usage in China is booming
● 751 million internet users in
china in 2017 (~54% of the
population)
● Urban = 550m u...
eCommerce is expected to dwarf the US by 2020
2020 eCommerce Market
$1.7 Trillion$632 Billion
Amazon = 3% of US retail Ali...
Leapfrogging the US in areas like Mobile
● Compared to Americans,
Chinese use their phones
much more to:
○ Shop
○ Pay
○ En...
eCom in the rural areas of China
● 620m people live in the
countryside
● Online rural shopping already
topped $50bn in 201...
Brands have jumped online wholeheartedly in China
● In 2016 there were over 14,500
overseas brands selling on
Tmall alone
...
The logistics boom
Alibaba has slated $16bn for future logistics investments to improve reliability and speed of delivery
...
Sections
● Why is Alibaba the world’s largest marketplace?
● eCommerce in China
● About me
● The Marketplace Mindset
1. In...
A bit about me, Ken Leaver
Born in New York. Graduated from Cornell. MBA from IESE Business School.
1999- 2008: spent 7 ye...
A bit about Lazada
● Founded in 2012 by Rocket Internet site
as an ‘Amazon’ play for SouthEast Asia
● CEO: Lucy Peng
● Mar...
Sections
● Why is Alibaba the world’s largest marketplace?
● eCommerce in China
● About me
● The Marketplace Mindset
1. In...
Alibaba is a marketplace ONLY, they do not
compete with their sellers
● What is a marketplace?
○ Provide a platform where ...
Marketplaces are more efficient than retail period.
● 10m sellers will be better at finding new
product niches and trends ...
Pricing optimized by many sellers & buyers
● Similar to a stock market, the multiple
seller model assumes basically that i...
Long tail = Great SEO
● Marketplace model makes it easy
for many sellers to sign up quickly &
easily
○ Alibaba has 10m+ se...
Never lose money like in Retail
Retail models face the difficult question:
Do I enter categories where i am not the
most p...
Sections
1. Introduction
2. Alibaba’s Businesses
3. The eCommerce Storefront
4. The Omni-everything Approach
5. The Seller...
Taobao
Source: https://expandedramblings.com/index.php/taobao-statistics/
● Founded in 2003 by Alibaba
● In 2017 had $350b...
Tmall
Source: https://www.emarketer.com/Article/Alibabas-Tmall-Maintains-Ecommerce-Lead-China/1016432
● The B2C eCommerce ...
Aliexpress
Source: https://www.chinainternetwatch.com/20230/aliexpress-100m-cainiao/
● Founded in 2010 as the platform for...
Alibaba.com
Source: alibaba.com
● The world’s largest online B2B trading platform
for small businesses
○ Handles sales b/w...
1688.com
● The Chinese version of the B2B commerce
site, Alibaba.com
○ Mainly used for sales by factories &
wholesalers to...
Juhuasuan: The flash sales platform
Juhuasuan site
Source: http://www.alizila.com/juhuasuan-alibabas-daily-deals-marketing...
Fliggy (online travel platform)
● The online travel platform designed as an online mall for brands such as airline compani...
Sections
1. Introduction
2. Alibaba’s Businesses
3. The eCommerce Storefront
4. The Omni-everything Approach
5. The Seller...
About Cainiao
● The logistics company of Alibaba founded in 2013
with a consortium of logistics companies (Alibaba
owns 48...
Sections
1. Introduction
2. Alibaba’s Businesses
3. The eCommerce Storefront
4. The Omni-everything Approach
5. The Seller...
Youku.com: The Chinese Youtube
● Acquired Youku Tudou for $4.7bn in 2015
(Youtube is not accessible in china)
● Gave acces...
Weitao: the social layer to
Alibaba’s eCommerce
● Weitao is like a social network geared
towards shopping and integrated w...
Sina Weibo: the micro-blogging site
● Launched in 2009
● 2 main businesses:
○ News platform - kind of like
yahoo
○ Twitter...
Alibaba Pictures: their own movie studio
Jack Ma calls Alibaba “the biggest entertainment co in the world” b/c of the time...
Tmall Box Office: their own video-streaming service
● In 2015 rolled out Tmall Box Office, a
subscription video streaming ...
UC Web
● Operates UC Browser, one of the most popular
mobile browsers globally
○ Founded in 2004 and acquired by Alibaba
i...
Alibaba Sports
● Established in 2015 to develop and operate
sports IP, sporting events, e-sports contests,
sporting venues...
Xiami
● A music streaming service founded in 2006 and
acquired by Alibaba in 2013
● Earns fees from advertising and paid
s...
Sections
1. Introduction
2. Alibaba’s Businesses
3. The eCommerce Storefront
4. The Omni-everything Approach
5. The Seller...
ANT FInancial: The financial services group
● What is ANT FInancial?
○ Alipay = Paypal equivalent
○ MYBank = online bank t...
Alipay: the Paypal of China
Source; https://www.forbes.com/forbes/welcome/?toURL=https://www.forbes.com/sites/quora/2017/0...
Alipay has led to a mobile commerce boom in China
● In China it’s not uncommon for a bridesmaid to wear a QR code
to facil...
MyBank: the online bank
● Launched in 2015 as a traditional bank taking
deposits and making loans up to $800k
● Takes no c...
Sesame Credit: credit scoring for consumers
● Sesame credit is Alibaba’s credit-scoring system for
consumers
● Based on fa...
Yuebao: the world’s largest money mgmt fund
● Launched in 2013, in a short amount of time
became the world’s top money mar...
The Lending Club tie-up
● Alibaba teamed up with Lending Club, the
American fintech co, to enable small US
businesses to a...
Sections
1. Introduction
2. Alibaba’s Businesses
3. The eCommerce Storefront
4. The Omni-everything Approach
5. The Seller...
Alibaba Cloud (Aliyun)
Source; https://techcrunch.com/2017/01/24/alibaba-q3-january-2017/
● Founded in 2009 and started ou...
Ali Health
Source: http://www.scmp.com/tech/china-tech/article/2094681/alibaba-health-revenue-soars-robust-online-pharmacy...
Autonavi
● Digital map and navigation provider in China
○ Partner of Google Map, Bing Map, and 360
map in the chinese mark...
YunOS
● An Internet of Things (IoT) operating system that brings
cloud functionality to IoT and mobile devices
○ 2nd large...
DingTalk
● An enterprise messaging platform aimed at
improving B2B communication and
collaboration for SME’s in China
● La...
Koubei.com: the platform for selling services to
consumers
● $1bn invested by Alibaba & ANT Financial into a JV
aimed at s...
Sections
● Attract
● Engage & Boost
● Keep
● Get Feedback
1. Introduction
2. Alibaba’s Businesses
3. The eCommerce Storefr...
Alimama: the marketing tool set available to sellers
● A wide range of advertising available to sellers &
brands on Alibab...
Big data is at the core of all advertising
● Alibaba has extremely advanced analytical tools that encourage sellers to upl...
Promotion events on the platforms
● Alibaba’s sites spit out hundreds
of theme-based promotional
events that sellers can o...
The Ad Exchange Network (TANX)
● Alibaba’s ad exchange where
advertisers can buy ads on
Alibaba-owned and non-
Alibaba own...
Seller paid sponsored ads
● Taobao does not charge commissions from its
sellers at all. Its main revenue stream is just
ad...
Sellers can bloggers to write about their products via
Alimama
● Brands can use Alimama to connect with
hundreds of thousa...
Sections
● Attract
● Engage & Boost
● Keep
● Get Feedback
1. Introduction
2. Alibaba’s Businesses
3. The eCommerce Storefr...
Entertainment via video streams
● On average Chinese spend about 30 minutes
shopping on Taobao
○ This is 3x longer than th...
Live shopping events
● Many live events are broadcasted on Tmall and
Taobao encouraging consumers to watch and
then purcha...
How social ‘Circles’ work on Alibaba
More than 1000 ‘Circles’ where hobbyists can talk about their pastimes and favorite p...
Engaging in news and content via Weibo
● Weibo has 5000+ live streams daily, with 40%
of viewers visiting the virtual stor...
Interactive offline shopping experiences
Starbucks in China has special
features built into the Taobao
shopping app that p...
Sections
● Attract
● Engage & Boost
● Keep
● Get Feedback
1. Introduction
2. Alibaba’s Businesses
3. The eCommerce Storefr...
Alibaba’s loyalty system optimizes “stickiness”
● In 2017 combined the TMall and Taobao programs into a
single club called...
The high-end membership - APASS
Alibaba Passport (APASS) is a membership club
created for the biggest online shoppers (who...
Sections
● Attract
● Engage & Boost
● Keep
● Get Feedback
1. Introduction
2. Alibaba’s Businesses
3. The eCommerce Storefr...
Sellers are given tools to get customer feedback
● Alibaba’s sites encourage as much
transparency about the product being ...
Sections
● Online-to-Offline (O2O)
● Multi-channel
● New Retail
● Global Approach
1. Introduction
2. Alibaba’s Businesses
...
Driving customers to offline merchants
● O2O, or “Online to Offline”, means using online
to drive customers to stores offl...
Sections
● Online-to-Offline (O2O)
● Multi-channel
● New Retail
● Global Approach
1. Introduction
2. Alibaba’s Businesses
...
Multichannel is the standard in China
● For many years already, most chinese sellers
are selling on at least 8 platforms, ...
Build your order management system to be cross-
platform
● When building your seller portal, you should
distinguish betwee...
Use standard seller API’s
● Sellers wants API’s to be similar across
platforms so that they plug in easily into their
ERP’...
Understand what ERP’s your sellers are using
● In 2016 Lazada organized a cross-border mini-conference for the large Chine...
Use standard SKU attributes to make it easy for sellers
● Sellers wants SKU attributes to be
similar across platforms
○ Th...
Sellers want to hold their offline & online inventory in
a single place
● Cainiao offers the ‘One Inventory’ system to
sel...
SKU data should be separated b/w frontend and
backend attributes
● Many eCommerce platforms mistakenly pack
warehouse sku ...
Supply chain software is built cross-platform
Cainiao’s ‘BMS’ system is essentially a cross-
platform tool that also enabl...
By understanding how to play in the multi-channel
world, you can scale fast
● Jet.com launched in July 2015 and hit a
$1bn...
Sections
● Online-to-Offline (O2O)
● Multi-channel
● New Retail
● Global Approach
1. Introduction
2. Alibaba’s Businesses
...
The “New Retail” experience
● Partnering with brick and mortar (and
sometimes investing) to focus on being good
showrooms
...
Changing how retail works
● Introduced the Hema concept
supermarket, which blends online
and offline shopping
● Deliveries...
Investing in offline retail to bring ‘new retail’
In end 2017, invested ~$3bn in a 36% stake in Sun
Art Retail, one of Chi...
How to choose what to put in-store
● Alibaba opened Home Times, a
concept store for ‘new retail’ in
Furniture and plans 15...
New technologies taking online to offline
“Magic mirrors” are an augmented reality powered
digital screen that allows shop...
Changing the shopping experience
● Tmall offers test drive experiences from their
own “Super test-drive centers”
● These c...
Pop-up stores
● Pop-up store in trendy shopping area only for
promotional event
● Divided into 5 sections - kitchen, study...
Providing the supply chain to mom and pops
● Mom and Pop convenience stores from China
can now select from a large Alibaba...
Sections
● Online-to-Offline (O2O)
● Multi-channel
● New Retail
● Global Approach
1. Introduction
2. Alibaba’s Businesses
...
Alibaba enables Chinese sellers to sell globally with
little effort
● Aliexpress is marketed and
dropships almost all over...
Automated translation of products
● Alibaba has a huge team working on
translation and in a meeting said they
believed the...
When shopping offline abroad, buy online and have
it ship from china
● Chinese are traveling more and more
and love to sho...
Sections
● Customization
● Motivating seller performance
● Great tools
● Providing great data
● Access to services
1. Intr...
Sellers create a shopping experience that matches their
brand
Sellers shop for their own page templates on
Fuwu’s seller m...
Sellers select their own logistics packages
● Another unique element of Cainiao’s approach to logistics is
the flexibility...
Sections
1. Introduction
2. Alibaba’s Businesses
3. The eCommerce Storefront
4. The Omni-everything Approach
5. The Seller...
The Seller Rating is a very important criteria to the
customer’s purchase decision
The amount of deposit the seller
has pa...
This rating motivates the seller to perform well in key
operational areas
● Seller rating is an integral piece of how all
...
By using automated systems to get sellers to
perform they only manage the very top of the tail
● The account management at...
Alibaba also gets sellers to do a lot of the operations
for them, like customer service
● Alibaba allows buyers to contact...
Sections
1. Introduction
2. Alibaba’s Businesses
3. The eCommerce Storefront
4. The Omni-everything Approach
5. The Seller...
Sellers have a lot of great tools to develop their own
business
● Driving traffic
○ Alimama, Weibo,
● Customer Service
○ 3...
Sellers can push promos to past customers
● Alibaba offers sellers
templates to push messages
to past customers
● They don...
Sellers can follow up on dropped carts
● Sellers on Alibaba platforms can
see when customers have dropped
their shopping c...
Sections
1. Introduction
2. Alibaba’s Businesses
3. The eCommerce Storefront
4. The Omni-everything Approach
5. The Seller...
The Seller Analytics platforms
● There is a mix of paid and free analytical
platforms for sellers, some of which are
provi...
Sellers even upload their own offline data
● Many brands upload their offline customer data to ALibaba platform
● The reas...
Sections
1. Introduction
2. Alibaba’s Businesses
3. The eCommerce Storefront
4. The Omni-everything Approach
5. The Seller...
Sellers outsource services to providers on FUWU, the
service marketplace
● Alibaba has built their own services marketplac...
An ecosystem of agents provide services to sellers
● Alibaba has cultivated a large network of “certified”
agents that ess...
Outsourcing services and providing financing has
been key to getting even rural areas to sell online
● 1000+ ‘Taobao Villa...
Sections
● High-level approach
● Logistics
● Warehousing
● Manufacturing
● Customer Service
1. Introduction
2. Alibaba’s B...
Jack Ma believes strongly in not owning physical
assets
● Alibaba owns very few trucks, planes, fulfillment
centers, deliv...
You are more free to generate competition
● By not owning the assets Cainiao gets them to compete
○ They make barriers to ...
Competition has drove Chinese logistics from being one of
the worst to the best in the world in a short span of time
● 20 ...
Why fulfillment & logistics was put into a separate
org from Alibaba
● Alibaba realized that logistics & fulfillment costs...
Sections
● High-level approach
● Logistics
● Warehousing
● Manufacturing
● Customer Service
1. Introduction
2. Alibaba’s B...
Cainiao has created a large, intelligent network
● Alibaba tries not to own any of its fulfillment network
○ 200+ warehous...
Carriers can participate easily
● It is simple and easy for carriers to become part of
the Cainiao network
● They just ent...
Everyone is just a node in a network
Above is a high-level schematic of how Alibaba’s ‘Smart Routing’ system works.
The ke...
Smart sorting
● An integral part of the sort center operations is routing inbound packages to the correct
outbound lane
● ...
Key partnerships overseas to widen the network
Cainiao has been making key overseas partnerships
to speeden and reduce the...
Even shipping documents are done scalably
● Alibaba has centralized all documents to a single
‘Cloudprint’ system, which w...
Pickup stations to reduce failed pickups
● Cainiao pledged in 2017 to set up 40,000 pickup
facilities close to residential...
Convert stores into last mile fulfillment centers
● Inefficient to fly packages from
another city for a 200 mile+
delivery...
Delivery robots being tested
● Robot “Xiao G” is an autonomous delivery vehicle
that interfaces with a transport mgmt syst...
Drones to be used in specific circumstances
● In 2017 Alibaba ran a test of sending unmanned
aerial vehicles (UAVs) carryi...
Smart logistics vehicles
● Cainiao has pledged to putting 1 million smart
logistics vehicles into the market
○ Expected to...
Sections
● High-level approach
● Logistics
● Warehousing
● Manufacturing
● Customer Service
1. Introduction
2. Alibaba’s B...
Cainiao outsources much of its warehouse footprint
● Operating over 200 warehouses in its network,
Cainiao is collaboratin...
Plugging in 3rd party WMS’s
● Cainiao is able to plug in many different
WMS’s via standard API’s to its warehouse
integrat...
Smart warehousing
● Cainiao’s Guangdong Tmall warehouse is the
largest warehouse of “automated guided
vehicles” in China
●...
Sections
● High-level approach
● Logistics
● Warehousing
● Manufacturing
● Customer Service
1. Introduction
2. Alibaba’s B...
Working to help tailor manufacturing to eCommerce
Alibaba has a program where they work with regional
Chinese cities to de...
“New manufacturing” = customizing what is
produced based on real-time data
● Anticipates the near real-time consumer
data ...
Helping farmers choose what to produce
● Alibaba is giving farmers access to big data
analytical tools to determine what t...
Sections
● High-level approach
● Logistics
● Warehousing
● Manufacturing
● Customer Service
1. Introduction
2. Alibaba’s B...
You don’t need to have armies of customer service
reps to provide great service
● Most seller-related issues/questions are...
Customer<>Seller disputes are automated via a jury
● Even customer<>seller disputes are automated
using a community of use...
Sections
● Tech driven org
● Work hard & smart
● Clean architecture
● Service-oriented product teams
● Being an open platf...
A true tech driven org
● Alibaba is probably the most tech-driven eCommerce
company in the world
● What does that mean? Th...
Senior leaders at Alibaba are not “typical”
● Compared to western companies Alibaba’s
management teams and leaders are muc...
A culture of the best solution wins regardless of rank
● Many large companies are impacted by the HiPPO
(Highest Paid Pers...
As an organization, Alibaba is both secretive and
humble
● When it comes to guarding their technology design, Alibaba is
p...
Sections
● Tech driven org
● Work hard & smart
● Clean architecture
● Service-oriented product teams
● Being an open platf...
They get stuff out fast by working hard
● One of the biggest things that was immediately noticed by any Lazada folks that ...
But they also work smart
● When watching a tech team during their internal
meetings it was interesting to note that:
○ Eve...
Product Managers are tooled to work very efficiently
● Alibaba is creating a platform that essentially allows PM’s to crea...
Sections
● Tech driven org
● Work hard & smart
● Clean architecture
● Service-oriented product teams
● Being an open platf...
Clean tech architecture
● Alibaba’s tech teams work very
independently by taking a
service-oriented architecture
● Alibaba...
Little redundancy
● One problem i have seen in non-Alibaba eCommerce companies is
redundancy in logic, and my perception w...
Sections
● Tech driven org
● Work hard & smart
● Clean architecture
● Service-oriented product teams
● Being an open platf...
Build once for many platforms
● Alibaba technology teams work like separate products
that try to sell themselves to as man...
Service-oriented architecture
● During my participation in the integration of
Cainiao’s operational systems i was surprise...
Service-orientation of product teams prepares them
for integrating acquisitions
● Each product team at Alibaba plugs into ...
Jack Ma understands that the core value Alibaba
brings to any acquisition is their software platform
● Why does one eComme...
Sections
● Tech driven org
● Work hard & smart
● Clean architecture
● Service-oriented product teams
● Being an open platf...
Open API’s to encourage 3rd party developers to
build non-core software
● Similar to Amazon, Alibaba has created a
robust ...
Sections
● Tech driven org
● Work hard & smart
● Clean architecture
● Service-oriented product teams
● Being an open platf...
Helping tailor what they show shoppers
● Alibaba has developed software it calls the ‘E-
Commerce Brain”
● It uses real-ti...
Smart Customer Service via AI
● 95% of customer calls to Alibaba are
answered by a computer system
called Ali Assistant
● ...
Personalized storefronts powered by AI
● Merchants selling on Taobao and Tmall can
offer tailored product recommendations
...
Supply Chain powered by AI
● Ali Smart Supply Chain (ASSC) applies AI to
help online and offline merchants to:
○ forecast ...
AI powered logistics
Use AI to determine the fastest and most cost
effective delivery routes in a variety of complex
road ...
How ANT Financial uses AI
● If you get in a car accident, you can pull
your your smartphone, take a photo, and
file an ins...
Sections
● Global-to-global vision
● The railroad tracks to global ecommerce
● Chinese sellers are the locomotives
● Lazad...
Jack’s global-to-global vision
• Jack Ma has stated that he sees eCommerce moving
to a “global-to-global model” and he wan...
Enablers to the global-to-global vision
1. Sellers all around the world will work multi-platform
a. They will work on cros...
Why are they likely going to continue to win?
They have the best software platform in eCommerce in the
world by a WIDE MAR...
Why are they likely going to continue to win? cont’d
They take automation to a completely different level
● Alibaba finds ...
Sections
● Global-to-global vision
● The railroad tracks to global ecommerce
● Chinese sellers are the locomotives
● Lazad...
The focus is on being the infrastructure to global
eCommerce
• Jack Ma’s ambition is 100% global, but he wants to achieve ...
Cainiao will be the backbone to this global expansion
• Cainiao will only build warehouses when they need to.. “If its som...
Being asset light is also a key enabler of being able
to globalize quickly
● By not owning infrastructure like warehouses,...
Sections
● Global-to-global vision
● The railroad tracks to global ecommerce
● Chinese sellers are the locomotives
● Lazad...
Chinese sellers and their products are the
locomotives running on the tracks
• Alibaba’s strength in China is the key pill...
Sections
● Global-to-global vision
● The railroad tracks to global ecommerce
● Chinese sellers are the locomotives
● Lazad...
The Alibaba Playbook
The Alibaba Playbook
The Alibaba Playbook
The Alibaba Playbook
The Alibaba Playbook
The Alibaba Playbook
The Alibaba Playbook
The Alibaba Playbook
The Alibaba Playbook
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The Alibaba Playbook

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An in-depth look at Alibaba's modern day business, with particular focus on logistics, marketplace, and their approach to product management. Includes TMall, Taobao, Alipay, Aliexpress, Cainiao, Youku, Sina Weibo and Lazada.

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The Alibaba Playbook

  1. 1. The Alibaba Playbook: A Guide to How the World’s Best eCommerce Company Thinks Author: Ken Leaver Date: March 2018
  2. 2. Sections ● Why is Alibaba the world’s largest marketplace? ● eCommerce in China ● About me ● The Marketplace Mindset 1. Introduction 2. Alibaba’s Businesses 3. The eCommerce Storefront 4. The Omni-everything Approach 5. The Seller Experience & Tools 6. Operations 7. Software 8. How they will go global
  3. 3. Who is Alibaba? ● Founded by Jack Ma in 1999 ● Market cap of $490bn in January 2018 (top 10 most valuable companies in the world) ● IPO’d in 2014 (biggest IPO in history)
  4. 4. Just how big are they? 2017 GMV (General Merchandise Volume) $547bn $136bn 310m users 3m sellers 340,000 employees 493m users 10m sellers 50,000 employees Source: https://www.seattletimes.com/business/amazon/amazon-revenues-hit-by-stronger-dollar-miss-wall-street-expectations/ https://www.businesswire.com/news/home/20170518005564/en/Alibaba-Group-Announces-March-Quarter-2017-Full
  5. 5. Alibaba’s GMV growth ● Partially from riding the tidal wave of China growth ● However platforms like Alibaba.com and Aliexpress.com have had tremendous success selling overseas Source: https://www.reuters.com/article/us-alibaba-results/alibaba-beats-on-earnings-as-e-commerce-remains-core-revenue-driver-idUSKCN1AX153
  6. 6. The operating footprint Source: https://www.cbinsights.com/research/amazon-alibaba-international-expansion/
  7. 7. Alibaba’s companies The “Core” The “Investments” (50+ deals)
  8. 8. How they’ve fared against competition After investing many billions in China, Amazon has now been divesting its warehouses and essentially conceding defeat. Famously beat eBay 10 years ago, who later pulled out of China completel Aliexpress is far and away the #1 eCommerce platform in Russia overcoming local incumbents like Ozon and Ulmart
  9. 9. Sections ● Why is Alibaba the world’s largest marketplace? ● eCommerce in China ● About me ● The Marketplace Mindset 1. Introduction 2. Alibaba’s Businesses 3. The eCommerce Storefront 4. The Omni-everything Approach 5. The Seller Experience & Tools 6. Operations 7. Software 8. How they will go global
  10. 10. Internet usage in China is booming ● 751 million internet users in china in 2017 (~54% of the population) ● Urban = 550m users (73.3% penetration) ● Rural = 201m users (26.7% penetration) Source: TechinAsia
  11. 11. eCommerce is expected to dwarf the US by 2020 2020 eCommerce Market $1.7 Trillion$632 Billion Amazon = 3% of US retail Alibaba= 11% of China retail Source: http://multichannelmerchant.com/news/chinese-ecommerce-market-pegged-1-7-trillion-2020/
  12. 12. Leapfrogging the US in areas like Mobile ● Compared to Americans, Chinese use their phones much more to: ○ Shop ○ Pay ○ Entertainment ○ Info search while in a retail search Source: https://www.chinainternetwatch.com/whitepaper/china-internet-statistics/
  13. 13. eCom in the rural areas of China ● 620m people live in the countryside ● Online rural shopping already topped $50bn in 2016 ● 84.4% of rural residents already shop online eCom expected to continue to grow at >20% per year over next 5 years in China, driven mainly by rural communities Source: https://atelier.bnpparibas/en/retail/article/china-rural-e-commerce-market-gold-mine
  14. 14. Brands have jumped online wholeheartedly in China ● In 2016 there were over 14,500 overseas brands selling on Tmall alone ● Chinese are very brand conscious ● Online allows brands to extend their reach well beyond the major cities where their retail presence is
  15. 15. The logistics boom Alibaba has slated $16bn for future logistics investments to improve reliability and speed of delivery Source: https://seekingalpha.com/article/4012458-chinas-logistics-sector-structural-uptrend
  16. 16. Sections ● Why is Alibaba the world’s largest marketplace? ● eCommerce in China ● About me ● The Marketplace Mindset 1. Introduction 2. Alibaba’s Businesses 3. The eCommerce Storefront 4. The Omni-everything Approach 5. The Seller Experience & Tools 6. Operations 7. Software 8. How they will go global
  17. 17. A bit about me, Ken Leaver Born in New York. Graduated from Cornell. MBA from IESE Business School. 1999- 2008: spent 7 years as a business consultant (BCG, Mars & Co) 2008 - 2011: Visa senior manager in charge of acquiring in Russia, then issuing products business in Eastern Europe / CIS countries 2011 - 2013: Groupon CEO of Ukraine: took it from ~10 to 100+ employees and making groupon the top 10 ecom companies in Ukraine in 2012 Feb 2014 - April 2017: Worked in Lazada (based in Vietnam) ● Feb > Dec. 2014: Senior PM in charge of Ops ● Jan 2015 - Dec. 2016: VP of Ops & Finance product ● Jan 2017 - Dec 2017: SVP of Ops, Seller Platform and Finance Product ● Jan 2018 - April 2017: SVP Product for eLogistics (fulfillment & logistics company that was separated out from Lazada) April 2017 - Current: Wayfair
  18. 18. A bit about Lazada ● Founded in 2012 by Rocket Internet site as an ‘Amazon’ play for SouthEast Asia ● CEO: Lucy Peng ● Markets ● Indonesia, Thailand, Vietnam, Malaysia:, Singapore, Philippines ● Model: ● Retail + Marketplace ● 130,000+ sellers (in Sept 2017) ● eLogistics (in-house fulfillment & logistics provider) Timeline 2012-3: Raised $186m from Rocket, Kinnevik, Summit Partners, Tengelmann Ventures & others Dec 2013: Raised EUR200m from Tesco Nov 2014: Raised EUR 200m from Temasek Apr 2016: Alibaba invests $1bn June 2017: Alibaba invests another $1bn March 2018: Alibaba invests another $2bnSource: https://www.techinasia.com/who-is-lucy-peng-lazada-ceo https://www.reuters.com/article/lazada-strategy/planes-trains-and- automobiles-lazadas-logistics-battle-to-win-se-asia-idUSL8N1M906S Source: https://www.crunchbase.com/organization/lazada- group#section-funding-rounds
  19. 19. Sections ● Why is Alibaba the world’s largest marketplace? ● eCommerce in China ● About me ● The Marketplace Mindset 1. Introduction 2. Alibaba’s Businesses 3. The eCommerce Storefront 4. The Omni-everything Approach 5. The Seller Experience & Tools 6. Operations 7. Software 8. How they will go global
  20. 20. Alibaba is a marketplace ONLY, they do not compete with their sellers ● What is a marketplace? ○ Provide a platform where 3rd party sellers can sell and pay you a commission ○ These sellers choose their own price, write their own content, etc. ● How does it differ from a retail model? ○ In Retail the platform buys from suppliers at a negotiated purchase price and selects the price to sell to consumers ● Amazon is a hybrid Marketplace + Retail model ○ They will often compete against their 3rd party sellers, creating some distrust ● Alibaba is only a marketplace
  21. 21. Marketplaces are more efficient than retail period. ● 10m sellers will be better at finding new product niches and trends better than a small in-house team Product Selection PricingContent ● Sellers generate the content themselves, no need for in-house resources to be spent creating / reviewing them ● Sellers compete with each other to find the optimal market price The metaphor i like to use is capitalism (marketplace) vs. retail (communism). One is simply a more efficient model by definition. The Pyramid of Marketplace Advantages
  22. 22. Pricing optimized by many sellers & buyers ● Similar to a stock market, the multiple seller model assumes basically that if you have enough sellers & buyers that they will be naturally inclined to optimize price over time ○ enough buyers/sellers will always perform better than an algorithm, as proven by stock markets ● And if you are the largest marketplace, as time goes on you will tend to have the lowest price of anyone else ○ Due to the fact that suppliers will be willing to drop margin more, knowing that they will get the volume to maintain an overall profit target Many sellers compete for sales of Apple iPhone 6 on Amazon
  23. 23. Long tail = Great SEO ● Marketplace model makes it easy for many sellers to sign up quickly & easily ○ Alibaba has 10m+ sellers in China ● They create many products = lots of long tail keywords ○ There are 1bn+ SKU’s for sale on Alibaba websites ● On Taobao sellers are also constantly optimizing for SEO
  24. 24. Never lose money like in Retail Retail models face the difficult question: Do I enter categories where i am not the most price competitive? ● If I do and I don’t price down to be competitive: my perception is hurt as Im not the cheapest ● If I do price down, i often make a negative margin Marketplace models never face this problem ● If you get the same sellers they will likely price competitively across channels As a retail model, how do you maintain price competitiveness with Amazon on a product that you do a small fraction of their volume?
  25. 25. Sections 1. Introduction 2. Alibaba’s Businesses 3. The eCommerce Storefront 4. The Omni-everything Approach 5. The Seller Experience & Tools 6. Operations 7. Software 8. How they will go global ● The eCommerce Marketplaces ● Logistics ● Entertainment ● Finance
  26. 26. Taobao Source: https://expandedramblings.com/index.php/taobao-statistics/ ● Founded in 2003 by Alibaba ● In 2017 had $350bn GMV (58% of all Alibaba marketplaces) ● The biggest C2C ecommerce site in China ○ Most of what is sold is new ● 580 million monthly active users (top 10 most visited sites in the world) ● Over 1 billion product listings in 2016 ● Close to 10m sellers on Taobao ● Focuses a lot on engagement of its users through videos, etc.
  27. 27. Tmall Source: https://www.emarketer.com/Article/Alibabas-Tmall-Maintains-Ecommerce-Lead-China/1016432 ● The B2C eCommerce site established by Alibaba in 2008 after being spun out of Taobao ○ Leading B2C player in China with ~53% market share ● Focused a lot on brands ○ 75% of the consumer brands in the Forbes Top 100 World’s Most Valuable Brands are selling on TMall ○ More than 70,000 international and Chinese brands ● Business model: ○ Charges annual fee and commissions ○ Difficult process to be accepted as a Tmall seller
  28. 28. Aliexpress Source: https://www.chinainternetwatch.com/20230/aliexpress-100m-cainiao/ ● Founded in 2010 as the platform for selling Chinese seller’s products abroad ○ Users from over 220 countries ○ 100m+ active buyers in the past year ○ Daily visitors is over 20m ● Creating more of a local presence overseas ○ Key markets are Russia, US, Spain, Brazil, France and UK ○ Establishing local presence in countries like Russia by adding Tmall to the platform ○ Establishing overseas warehouses in countries like Europe ● Business model ○ 5% commission on transactions + annual fee
  29. 29. Alibaba.com Source: alibaba.com ● The world’s largest online B2B trading platform for small businesses ○ Handles sales b/w importers and exporters from more than 240 million countries ○ Typically have a fairly large Minimum Order Quantity ● Size ○ Has over 150,000 businesses as members ○ 18m+ buyers ● Also provide services to sellers such as logistics, etc. ○ Partnerships with 3PL’s like Fedex, ,UPS, Maersk, etc.
  30. 30. 1688.com ● The Chinese version of the B2B commerce site, Alibaba.com ○ Mainly used for sales by factories & wholesalers to small businesses ○ There is a minimum order quantity ○ Has over 961,000 paying members and 230 million suppliers ● Typically the procurement site for Taobao sellers ● Business model ○ Charges annual membership fee as well as value added services (ads, order matching fees, etc.)
  31. 31. Juhuasuan: The flash sales platform Juhuasuan site Source: http://www.alizila.com/juhuasuan-alibabas-daily-deals-marketing-muscle/ ● Juhuasuan, a Groupon-styled flash sales marketplace, was integrated with Tmall & Taobao ● It provides an excellent way for sellers to launch promotional events and introduce new products ● Integrated with Tmall in 2016 so that brands can launch new products thru Tmall and run a marketing campaign for them thru Juhuasuan ● About 70% of products are new or hot products, excess inventory is a small proportion ● The reach: ○ 450 products and 25 brands on the platform daily ○ 30m unique visitors daily
  32. 32. Fliggy (online travel platform) ● The online travel platform designed as an online mall for brands such as airline companies and agencies ● Was launched in 2016 and targets the younger generation as a one-stop service for planning trips ○ Already has over 200m users and 100m downloads Source: https://www.tnooz.com/article/fliggy-online-travel-platform-China/
  33. 33. Sections 1. Introduction 2. Alibaba’s Businesses 3. The eCommerce Storefront 4. The Omni-everything Approach 5. The Seller Experience & Tools 6. Operations 7. Software 8. How they will go global ● The eCommerce Marketplaces ● Logistics ● Entertainment ● Finance
  34. 34. About Cainiao ● The logistics company of Alibaba founded in 2013 with a consortium of logistics companies (Alibaba owns 48%) ● Services the deliveries of Alibaba’s eCommerce platforms but also services non-Alibaba platforms ● Has a network that covers 224 countries and processes about 70% of all packages in China (about 42m per day) ● Over 200 warehouses and 1800+ distribution centers. ● Has a stated goal of being able to deliver anywhere in China within 24 hours and anywhere in the globe within 72 hours Source: http://www.alizila.com/wp-content/uploads/2016/09/Cainiao-Factsheet.pdf?x95431
  35. 35. Sections 1. Introduction 2. Alibaba’s Businesses 3. The eCommerce Storefront 4. The Omni-everything Approach 5. The Seller Experience & Tools 6. Operations 7. Software 8. How they will go global ● The eCommerce Marketplaces ● Logistics ● Entertainment ● Finance
  36. 36. Youku.com: The Chinese Youtube ● Acquired Youku Tudou for $4.7bn in 2015 (Youtube is not accessible in china) ● Gave access to 500m users and 800m+ daily video views ● Streams both video games and videos ● Invests in their own original content, in particular live events on news, music, sports, etc. ● Alibaba uses the platform as its only “shopping while watching live streaming videos” service Source: https://thenextweb.com/asia/2014/08/20/chinas-youku-tudou-now-serves-500-million-users-per-month-half-of-youtubes-reach/
  37. 37. Weitao: the social layer to Alibaba’s eCommerce ● Weitao is like a social network geared towards shopping and integrated with Taobao ● Users and brands create their own pages ● Users follow brands that they like and read articles, etc. ● They can also find products they like and shop Users can purchase from Weitao Users & brands create their own pages and have followers
  38. 38. Sina Weibo: the micro-blogging site ● Launched in 2009 ● 2 main businesses: ○ News platform - kind of like yahoo ○ Twitter-type social network (140 character limit to each post and there is a follower- followee network) ● Alibaba invested $586m in Sina Weibo in 2013 to drive more traffic to Taobao ○ IPO’d in 2014 and Alibaba owns ~32% ● Had ~400m monthly active users in 2017 ● $30bn+ market valuation Source: https://www.techinasia.com/why-alibaba-invest-sina-weibo
  39. 39. Alibaba Pictures: their own movie studio Jack Ma calls Alibaba “the biggest entertainment co in the world” b/c of the time chinese spend browsing the ecom sites. And similar to Bezos sees avery symbiotic relationship b/w entertainment and ecom ● In 2014 paid $804m to buy ChinaVision Media Group (HK film & tv producer) and renamed Alibaba Pictures Group ● In 2015 invested in first Hollywood film by taking a stake in Paramount’s “Mission Impossible: Rogue Nation” ● Plan to use Big Data to help determine what to produce ● Ticket platform (Tao Piaopiao) was selling over 3m tickets a day in 2016
  40. 40. Tmall Box Office: their own video-streaming service ● In 2015 rolled out Tmall Box Office, a subscription video streaming service similar to Netflix ● Gives viewers access to Chinese & foreign shows and movies for <$10 per month ● A lot of original content from Alibaba Pictures ● Creating deals with companies like Disney to create specific channels (eg. DisneyLife) on the platform ● Alibaba has also started selling tv set top boxes powered by its smart tv operating system ○ Via a partnership with Skyworth
  41. 41. UC Web ● Operates UC Browser, one of the most popular mobile browsers globally ○ Founded in 2004 and acquired by Alibaba in 2014 ● Is a leading content distribution platform ○ UC News - content distributor ○ 9Apps - Android app store ○ UC Union - mobile traffic and monetization platform ● Revenue is mainly from ads ● Connects users to the Alibaba media ecosystem of eCommerce, music, video streaming and social networks ● 252m MAU as of Sept 2016 ○ Largest mobile browser in India Source: https://www.fungglobalretailtech.com/research/alibaba-group-strength-strength-overview-business-units-worlds-largest-e-commerce-company/
  42. 42. Alibaba Sports ● Established in 2015 to develop and operate sports IP, sporting events, e-sports contests, sporting venues, merchandise, etc. ● Vision is to digitalize the traditional sports industry by integrating Alibaba’s eCommerce and media assets ● Strategic partnerships with all major sporting associations like boxing, rugby, FIFA, NFL, Olympics, LPGA ● Streamed the 2016 Rio Olympics via Youku and over 380m viewers watched through Alisports Source: https://www.fungglobalretailtech.com/research/alibaba-group-strength-strength-overview-business-units-worlds-largest-e-commerce-company/
  43. 43. Xiami ● A music streaming service founded in 2006 and acquired by Alibaba in 2013 ● Earns fees from advertising and paid subscriptions (similar to Spotify) ● Has int’l and domestic licensing partners like Universal, BMG, K-POP, etc. ● Over 14m MAU as of Sept 2016 and app installed on 9m devices Source: https://www.fungglobalretailtech.com/research/alibaba-group-strength-strength-overview-business-units-worlds-largest-e-commerce-company/
  44. 44. Sections 1. Introduction 2. Alibaba’s Businesses 3. The eCommerce Storefront 4. The Omni-everything Approach 5. The Seller Experience & Tools 6. Operations 7. Software 8. How they will go global ● The eCommerce Marketplaces ● Logistics ● Entertainment ● Finance
  45. 45. ANT FInancial: The financial services group ● What is ANT FInancial? ○ Alipay = Paypal equivalent ○ MYBank = online bank that provides consumer loans based on online eCom transaction history ○ Yue Bao = money market fund ● How big? ○ $100bn valuation ○ 450m active users ○ estimated that 58% of all chinese online transactions go thru Alipay https://qz.com/1204717/chinas-ant-financial-plans-to-raise-5-billion-reportedly-at-a-valuation-of-100-billion/
  46. 46. Alipay: the Paypal of China Source; https://www.forbes.com/forbes/welcome/?toURL=https://www.forbes.com/sites/quora/2017/06/20/is-wechat-pay-taking-over- alipay/&refURL=https://www.google.com/&referrer=https://www.google.com/ ● Alipay started out as the Chinese “Paypal” to help Taobao sellers get paid ● Alipay is now accepted in over 500k Chinese offline merchants and is a common way of paying in China ● 54% share of China’s $5.5 trillion mobile payment market ○ 520m active users / 200m transactions daily ○ Competes against Tencent’s WeChat Pay ● Business model: ○ Interest income - when transactions temporarily deposited in Alipay ○ Commission from merchants ○ Advertising fees - from ad space on app
  47. 47. Alipay has led to a mobile commerce boom in China ● In China it’s not uncommon for a bridesmaid to wear a QR code to facilitate payments from guests during a wedding ● Not your typical financial app as it includes sections like: ○ Merchants - users can learn the locations of nearby locations of shops, get discounted coupons and settle payments at merchants’ e-shops ○ Friends - contains social features like messaging, instant money transfer, an IOU feature, etc. ● Additional features: ○ Use public services like check the status of visas and passports, motor vehicle licensing, pay for traffic violations, etc. ○ In China when you scan a QR code in hotel room rented via the payment app, they can control the temperature, lighting, room service, etc.
  48. 48. MyBank: the online bank ● Launched in 2015 as a traditional bank taking deposits and making loans up to $800k ● Takes no collateral from debtors, but instead looks at the customer’s Alipay financial data ○ As a result cost of approving a loan is <$1 as compared to the $320 average in China ● Has no branches and thus reaches rural areas well ● Targeted Alibaba’s small and mid-sized Taobao sellers for initial customer base (5+ merchants) ○ Targets China’s 70-100m small businesses that are underserved by traditional banks ● Non-performing loan ratio so far is ~1% Source; hhttps://www.techinasia.com/alibaba-launches-online-bank-mybank
  49. 49. Sesame Credit: credit scoring for consumers ● Sesame credit is Alibaba’s credit-scoring system for consumers ● Based on factors such as social media interactions, purchases on Alibaba / Alipay ● Score allows them to get loans from Ant Financial and having a more trustworthy profile on Alibaba’s ecommerce sites ● Anyone w/ 750 pts can select a car online, pay 10% initial fee and pick up their new car from a vending machine. ● At hotels a high score will allow you to book and stay without paying in advance ● Testing using it on Chinese online dating sites to allow suitors to check the credit score and make sure the person is not ‘sketchy’
  50. 50. Yuebao: the world’s largest money mgmt fund ● Launched in 2013, in a short amount of time became the world’s top money market fund with over $210bn USD under mgmt ● Convenient to invest in and take money out of. And no minimum. ● Surpassed 300m users in early 2017 ○ In particular from rural and underbanked segments ● Pays ~4% annual return (stable and better than most commercial banks) Yuebao mobile app Source; https://www.bloomberg.com/news/articles/2017-08-17/world-s-biggest-money-market-fund-to-get-even-bigger-fitch-says
  51. 51. The Lending Club tie-up ● Alibaba teamed up with Lending Club, the American fintech co, to enable small US businesses to apply for credit up to $300k in under 5 minutes ● Must be used to pay an Alibaba.com vendor for goods purchased from China ● Being done to encourage US businesses to buy more from China
  52. 52. Sections 1. Introduction 2. Alibaba’s Businesses 3. The eCommerce Storefront 4. The Omni-everything Approach 5. The Seller Experience & Tools 6. Operations 7. Software 8. How they will go global ● The eCommerce Marketplaces ● Logistics ● Entertainment ● Finance ● Other
  53. 53. Alibaba Cloud (Aliyun) Source; https://techcrunch.com/2017/01/24/alibaba-q3-january-2017/ ● Founded in 2009 and started out as a private cloud to serve Alibaba’s eCommerce businesses ● The largest cloud computer service provider in China with a market share of over 50% (very similar to Amazon Web Services) ● Does about $2bn in revenue (up 115% y-o-y) ● Number of paying customers increased to 874,000 ● Expanding aggressively to increase capacity and improve its technology
  54. 54. Ali Health Source: http://www.scmp.com/tech/china-tech/article/2094681/alibaba-health-revenue-soars-robust-online-pharmacy-sales ● Online pharmacy and seller of health insurance ○ From acquisition of Citic 21CN in 2014 ○ Objective is to improve healthcare services ● Revenue: $69m in revenue in 2016 ○ Mainly from online drug tracking and pharmacy online system ● Has partnership with Tmall for driving customers to Ali Health ● Traded separately on HK stock exchange
  55. 55. Autonavi ● Digital map and navigation provider in China ○ Partner of Google Map, Bing Map, and 360 map in the chinese market ○ Captures users’ driving patterns in real-time, powered by Big Data and Cloud ○ Collaborates with police & transport offices to capture info about traffic accidents ● Established in 2001 and acquired by Alibaba in 2014 ○ 29m MAU in 2016 ● Revenue through Value add services like: ○ Commissions from location-based services such as car hailing company, Didi Chuxing ○ Advertising Source: https://www.fungglobalretailtech.com/research/alibaba-group-strength-strength-overview-business- units-worlds-largest-e-commerce-company/
  56. 56. YunOS ● An Internet of Things (IoT) operating system that brings cloud functionality to IoT and mobile devices ○ 2nd largest operating system for smartphones in China (behind Android who has 80%, but ahead of IoS) ○ 70m phone users (about 14% share) ● Users can access applications without having to download to their devices ○ Used in smartphones, smart cars, wearables, smart home applications, etc. ● Revenue model: sells cloud-based services on YunOS. Doesnt charge hardware manufacturers license fees. ● Being used in new retail applications like face recognition mirrors that allow you to project cosmetics on the person Source: https://www.fungglobalretailtech.com/research/alibaba-group-strength-strength-overview-business-units-worlds-largest-e-commerce-company/
  57. 57. DingTalk ● An enterprise messaging platform aimed at improving B2B communication and collaboration for SME’s in China ● Launched in 2015 and is the no.1 ranked enterprise messaging app in China ○ Similar to Skype for Business ● Offers video, voice conferencing, cloud storage, etc. ● Revenue model: currently free ● 3 million corporate users as of 2017 Source: https://www.fungglobalretailtech.com/research/alibaba-group-strength-strength-overview-business-units-worlds-largest-e-commerce-company/
  58. 58. Koubei.com: the platform for selling services to consumers ● $1bn invested by Alibaba & ANT Financial into a JV aimed at selling local services that are paid by smartphone called Koubei.com ○ The key O2O (online to Offline) play for Alibaba ● Services range from car repairs to movie tickets to take out lunches to booking hospital appointments ● Had 1.5m third party service providers signed up ○ 15m transactions daily ○ $10.5bn in payment volume in Q4 2016 ● Local merchants can conduct mobile marketing campaigns ● Accessible through Alipay Wallet app, Mobile Taobao app, AutoNavi, Weibo and UC Browser Source: https://www.fungglobalretailtech.com/research/alibaba-group-strength-strength-overview-business-units-worlds-largest-e-commerce-company/
  59. 59. Sections ● Attract ● Engage & Boost ● Keep ● Get Feedback 1. Introduction 2. Alibaba’s Businesses 3. The eCommerce Storefront 4. The Omni-everything Approach 5. The Seller Experience & Tools 6. Operations 7. Software 8. How they will go global
  60. 60. Alimama: the marketing tool set available to sellers ● A wide range of advertising available to sellers & brands on Alibaba platforms ○ TANX - real-time online marketing exchange that automates the transaction of ad inventory ○ Data Management Platform (DMF) - allows marketers to identify targeted audience groups thru big data ○ Taobao Zhitongsche - marketing service that returns personalized product recommendations on Ali marketplaces from keyword searches ○ Diamond - displays customized banners and visual ads across Alibaba’s platforms ● Ads appear across all ALibaba platforms: ○ Online marketplaces, Youku Tudou, weibo, Dingtalk, UC Web, AutoNavi
  61. 61. Big data is at the core of all advertising ● Alibaba has extremely advanced analytical tools that encourage sellers to upload their customer data (from offline channels and their own direct online efforts) and leverage it to improve their reach and conversion on their platform ○ Most of the large international brands are using these tools to sell on TMall ● Brand Data Bank ○ Online dashboard that shows brands how many consumers interested in their products and where they are in the product lifecycle ● Example: Skincare ○ If brand launched flagship store it could use the data to engage anyone who previously purchased ○ Knows who is inactive vs. active and target them differently
  62. 62. Promotion events on the platforms ● Alibaba’s sites spit out hundreds of theme-based promotional events that sellers can opt into each day ● Sellers participate in these events by providing a discount ● Humans only play a small role in deciding on themes of events, rest is automated ● Products are selected for events using algorithms, as well as targeted discount ○ data science helps to determine which products are best applied for which themes
  63. 63. The Ad Exchange Network (TANX) ● Alibaba’s ad exchange where advertisers can buy ads on Alibaba-owned and non- Alibaba owned sites ● Real-time exchange ● Participants include merchants and brand advertisers Alibaba’s very own ‘DoubleClick’ ad exchange network
  64. 64. Seller paid sponsored ads ● Taobao does not charge commissions from its sellers at all. Its main revenue stream is just advertising ○ eg. for positioning at the top of search results ● Similar to Google Taobao’s long-term goal is to have all search results be paid ones ○ but these should also be the ‘best’ search results as these advertisers also can afford those positions by having great prices, conversion, etc ○ and so taobao tries to ‘blend’ these paid results with the organic ones more and more (just like google is doing) ● Advertisers can even design their own popups and banners, including multimedia (see right)
  65. 65. Sellers can bloggers to write about their products via Alimama ● Brands can use Alimama to connect with hundreds of thousands of bloggers in an automated way ● The blogger writes an article about the seller’s product with a link back to their Tmall store and can earn a commission on sales ● For int’l brands looking to create a brand in China this has been a very powerful way of entering the market and conveying their brand attributes Leading US toymaker, Mattel, used the Alimama platform to connect with bloggers to help create their online brand in China
  66. 66. Sections ● Attract ● Engage & Boost ● Keep ● Get Feedback 1. Introduction 2. Alibaba’s Businesses 3. The eCommerce Storefront 4. The Omni-everything Approach 5. The Seller Experience & Tools 6. Operations 7. Software 8. How they will go global Recommended Reading Why Alibaba's store-centric approach is better than Amazon's search-focused one By Ken Leaver
  67. 67. Entertainment via video streams ● On average Chinese spend about 30 minutes shopping on Taobao ○ This is 3x longer than the avg customer spends on Amazon ○ This is because Taobao customers look to have fun during their experience ● 20,000+ live stream video sessions in the lead up to 12.12 promotion ● Taobao has started running a series of ‘webisodes’ ○ in 2016 a series called “One Thousand and One Nights” helped drive the sale of 537,000 dumplings in just a few hours ○ video was watched 2.7m times Source; http://www.alizila.com/mobile-taobao-pushes-webisodes-targeting-night-owls/
  68. 68. Live shopping events ● Many live events are broadcasted on Tmall and Taobao encouraging consumers to watch and then purchase ● Tmall Global Fashion show had 200 models showing off apparel from 80 different brands
  69. 69. How social ‘Circles’ work on Alibaba More than 1000 ‘Circles’ where hobbyists can talk about their pastimes and favorite products Q&A feature that allows shoppers with questions about a product get answers from the community ● big data is used to identify the person who is most qualified to answer the question ● 25% of questions are answered within 1 minute and 60% are answered within 10 minutes ● 1m questions per day, 2m consumers participate Source; http://www.alibabagroup.com/en/ir/article?news=p160726
  70. 70. Engaging in news and content via Weibo ● Weibo has 5000+ live streams daily, with 40% of viewers visiting the virtual stores being promoted ● Provides consumers with engaging news and content related to shopping and retail ○ aimed at increasing the amount of time consumers spend on the marketplaces ○ # of active users has climbed to over 80m ● 1,300 media outlets provide content Ava Foo has a fan base of 340,000+ on Weibo for her fashion blog Source; https://www.techinasia.com/weibo-live-streaming-china
  71. 71. Interactive offline shopping experiences Starbucks in China has special features built into the Taobao shopping app that provides info about the products Users who collect all the badges by visiting all the right spots in the Starbucks cafe, win a prize.
  72. 72. Sections ● Attract ● Engage & Boost ● Keep ● Get Feedback 1. Introduction 2. Alibaba’s Businesses 3. The eCommerce Storefront 4. The Omni-everything Approach 5. The Seller Experience & Tools 6. Operations 7. Software 8. How they will go global Recommended Reading Alibaba has elevated the game in product content... and the world will soon realize it By Ken Leaver
  73. 73. Alibaba’s loyalty system optimizes “stickiness” ● In 2017 combined the TMall and Taobao programs into a single club called “88 Membership” ● Offers members exclusive discounts, benefits and brand services ○ Including invitations to special member-only events ○ Incorporates ‘new retail’ by offering discounts to offline retail stores ○ Shopping pages that are viewable only to them ● More than 50 top brands participate (like Hugo Boss, L’Oreal, etc) ● Loyalty tiers that reward greater levels of consumer engagement ○ Not just purchases but accounts for visits, sharing to social media, posting questions in forums, and writing product reviews The user’s loyalty score, or ‘Taoqizhi’, is viewable to customers on all Alibaba sites Super members got invited to court time with NBA star, James Harden
  74. 74. The high-end membership - APASS Alibaba Passport (APASS) is a membership club created for the biggest online shoppers (who spend $15,000+ per year) Benefits: - Assigned personal account managers - Access to special events like wine tastings and automobile test drives - Exclusive daily deals from top brands These consumers spend 8x more time on average than others ~100,000 members Source; https://www.bloomberg.com/news/articles/2016-11-18/how-alibaba-turns-wealthy-shopaholics-into-a-marketing-squad
  75. 75. Sections ● Attract ● Engage & Boost ● Keep ● Get Feedback 1. Introduction 2. Alibaba’s Businesses 3. The eCommerce Storefront 4. The Omni-everything Approach 5. The Seller Experience & Tools 6. Operations 7. Software 8. How they will go global Recommended Reading Alibaba's "New Manufacturing" and why you should be worried By Ken Leaver
  76. 76. Sellers are given tools to get customer feedback ● Alibaba’s sites encourage as much transparency about the product being delivered as possible ● Only purchasers of a product can leave feedback ● They are encouraged to leave quality descriptions and photos thru incentives (like coupons, etc) ● They can also answer questions posed by future would-be purchasers Sellers can offer coupons to buyers to post photos of the products they have bought
  77. 77. Sections ● Online-to-Offline (O2O) ● Multi-channel ● New Retail ● Global Approach 1. Introduction 2. Alibaba’s Businesses 3. The eCommerce Storefront 4. The Omni-everything Approach 5. The Seller Experience & Tools 6. Operations 7. Software 8. How they will go global
  78. 78. Driving customers to offline merchants ● O2O, or “Online to Offline”, means using online to drive customers to stores offline ● According to McKinsey 71% of Chinese consumers are already using O2O services ● O2O grew 38% in 2015 to $51bn ● Drives very significant traffic during promotions (similar to Groupon) ● Categories include housekeeping, education courses, housing, dental practice, food, etc. Alibaba bought Ele.me for $900m, a food delivery business, to push into the local services market Source;http://www.alizila.com/o2o-commerce-is-generating-real-money-in-china/
  79. 79. Sections ● Online-to-Offline (O2O) ● Multi-channel ● New Retail ● Global Approach 1. Introduction 2. Alibaba’s Businesses 3. The eCommerce Storefront 4. The Omni-everything Approach 5. The Seller Experience & Tools 6. Operations 7. Software 8. How they will go global Recommended Reading Would Alibaba's shopping formula in China work in Russia? By Ken Leaver
  80. 80. Multichannel is the standard in China ● For many years already, most chinese sellers are selling on at least 8 platforms, which are plugged into an in-house built ERP or an off- the-shelf ERP. ● platforms they were typically selling on included: Amazon, Taobao, Tmall, Aliexpress, eBay, Wish, Walmart, Price Minister ● Cainiao was setup to be cross-platform to allow it to best fulfill sellers’ needs ● Sellers want to have a single workflow for order processing for their teams, which is enabled thru Cainiao’s cross-platform approach and systems
  81. 81. Build your order management system to be cross- platform ● When building your seller portal, you should distinguish between platform-specific and non- platform specific services ● Platform-specific = things that you do that are specifically tailored to that ecom site ○ SKU creation: a sku’s attributes on Taobao may differ from Tmall ○ Promotions: a promo on Taobao will differ from one on Tmall ● Non-Platform-specific ○ Order mgmt: when you fulfill an order you don’t really care what platform it is for ● If your seller portal is simply a portal linking to various services, then no matter whether you are in Taobao’s or Tmall’s or Aliexpress’s seller portal, when you click on order management, they can all take you to the same page. Services on Seller Portals of different eCom platforms can contain services that are platform-specific or not Taobao TMall Aliexpress SKU Creation Order Management Promotions Not platform-specific!!!! Analytics
  82. 82. Use standard seller API’s ● Sellers wants API’s to be similar across platforms so that they plug in easily into their ERP’s ● Most large sellers are working across many platforms, and therefore their teams only use their ERP and dont even log into individual seller portals ● Therefore don’t put any ‘critical’ features into your seller portal that is not accessible via API ○ And don’t build features with API’s that most ERP’s won’t support Taobao Tmall Aliex pressSeller ERP Typical Seller ERP setup ● Order api ● Ready to ship api ● Inventory api ● Order api ● Ready to ship api ● Inventory api ● Order api ● Ready to ship api ● Inventory api
  83. 83. Understand what ERP’s your sellers are using ● In 2016 Lazada organized a cross-border mini-conference for the large Chinese ERP’s and some of the large sellers in Shenzen that I attended, where some clear messages came out: ○ All large sellers in China are either using their own ERP or one of the off the shelf ones (like Mango ERP). They are not using each portal of each ecommerce platform. ○ They want to be able to plug & play platforms and are not willing to do a lot of work to add a platform unless they see a business case ○ eCommerce platforms that ‘get this’ like Wish are widely adopted in China The user interface of MangoERP, a popular ERP in ChinaWish’s ‘Help’ page for MangoERP users
  84. 84. Use standard SKU attributes to make it easy for sellers ● Sellers wants SKU attributes to be similar across platforms ○ This allows them to plug in the platform to their ERP with little extra work ● If you use standard SKU’s you can easily plug in millions of Chinese sellers ● If you make non-standard SKU attributes mandatory then the seller will do a business case to see whether it is worth his while Inside Seller’s ERP Amazon Taobao Wish.com Name iPhone 6 Mandatory Mandatory Mandatory Category Electronics Mandatory Mandatory Mandatory Subcategory Cell Phones Mandatory Mandatory Mandatory Color Black Mandatory Optional Optional Length - Optional Optional Mandatory Width - Optional Optional Mandatory Wish.com will be a relatively small seller for most large Chinese sellers, and therefore if they ask for attributes that are not already in the seller’s ERP, its unlikely the seller will bother to add them
  85. 85. Sellers want to hold their offline & online inventory in a single place ● Cainiao offers the ‘One Inventory’ system to sellers ● Nestle used to integrate warehouse stock across all Alibaba platforms into a shared industry ● Enabled % of products offering 2nd day delivery to jump from 30 > 70% ● Next they are looking to integrate offline channels as well Source: http://www.alizila.com/one-inventory/
  86. 86. SKU data should be separated b/w frontend and backend attributes ● Many eCommerce platforms mistakenly pack warehouse sku attributes into the Frontend sku ● Why is that problematic? ○ Because the seller is selling a single product on multiple sites and when he makes a change to that sku he wants to be able to do so once and not many times ○ Also when you bundle products into a single sku on a platform (eg. iPhone + cover) this may then map to 2 different warehouse SKU’s. And it would be inefficient to have that bundle as a single warehouse SKU as you may also want to sell them both separately ● At Lazada we needed to unpack warehouse SKU attributes from our front end SKU Tao11 Warehouse SKU: AA1 Weight: 1kg Length: 1m Storage: Normal Tmall1 Amz1 Warehouse SKU is typically mapped to multiple Frontend SKU’s inside the seller’s ERP Front end SKU Name: Warehouse SKU Taobao Tmall Amazon
  87. 87. Supply chain software is built cross-platform Cainiao’s ‘BMS’ system is essentially a cross- platform tool that also enables supply chain planning across all of the seller’s platforms and inventory locations ● This is more valuable to the supplier as it tells him not just how to forward position within Cainiao’s warehouse network, but also how he should forward position products in all of his own warehouses ● Takes into account demand from not just one eCom platform, but multiple It is much more valuable to a seller to accurately forecast what he will sell in all channels than just a single channel BMS Own warehouse 1 Own warehouse 2 Cainiao warehouse 1 Cainiao warehouse 2 Taobao Tmall JD.com Shanghai Taobao Tmall JD.com Beijing Forecast: 20 Forecast: 8 Forecast: 11 Forecast: 35 Forecast: 24Forecast: 7Forecast: 15Forecast: 10Forecast: 8Forecast: 10 BMS architecture diagram
  88. 88. By understanding how to play in the multi-channel world, you can scale fast ● Jet.com launched in July 2015 and hit a $1bn run rate by end of its first year ● How? They tapped Chinese sellers and knew that to get them to plug them in, in needed to be easy as a push of a button ● Chinese sellers typically have a single ERP connected to many platforms. If you use standard api’s to connect to the ERP, then they can plug you in almost instantaneously ● Also allows Chinese sellers to put millions of SKU’s on your platform at the click of a button Source: BI Intelligence April 2018
  89. 89. Sections ● Online-to-Offline (O2O) ● Multi-channel ● New Retail ● Global Approach 1. Introduction 2. Alibaba’s Businesses 3. The eCommerce Storefront 4. The Omni-everything Approach 5. The Seller Experience & Tools 6. Operations 7. Software 8. How they will go global Recommended Reading 8 Things every eCommerce platform should know about China By Ken Leaver
  90. 90. The “New Retail” experience ● Partnering with brick and mortar (and sometimes investing) to focus on being good showrooms ● Eliminates the need to hold inventory ● Have access to a much wider catalog. Customers can order things that are not in-store ● Purchase made online and delivery by Alibaba ● Retailers can eliminate a lot of competencies and focus on being a great showroom
  91. 91. Changing how retail works ● Introduced the Hema concept supermarket, which blends online and offline shopping ● Deliveries from the store itself to customers in a 30km radius as quickly as 30 minutes ● Operates about 20 stores and doesn’t intend to scale it. But rather aim is to showcase the benefits of the “new retail” experience to customers A customer at a Hema supermarket scans the barcode to get a ton of info about the product. Plus get a recommendation on similar products.
  92. 92. Investing in offline retail to bring ‘new retail’ In end 2017, invested ~$3bn in a 36% stake in Sun Art Retail, one of China’s leading retail operators ● Operates 446 hypermarkets in 29 provinces Invested in Lianhua Supermarket chain ● Operates 3618 outlets Invested in EasyHome, #2 furniture chain in China ● 223 stores in 29 provinces Source:http://www.alizila.com/alibaba-amps-up-new-retail-with-easyhome-investment/
  93. 93. How to choose what to put in-store ● Alibaba opened Home Times, a concept store for ‘new retail’ in Furniture and plans 15-20 stores in 2018 ● Tmall analyzes the behavior and preferences of users within a 5-mile radius of the shop ● Products picked from these users’ top preferred categories ● Cuts the time required to source products worldwide for retailers to a single day ● Store offerings will change every 10-15 days Customers just scan a barcode with their app to purchase and it will be delivered to their home
  94. 94. New technologies taking online to offline “Magic mirrors” are an augmented reality powered digital screen that allows shoppers to try on and purchase cosmetics A woman checks how different lipsticks look on her digitall in a woman’s bathroom at a mall and then orders the one she wants.
  95. 95. Changing the shopping experience ● Tmall offers test drive experiences from their own “Super test-drive centers” ● These centers are completely unmanned ● Customer can schedule a test drive directly from Tmall and use their phone to unlock the car ● Free 3-day test drive of over 100 models like Mercedes, BMW, Volvo ● The results: ○ Maserati sold 100 cards in 18 seconds during a flash sale on Tmall to mark the opening of their flagship store ○ Alfa Romeo sold 350 Giulia Milano cars in 33 seconds during its own flash sale Source: http://www.alizila.com/tmall-teases-car-vending-machines-with-super-test-drive-centers/
  96. 96. Pop-up stores ● Pop-up store in trendy shopping area only for promotional event ● Divided into 5 sections - kitchen, study, bedroom, bathroom and living room ● All rooms host connected products that can be remotely controlled by smartphones ● Customers can scan QR codes for product info or to purchase on an Alibaba online store
  97. 97. Providing the supply chain to mom and pops ● Mom and Pop convenience stores from China can now select from a large Alibaba-enabled assortment and eliminate having to work with multiple distributors ● Restocking is done next day ● Can fine tune their merchandising, product display and in-store promotion thru the app ● App tells them what products are in highest demand ● Can offer many digital services for sale
  98. 98. Sections ● Online-to-Offline (O2O) ● Multi-channel ● New Retail ● Global Approach 1. Introduction 2. Alibaba’s Businesses 3. The eCommerce Storefront 4. The Omni-everything Approach 5. The Seller Experience & Tools 6. Operations 7. Software 8. How they will go global Recommended Reading Learning about how Alibaba thinks about logistic network design By Ken Leaver
  99. 99. Alibaba enables Chinese sellers to sell globally with little effort ● Aliexpress is marketed and dropships almost all over the world ● Enabled by: ○ Cheap and relatively fast dropshipping from China ○ Automated translation from Chinese to many languages
  100. 100. Automated translation of products ● Alibaba has a huge team working on translation and in a meeting said they believed their translations were better than Google’s ● As a seller on Aliexpress you can either use automated translation or invest in doing a manual translation Aliexpress is #1 eCommerce site in Russia
  101. 101. When shopping offline abroad, buy online and have it ship from china ● Chinese are traveling more and more and love to shop ● Some retailers abroad have begun to take advantage of this, and win Chinese customers by providing a great experience ● For example: ○ Summerhill Wine in Canada attracts many Chinese tourists ○ They allow customers to purchase using Alipay and then ship to them to their address in China
  102. 102. Sections ● Customization ● Motivating seller performance ● Great tools ● Providing great data ● Access to services 1. Introduction 2. Alibaba’s Businesses 3. The eCommerce Storefront 4. The Omni-everything Approach 5. The Seller Experience & Tools 6. Operations 7. Software 8. How they will go global
  103. 103. Sellers create a shopping experience that matches their brand Sellers shop for their own page templates on Fuwu’s seller marketplace, similar to how Wordpress templates work Brands can create the look and feel for their shop that matches their brand identity (unlike Amazon and most other platforms)
  104. 104. Sellers select their own logistics packages ● Another unique element of Cainiao’s approach to logistics is the flexibility it provides in allowing merchants to select their own logistics packages ● How does this work? ○ When a merchant wants to use Cainiao’s services they go to Fuwu, the Services marketplace, and choose from a set of options ○ These options consist of ‘resources’, which are things like warehouses and certain capabilities (such as handling large goods, valuable goods, fresh food, etc.) ○ By selecting an option, the merchant is essentially defining what and where his goods can be sold as the eCommerce platforms will check these capabilities when they offer customers delivery options ○ When selecting a service on Fuwu, the merchant is signing an e-contract with defined pricing for those servicing Sellers can choose which warehouses/countries they want to fulfill from and what carriers they want to use. These are the only options that will show up to the customer on checkout.
  105. 105. Sections 1. Introduction 2. Alibaba’s Businesses 3. The eCommerce Storefront 4. The Omni-everything Approach 5. The Seller Experience & Tools 6. Operations 7. Software 8. How they will go global ● Customization ● Motivating seller performance ● Great tools ● Providing great data ● Access to services Recommended Reading Jack Ma's 'New Retail' will change eCommerce as we know it By Ken Leaver
  106. 106. The Seller Rating is a very important criteria to the customer’s purchase decision The amount of deposit the seller has paid (to protect against fraud of not fulfilling) Taobao product page Seller’s overall rating, which is based on numerous factors that the consumer can click and see broken out as below Performance specifically about the accuracy of the description of the project, quality of customer service and logistics (on-time, etc)
  107. 107. This rating motivates the seller to perform well in key operational areas ● Seller rating is an integral piece of how all Alibaba’s marketplaces work ○ the reason they work well is that they have a major impact on sort rank and participation in promotions, so sellers take their rating very seriously ● Ratings are based on things like: ○ fill rate ○ damaged product ○ contact response time ○ return rate ○ on time delivery ● Ratings typically update once a week but are based on a longer period, depending on the specific KPI
  108. 108. By using automated systems to get sellers to perform they only manage the very top of the tail ● The account management at Alibaba is almost completely automated except at the very top end (eg. the Nikes and GE’s of the world) ● This is not at the expense of poor service. Taobao and Tmall middle and long-tail sellers are still extremely happy ○ Why? Because great tools keep the sellers happy. ○ It is very rare that sellers need to interact directly with someone at Alibaba b/c the tools are so automated and intuitive ○ Due to the fact that most things are automated well, when there are requests that need human interaction, Alibaba is able to handle these very quickly with relatively few people involved
  109. 109. Alibaba also gets sellers to do a lot of the operations for them, like customer service ● Alibaba allows buyers to contact sellers both pre- purchase and post-purchase ○ Pre-purchase issues typically include questions about product specs ○ Post-purchase issues are typically around returns, how to assemble/install, etc. ● on such issues the customer can always escalate to an Alibaba service agent if he is not happy with the seller’s response ● Sellers’ response time to such inquiries is part of their seller rating ● Sellers in China often outsource the management of these chats to 3rd party customer service companies that they find on the Services Marketplace
  110. 110. Sections 1. Introduction 2. Alibaba’s Businesses 3. The eCommerce Storefront 4. The Omni-everything Approach 5. The Seller Experience & Tools 6. Operations 7. Software 8. How they will go global ● Customization ● Motivating seller performance ● Great tools ● Providing great data ● Access to services
  111. 111. Sellers have a lot of great tools to develop their own business ● Driving traffic ○ Alimama, Weibo, ● Customer Service ○ 3rd party providers and services on Fuwu ○ Free Alibaba customer-seller communication platform ● Order management ○ 3rd party providers and services on Fuwu ● ERP Software ○ 3rd party providers and services on Fuwu ● Content creation / Photos ○ 3rd party providers and services on Fuwu ● Store design ○ 3rd party providers and services on Fuwu ● Analytics ○ Mix of Alibaba and 3rd party platforms ● Finance / Accounting ○ 3rd party providers and services on Fuwu
  112. 112. Sellers can push promos to past customers ● Alibaba offers sellers templates to push messages to past customers ● They don’t get the customer email so can only advertise thru Alibaba platform
  113. 113. Sellers can follow up on dropped carts ● Sellers on Alibaba platforms can see when customers have dropped their shopping carts ● They have the option to send automated messages to find out why the customer dropped and try to get them back
  114. 114. Sections 1. Introduction 2. Alibaba’s Businesses 3. The eCommerce Storefront 4. The Omni-everything Approach 5. The Seller Experience & Tools 6. Operations 7. Software 8. How they will go global ● Customization ● Motivating seller performance ● Great tools ● Providing great data ● Access to services Recommended Reading eGrocery Player Analysis By Ken Leaver
  115. 115. The Seller Analytics platforms ● There is a mix of paid and free analytical platforms for sellers, some of which are provided by Alibaba and others by 3rd parties (using Alibaba API’s) ● Some of the popular ones include: ○ Hao Dian Pu - provides paid analysis of traffic and customers ○ Taobao Quantum (by Alibaba) - offers a free package (traffic, sales, customer, promotion analysis) and paid (traffic source analysis, store experience analysis, etc.) ○ Taobao Hang Qing (by Alibaba) provides keyword trends, product name optimisation, product ranking, competitor price analysis, etc. ● I also saw the paid Alibaba analytics platform and was blown away by the crisp UI and breadth of data. Unfortunately i could not find screenshots online.
  116. 116. Sellers even upload their own offline data ● Many brands upload their offline customer data to ALibaba platform ● The reason: Alibaba offers advanced tools to leverage this data to make their online marketing more impactful ● International brands even market their Tmall shop in their own direct communications with consumers, thus doing Alibaba’s marketing for them ○ this is rarely the case with Amazon as the brands often view Amazon as more of a threat that tries to ‘squeeze them’
  117. 117. Sections 1. Introduction 2. Alibaba’s Businesses 3. The eCommerce Storefront 4. The Omni-everything Approach 5. The Seller Experience & Tools 6. Operations 7. Software 8. How they will go global ● Customization ● Motivating seller performance ● Great tools ● Providing great data ● Access to services
  118. 118. Sellers outsource services to providers on FUWU, the service marketplace ● Alibaba has built their own services marketplace called Fuwu where sellers on all Alibaba platforms can find 3rd parties for services like: ○ Photography ○ content writing ○ creation of store templates for taobao ○ banner ad creation ○ outsourcing of fulfillment ○ outsourcing CS tickets ○ and many more ● This Fuwu marketplace does $10bn+ in annual sales ● It is key to allowing sellers to outsource pieces of the value chain they are bad at, and allow them to focus on what they are good at.
  119. 119. An ecosystem of agents provide services to sellers ● Alibaba has cultivated a large network of “certified” agents that essentially help sellers sell ● These partners either offer a one-stop solution or some specialized services that can include: ○ Design of the store ○ Setup of hte store ○ Merchandising, price, promo mgmt ○ IT integration to ERP/WMS ○ Customer service ○ Etc ● Typically charge a fixed monthly retainer or % commission, or combo
  120. 120. Outsourcing services and providing financing has been key to getting even rural areas to sell online ● 1000+ ‘Taobao Villages’ ● More than 200,000 active online shops in 17 provinces ● Villages now can sell cross border ● Get financing from ANT Financial ○ More than 180,000 rural SME’s selling on Alibaba platforms have gotten financing ● Planning to invest $1.6bn over next 3-5 years to build eCommerce facilities in rural china ○ Local “service centers” where villagers can purchase and sell goods through Tmall and Taobao Source: http://www.alizila.com/an-introduction-to-taobao-villages/
  121. 121. Sections ● High-level approach ● Logistics ● Warehousing ● Manufacturing ● Customer Service 1. Introduction 2. Alibaba’s Businesses 3. The eCommerce Storefront 4. The Omni-everything Approach 5. The Seller Experience & Tools 6. Operations 7. Software 8. How they will go global
  122. 122. Jack Ma believes strongly in not owning physical assets ● Alibaba owns very few trucks, planes, fulfillment centers, delivery hubs, etc. ○ This is in major contrast to the Amazon approach, which is very asset intensive (ie. Amazon owns tons of buildings, vehicles, etc.) ● Instead Cainiao has created an intelligent network that connects 3rd party owned assets and manages their performance ○ Easy to plug in warehouses, carriers, etc. ● It has even created Cainiao, its fulfillment/logistics arm, into a separate company own by separate investors The standard eCommerce Delivery with assets involved
  123. 123. You are more free to generate competition ● By not owning the assets Cainiao gets them to compete ○ They make barriers to entry as low as possible… it will soon just be a 30-minute sign up process to become an Alibaba carrier ● Thousands of carriers compete with one another to get volumes on routes ○ Who gets the volume depends on price, reliability and who gets it there faster ○ Cainiao can adjust how these volumes are distributed among carriers real-time ○ They also adjust volumes to achieve volume-based price incentives ● Fulfillment centers in the Cainiao network are starting to work similarly Have a scooter and want to become a carrier for Cainiao? Just sign up!
  124. 124. Competition has drove Chinese logistics from being one of the worst to the best in the world in a short span of time ● 20 years ago logistics beyond the main cities of China was broken, creating major distribution issues for companies trying to get their products to those areas ● Now China has probably the most competitive and advanced eCommerce logistics network in the world ● Why? Competition. Pure and Simple ○ The number of carriers that have sprouted up in China is simply immense ○ And due to this they have had to invest in cutting edge technology and operations to compete with one another ● A key enabler to this has been the plug-and- play approach of Cainiao ○ Carriers can plug into the platform and compete very easily ○ They are given access to incredible amounts of data to optimize their business
  125. 125. Why fulfillment & logistics was put into a separate org from Alibaba ● Alibaba realized that logistics & fulfillment costs decline with volume as its a heavy asset-based biz ○ Relying on their own volume was too slow So they created a separate company, Cainiao, that would service not just Alibaba but other eCom platforms ● Entirely different technology stack was built ○ The eCom platform (eg. Taobao, Tmall, etc) was split technologically from operations ○ Everything operated via clean, industry-standard APIs ● Lazada took this painful step soon after Alibaba made its first investment A new company, eLogistics, was created and all warehouses + LEX (the carrier) were moved into it. Shareholder structure of Cainiao Source: https://ecommerceiq.asia/cainiao-logistics-southeast-asia/
  126. 126. Sections ● High-level approach ● Logistics ● Warehousing ● Manufacturing ● Customer Service 1. Introduction 2. Alibaba’s Businesses 3. The eCommerce Storefront 4. The Omni-everything Approach 5. The Seller Experience & Tools 6. Operations 7. Software 8. How they will go global
  127. 127. Cainiao has created a large, intelligent network ● Alibaba tries not to own any of its fulfillment network ○ 200+ warehouses operated by 3rd parties ○ 3000+ carriers and delivery agents ● Instead Alibaba tries to connect them all in an intelligent network that Cainiao has built ○ carriers & warehouses enter their own network details in a ‘Resource Center’ that Cainiao has built ● For each node in the network they track capacity, start/end times and reliability ○ the network can reroute to other partners when reliability of one node goes down ● Delivery leadtimes are given at the time of the customer order ○ They are able to deliver within promise 95%+ of the time ○ by deciding at the time of the order the carriers, they are able to tell carriers days in advance what to carry Source: Cainiao website
  128. 128. Carriers can participate easily ● It is simple and easy for carriers to become part of the Cainiao network ● They just enter their route information, (including things like capacity, cost, etc) in a Cainiao portal and sign an electronic agreement ● The better their reliability and lower their cost, the more volume they will get ● This flexibility has encouraged massive competition in the logistics space in China, which has resulted in costs dropping very quickly Source: Cainiao website
  129. 129. Everyone is just a node in a network Above is a high-level schematic of how Alibaba’s ‘Smart Routing’ system works. The key thing to note in this design is: - You can plug in as many nodes as you want and can have many legs to a route without disrupting the logic - You can decide the exact carrier + date + time of every leg in the journey at the time of the customer order, which is absolutely huge from a logistics planning perspective Supplier WH - NJ Days: MTWRF Cut time: 10:00 Start time: 12:00 End time: +1d 12:00 Capacity: 100 Reliability: 94% Sept 1(M) 9:00 By: Sept 4 (R) 12:00 *input by supplier in portal By: Sept 5 (F) 16:00 By: Sept 8 (M) 14:00 By: Sept 9 (T) 9:00 By: Sept 9 (T) 16:00 By: Sept 10 (W) 14:00 Carrier A Days: MWF Cut time: 13:00 Start time: 14:00 End time: 16:00 Capacity: 50 Reliability: 93% *input by carrier in Resource Center *input by carrier in Resource Center *input by carrier in Resource Center *input by carrier in Resource Center *input by carrier in Resource Center Wayfair NJ Sort Days: MTWRF Cut time: 9:00 Start time: 10:00 End time: 14:00 Capacity: 5000 Reliability: 99% OPTION 1 Linehaul A: NJ > CA Days: MTWRF Cut time: 16:00 Start time: 17:00 End time: +1d 9:00 Capacity: 200 Reliability: 99% Wayfair CASort Days: MTWRF Cut time: 12:00 Start time: 13:00 End time: 16:00 Capacity: 7000 Reliability: 99% Carrier C Days: MTWRF Cut time: 8:00 Start time: 9:00 End time: 14:00 Capacity: 50 Reliability: 94% Customer Promise = Sept 10 @ 14:00 WH Processing PickupCustomer order Sort Linehaul Sort Last Mile
  130. 130. Smart sorting ● An integral part of the sort center operations is routing inbound packages to the correct outbound lane ● Alibaba’s Smart Routing system is integrated with the software running the package conveyor in sort centers so that this all happens automatically and packages are put on the outbound truck that was scheduled at the time of the customer order ○ Ensures that sort center does not get clogged Inbound Outbound Storage Storage Package Conveyor To Beijing North To Beijing South To Beijing East To Beijing West From Shanghai From Suzhou From Guangdong Sort Center Operations
  131. 131. Key partnerships overseas to widen the network Cainiao has been making key overseas partnerships to speeden and reduce the cost of dropshipping from China to key markets like Europe, the US, etc. These partners just connect by API ● Warehouse operators can even use their own WMS systems One example is the partnership with the US Postal Service for Aliexpress parcels
  132. 132. Even shipping documents are done scalably ● Alibaba has centralized all documents to a single ‘Cloudprint’ system, which works in conjunction with an ‘e-AWB’ system that handles variables ● This allows for all documentation (like airway bills, picklists, etc.) to be managed in one centralized place ○ which is a key enabler for allowing sellers to completely process orders on their own ERP and just call by api for the appropriate document ● Enabled by the fact that carriers maintain their own document templates in Cloudprint and maintain their own data mappings for things like location tree, carrier codes, etc in e-AWB
  133. 133. Pickup stations to reduce failed pickups ● Cainiao pledged in 2017 to set up 40,000 pickup facilities close to residential areas, including 2000 on college campuses ● Opened 5000 self-collection outlets with China Post with plans to expand to 100,000 ● Partnering with convenience stores such as C-Store for pickup ● Developing facial recognition technology to allow users to unlock delivery drop boxes Source: http://www.advangent.com/2015/04/08/china-post-5000-self-collect-outlets-for-alibabas-logistic-network-cainiao/
  134. 134. Convert stores into last mile fulfillment centers ● Inefficient to fly packages from another city for a 200 mile+ delivery ● Simpler to deliver it from a store nearby ● That is why Alibaba is making a big play into retail with their “new retail” strategy Source: http://www.alizila.com/tag/new-retail/
  135. 135. Delivery robots being tested ● Robot “Xiao G” is an autonomous delivery vehicle that interfaces with a transport mgmt system to optimize a delivery route ● Uses a deep learning algorithm to predict the trajectory of moving objects, vehicles and pedestrians ● Testing with Zhejian University a robot that learns where students are at what time of the day to improve efficiency, and allow students to take out their parcels as they pass ● Planned to allow students to communicate with the vehicle via a mobile app
  136. 136. Drones to be used in specific circumstances ● In 2017 Alibaba ran a test of sending unmanned aerial vehicles (UAVs) carrying boxes of passion fruit from Putian to the nearby Meizhou Island over water ● Expected that this will cut transport time to the island in half and save on logistics costs ● Plans to use drones to delivery high value add products such as fresh food and medical supplies over water Cainiao drone that delivered passion fruit to a nearby island
  137. 137. Smart logistics vehicles ● Cainiao has pledged to putting 1 million smart logistics vehicles into the market ○ Expected to save as much as $1.4bn annually ● Vehicles co-manufactured with auto companies like SAIC Motor Corp and Dongfeng Motor ● Optimize the delivery route for couriers based on Cainiao’s advanced big data algorithms ● Trials in Shenzen and Chengu in process Source: https://rctom.hbs.org/submission/is-alibabas-smart-logistic-platform-sufficient/
  138. 138. Sections ● High-level approach ● Logistics ● Warehousing ● Manufacturing ● Customer Service 1. Introduction 2. Alibaba’s Businesses 3. The eCommerce Storefront 4. The Omni-everything Approach 5. The Seller Experience & Tools 6. Operations 7. Software 8. How they will go global
  139. 139. Cainiao outsources much of its warehouse footprint ● Operating over 200 warehouses in its network, Cainiao is collaborating with over 40 domestic partners to operate them ● Cainiao only self-operates in the top tier of the network warehouses (top 8-10 cities). The rest are run by partners ● Cainiao swaps the operator of the warehouse fairly frequently based on performance ● I visited a warehouse in Shanghai that they had bought from Amazon and they’d recently swapped the company that operated it due to performance / cost
  140. 140. Plugging in 3rd party WMS’s ● Cainiao is able to plug in many different WMS’s via standard API’s to its warehouse integration layer (WHC) ○ This allows them to plug into warehouses operated by 3rd parties like DHL and Fedex ● Why is this powerful? ○ You do not need to own and operate all of your own warehouses ○ Particularly helpful for overseas expansion and pop-up warehouses for campaigns ● What does the Warehouse Integration Layer do? ○ Routes inbound/outbound requests to the right WMS and sends responses back to the eCom platform ○ Is the ‘inventory master’ for warehouse stock Taobao Tmall Aliexpress Logistic order intake layer Dropship (seller) platform Warehouse integration layer (WHC) WMS1 (Cainiao) WMS2 (DHL) WMS3 (Fedex) Rough architectural sketch of how Cainiao connects to multiple WMS’s Dropship orders WH orders
  141. 141. Smart warehousing ● Cainiao’s Guangdong Tmall warehouse is the largest warehouse of “automated guided vehicles” in China ● Manned by ~200 robots that are equipped with sensors that prevent them from bumping into one another ● Goods move to human workers who arrange them for packing ● Worker efficiency increased significantly ○ From 1,500 products sorted during a 8hr shift to 3,000 Source; http://www.chinadaily.com.cn/business/2017-10/18/content_33409509.htm
  142. 142. Sections ● High-level approach ● Logistics ● Warehousing ● Manufacturing ● Customer Service 1. Introduction 2. Alibaba’s Businesses 3. The eCommerce Storefront 4. The Omni-everything Approach 5. The Seller Experience & Tools 6. Operations 7. Software 8. How they will go global
  143. 143. Working to help tailor manufacturing to eCommerce Alibaba has a program where they work with regional Chinese cities to develop ‘Tao Factories’ ● its estimated that there are already more than 15,000 such factories What are ‘Tao Factories’ ● Basically they aim to give eCommerce sellers access to small manufacturers ● These factories are able to provide smaller- quantity manufacturing (thus reducing the risk to sellers of testing new products) Source;http://www.alizila.com/alibaba-china-digital-economy-bcg/
  144. 144. “New manufacturing” = customizing what is produced based on real-time data ● Anticipates the near real-time consumer data to help manufacturers become more nimble and responsive to purchasing trends ● Enabling large scale customization to individual customers ● One example is how farmers in China use Alibaba’s big data to decide what products they should produce and in what quantity (this helps avoid producing too much or little) This farmer in Shandong Province entered new fruit categories and invested in more land based on the data that Alibaba gave to them Source;http://www.alizila.com/
  145. 145. Helping farmers choose what to produce ● Alibaba is giving farmers access to big data analytical tools to determine what to produce and in what quantities this has drastically reduced the risk associated to producing, and thereby enabled them to expand the business ● They also give farms the ability to sell direct to customers, thereby cutting out all the middlemen ● Over 10,000 farms are now using this software ● Now Alibaba is working on helping these farmers sell their products to the entire world Source;http://www.alizila.com/
  146. 146. Sections ● High-level approach ● Logistics ● Warehousing ● Manufacturing ● Customer Service 1. Introduction 2. Alibaba’s Businesses 3. The eCommerce Storefront 4. The Omni-everything Approach 5. The Seller Experience & Tools 6. Operations 7. Software 8. How they will go global
  147. 147. You don’t need to have armies of customer service reps to provide great service ● Most seller-related issues/questions are directed straight to sellers ○ The question becomes, how do you ensure the seller is equipped to handle them in a timely fashion? ● The answer that Alibaba has come up with? ○ Fuwu provides access to many 3rd party customer service outsource providers and software systems ○ Alibaba also provides a free customer service platform that integrates very well with their ecommerce numerous platforms ○ Response time and quality of response to customer queries is a key criteria in a seller’s rating, thus motivating them to do a good job ■ This is typically motivation enough for sellers to outsource it ot professionals in order to maintain competitiveness ● Many other non-seller customer service queries on Alibaba platforms are now answered by bots with AI
  148. 148. Customer<>Seller disputes are automated via a jury ● Even customer<>seller disputes are automated using a community of users on Alibaba’s platform using pan.taobao.com ○ in beta testing, over 800,000 people volunteered to be dispute assessors ○ over 340,000 disputes were resolved ○ target is to reduce dispute resolution time from 3-5days to 2 days ● For example if a customer returns a taobao item and it comes back broken to the seller but both disagree on who broke it ○ a team of resolution assessors would be assigned and presented the evidence via the platform ○ they would then decide based on the evidence provided Source; http://www.alizila.com/alibaba-allows-users-to-play-judge-in-e-commerce-disputes/
  149. 149. Sections ● Tech driven org ● Work hard & smart ● Clean architecture ● Service-oriented product teams ● Being an open platform ● Artificial intelligence 1. Introduction 2. Alibaba’s Businesses 3. The eCommerce Storefront 4. The Omni-everything Approach 5. The Seller Experience & Tools 6. Operations 7. Software 8. How they will go global
  150. 150. A true tech driven org ● Alibaba is probably the most tech-driven eCommerce company in the world ● What does that mean? That means the tech teams drive the solution/business process more than the business teams ● How does this work in reality? ○ The business teams in the field at Alibaba are typically very small ○ They provide the ‘context’ to problems to the PM’s in China, but the PM’s have a lot of leeway in designing the solution ○ While other eCom companies may say that it works like this, the reality i have typically seen is not even close to the reality at Alibaba
  151. 151. Senior leaders at Alibaba are not “typical” ● Compared to western companies Alibaba’s management teams and leaders are much more technical and soft-spoken ○ “Charisma” seemed to be much less important a factor in moving up the ladder ● Why is that? ○ Alibaba tends to put more weight on intelligence and strategy and less on charisma ○ I saw this consistently in the leaders that i met. The CTO’s often become the CEO’s in Alibaba ● Is that a good thing? ○ In my view it definitely leads to a more technical / architectural viewpoint being taken into account in how the company develops Not what your typical Western CEO looks like…
  152. 152. A culture of the best solution wins regardless of rank ● Many large companies are impacted by the HiPPO (Highest Paid Person in the Office) effect, but i specifically felt like this was much less the case with the teams I saw in Alibaba ● While watching Alibaba teams discussing a problem the pattern i noticed was: ○ It was difficult to tell who was an engineer vs.a product manager. The engineers were just as versed in the business problem and highly engaged in designing the solution ○ Junior team members felt free to voice their opinions and were listened to based on their merit, not on their rank
  153. 153. As an organization, Alibaba is both secretive and humble ● When it comes to guarding their technology design, Alibaba is probably one of the most secretive large organizations in the world next to Apple ○ Note that this is not true of their business strategy where Jack Ma is probably one of the most transparent CEO’s in the tech world ● What do i mean by secretive? ○ Even thought they bought Lazada, they would not allow any of their internal documents to be sent to us electronically and we could not take anything out of their office ● Why do i think they are that secretive? ○ Their software and how they have designed it is extremely smart and clean. They understand that this is one of their main competitive advantages against Amazon and others.
  154. 154. Sections ● Tech driven org ● Work hard & smart ● Clean architecture ● Service-oriented product teams ● Being an open platform ● Artificial intelligence 1. Introduction 2. Alibaba’s Businesses 3. The eCommerce Storefront 4. The Omni-everything Approach 5. The Seller Experience & Tools 6. Operations 7. Software 8. How they will go global
  155. 155. They get stuff out fast by working hard ● One of the biggest things that was immediately noticed by any Lazada folks that visited the Alibaba tech center in Hangzhou was that… … they worked HARD. VERY HARD. It was not rare to see the team working well past midnight all week, and even on the weekends. ● What drove this? In my mind several things can potentially explain it: ○ Teams were extremely devoted to the team’s success. The teams I met almost felt like families in that they had such close relationships with each other and felt very comfortable disagreeing with one another. ○ For many employees of Alibaba, their job is their life. They often work on-campus, marry someone else from Alibaba, and their entire social life revolves around Alibaba.
  156. 156. But they also work smart ● When watching a tech team during their internal meetings it was interesting to note that: ○ Everyone in the room seemed to be shouting at each other as at least one person was scribbling on a board ○ It was nearly impossible to differentiate who was more senior to who ○ It was nearly impossible to differentiate who was a product person vs. an engineer ● Why? My interpretation: ○ It felt as if they had a true culture of “the best argument wins”... regardless of your rank, job, etc. ● And by following “the best argument in the room wins” consistently as a culture, you tend to make better decisions, which allow you to work smarter..
  157. 157. Product Managers are tooled to work very efficiently ● Alibaba is creating a platform that essentially allows PM’s to create user interfaces on their own that eliminate the need for designers to be involved, and have the engineering built in ○ Will not be used for customer-facing tools but more for operational / seller tools where UX is simpler Align requirement with business Typical Product Mgmt Flow Product Manager Create Design Specifications UX Designer Make UX design Provide feedback on UX Give to Engineering Product Management setup of Alibaba Multiple iterations Align requirement with business Product Manager Make UX using drag & drop interface Give to Engineering only if non-standard elements Release Release
  158. 158. Sections ● Tech driven org ● Work hard & smart ● Clean architecture ● Service-oriented product teams ● Being an open platform ● Artificial intelligence 1. Introduction 2. Alibaba’s Businesses 3. The eCommerce Storefront 4. The Omni-everything Approach 5. The Seller Experience & Tools 6. Operations 7. Software 8. How they will go global
  159. 159. Clean tech architecture ● Alibaba’s tech teams work very independently by taking a service-oriented architecture ● Alibaba eliminates legacy code almost as a culture by rewriting and replacing systems ● I asked a PM about bugs, and for core systems it sounded like they were almost non-existent ● Despite this they are able to release amazingly fast
  160. 160. Little redundancy ● One problem i have seen in non-Alibaba eCommerce companies is redundancy in logic, and my perception was that this happens far less frequently at Alibaba due to clear ownership: ○ Ie. when two teams build a service that is similar in nature ○ Or when a team builds a service that really should be owned and built by a different one ● Why is this a problem? ○ It becomes a problem because when one of the teams changes the logic and it impacts downstream systems in unpredicted ways ● For example, the promotions team builds some pricing logic into their service despite the fact that the pricing team should own this ○ Then the pricing team changes their logic forgetting that the promotions team also has their own logic ○ As a result there are unforseen bugs in the promotion logic after the pricing team makes their changes
  161. 161. Sections ● Tech driven org ● Work hard & smart ● Clean architecture ● Service-oriented product teams ● Being an open platform ● Artificial intelligence 1. Introduction 2. Alibaba’s Businesses 3. The eCommerce Storefront 4. The Omni-everything Approach 5. The Seller Experience & Tools 6. Operations 7. Software 8. How they will go global
  162. 162. Build once for many platforms ● Alibaba technology teams work like separate products that try to sell themselves to as many of the ‘platforms’ (ie. Taobao, Tmall, Aliexpress, Juhuasan, Lazada, etc.) as they can ● Their incentives are based on the gmv that they handle and therefore its in their interest to be as flexible as possible to be able to plug into the max # of platforms ● This allows product teams to develop very deep expertise in a product vertical (eg. order mgmt, seller platform, etc) as they will build for many different use cases ● For example the order mgmt team could build a system that works for both Taobao and Didi (the Uber competitor that Alibaba backs)
  163. 163. Service-oriented architecture ● During my participation in the integration of Cainiao’s operational systems i was surprised by how little their various product teams interacted ● Why was this? Each team provided a service that was available via API’s, which were all clearly published in a consistent format ● So if any other team wanted to use the service it was clear how it worked ● This allowed teams to release code quickly without being dependent on one another
  164. 164. Service-orientation of product teams prepares them for integrating acquisitions ● Each product team at Alibaba plugs into the various eCommerce platforms almost as if they are an external customer using open APIs ● This service orientation makes them better prepared to plug in acquired eCommerce platforms as they already have very deep integration experience in many different contexts ● This is why Alibaba will be more willing/able to purchase and integrate large eCommerce platforms than Amazon (whose products are likely much more spaghetti’d together). Product team 1 (eg. Order mgmt) Taobao Tmall Aliexpress Lazada New acquisition? Product team 2 Product team 2 Product Management setup of Alibaba Open APIs Alibaba teams
  165. 165. Jack Ma understands that the core value Alibaba brings to any acquisition is their software platform ● Why does one eCommerce firm buy another one? They obviously see synergies. But most of the time these synergies are never truly realized. ● This is because it is too messy and challenging to ever fully integrate the systems ● For example, when I was Groupon CEO of Ukraine, both Russia and Ukraine were on a different platform from the US Groupon. ○ It was deemed too ‘difficult’ to integrate the two platforms ○ So I was not getting off of the great new features that were being released in the US ● Amazon is another great example as there is a long list of companies that they never integrated like: ○ Pets.com - never integrated.. Now exists as Petsmart ○ Drugstore.com - sold for a 90% loss to Walgreens ○ Zappos ● Lazada was the testbed for Alibaba’s ability to integrate its software platform into acquisitions ○ This essentially gives you the true control of the company ○ Enables you to automate more and more, thus reducing manual-based tasks (and people)
  166. 166. Sections ● Tech driven org ● Work hard & smart ● Clean architecture ● Service-oriented product teams ● Being an open platform ● Artificial intelligence 1. Introduction 2. Alibaba’s Businesses 3. The eCommerce Storefront 4. The Omni-everything Approach 5. The Seller Experience & Tools 6. Operations 7. Software 8. How they will go global
  167. 167. Open API’s to encourage 3rd party developers to build non-core software ● Similar to Amazon, Alibaba has created a robust set of API’s for all kinds of data from its platforms to encourage and foster 3rd party developers to create apps for sellers ● These tools are available to be purchased (and sometimes free) on Fuwu Service Marketplace ● Tools include things like: ○ ERPs ○ Customer service software ○ Analytics ○ Order management tools ○ Finance tools ○ Promotion tools 3rd party ERP’s available for purchase on Fuwu Service Marketplace
  168. 168. Sections ● Tech driven org ● Work hard & smart ● Clean architecture ● Service-oriented product teams ● Being an open platform ● Artificial intelligence 1. Introduction 2. Alibaba’s Businesses 3. The eCommerce Storefront 4. The Omni-everything Approach 5. The Seller Experience & Tools 6. Operations 7. Software 8. How they will go global
  169. 169. Helping tailor what they show shoppers ● Alibaba has developed software it calls the ‘E- Commerce Brain” ● It uses real-time online data to build models for predicting what consumers want ● Reflects not just what they’ve purchased but also browsing, bookmarking, commenting and other online actions ● Can home in on consumer’s preferences for categories, price ranges, brands, product specifications and other parameters Example: A mother browsing stories of skin allergies on Taobao Headlines (a news app) will then be offered to purchase dietary supplements when shopping on taobao
  170. 170. Smart Customer Service via AI ● 95% of customer calls to Alibaba are answered by a computer system called Ali Assistant ● Provides answers to frequently asked questions ● Assesses personal info of caller when making product recommendations
  171. 171. Personalized storefronts powered by AI ● Merchants selling on Taobao and Tmall can offer tailored product recommendations based on Alibaba’s AI technologies ● Based on age, gender, location, history and many other factors ● 20% higher conversion rate on personalized landing pages during 11.11 campaign compared to non-personalized 3 different customers, 3 different mobile presentations (first time visitors, new buyers, and loyal fans)
  172. 172. Supply Chain powered by AI ● Ali Smart Supply Chain (ASSC) applies AI to help online and offline merchants to: ○ forecast product demand and allocate inventory for optimal turnover ○ Determine the right products to offer ○ Optimal pricing strategy ● AI predictive model helps forecast demand for newly introduced products & for promo events
  173. 173. AI powered logistics Use AI to determine the fastest and most cost effective delivery routes in a variety of complex road networks Cainiao partnered with major Chinese automakers to manufacture 1 million green-energy delivery vehicles - Use AI to cut vehicle use by 10% and travel distances by 30% AI used to predict size of boxes that should be used to efficiently pack Source: http://www.scmp.com/tech/innovation/article/2119359/alibaba-lets-ai-robots-and-drones-do-heavy-lifting-singles-day
  174. 174. How ANT Financial uses AI ● If you get in a car accident, you can pull your your smartphone, take a photo, and file an insurance claim with an AI System ● The AI system can assess auto damage by an algorithm in 6 seconds and list nearby repair shops with their prices to fix the damage Source: http://www.alizila.com/china-auto-insurance-claims-adjusters-get-ai-boost-ant/
  175. 175. Sections ● Global-to-global vision ● The railroad tracks to global ecommerce ● Chinese sellers are the locomotives ● Lazada as a blueprint ● The final showdown with Amazon 1. Introduction 2. Alibaba’s Businesses 3. The eCommerce Storefront 4. The Omni-everything Approach 5. The Seller Experience & Tools 6. Operations 7. Software 8. How they will go global
  176. 176. Jack’s global-to-global vision • Jack Ma has stated that he sees eCommerce moving to a “global-to-global model” and he wants Alibaba to be the best at it. What does this mean? - I as a seller in any country of the world can sell on all of the major ecommerce platforms anywhere else in the world and it will be as easy as selling on a single platform - I as a consumer can buy from any eCommerce platform in the world and have it delivered quickly and cheaply • We are still many years away from fulfilling this vision and putting together the logistics puzzle is going to be the hardest piece
  177. 177. Enablers to the global-to-global vision 1. Sellers all around the world will work multi-platform a. They will work on cross-platform ERP’s where they create content, manage inventory, orders, mange customer service and do marketing in a single place for many ecommerce platforms 2. Operations will be simplified a. A single pickup from Chinese sellers each day. b. They will pack packages for Amazon, Aliexpress (to Russia), Lazada (to SE Asia), Taobao (to China), TMall (to China) and other platforms without even knowing or caring where it goes. 3. A global logistics chain that pieces thousands of carriers/warehouse providers a. Cainiao is piecing together this network thru partners and investing to fill missing capabilities b. Quality and price will improve with time Folks like this in China are already selling their wares to 15+ countries around the world painlessly
  178. 178. Why are they likely going to continue to win? They have the best software platform in eCommerce in the world by a WIDE MARGIN!!!!!!!!!!!!!!! ● In most areas they are quite a bit better than Amazon (ex-Amazon employees that worked in Lazada and saw Alibaba’s tech stack during the integration even said this) ● Why is it so good? Because it has been designed to be extremely clean, flexible, and scalable They are ‘inclusive’ of other players in their approach, unlike Amazon ● Amazon seeks to destroy brick n’ mortar chains rather than cooperate ● Alibaba has instead invested in stakes in many brick n’ mortar chains to demonstrate to the rest of the industry how they can successfully turn into showrooms for the eCommerce industry 1 2
  179. 179. Why are they likely going to continue to win? cont’d They take automation to a completely different level ● Alibaba finds ways to automate almost every element of their business. Often this means getting others to do the work for them (eg. sellers, carriers, etc.) ● This means they will have a major cost advantage against others who are not able to do it to the extent they are They understand Chinese sellers (who are the manufacturing base of the world) the best ● If you control the source of goods, you are as far upstream in the supply chain as you can be. Meaning you can cut out the middle men to offer the best price anywhere in the world. US-based Amazon sellers are learning this the hard way as they get kicked out of the game by the Chinese. 3 4
  180. 180. Sections ● Global-to-global vision ● The railroad tracks to global ecommerce ● Chinese sellers are the locomotives ● Lazada as a blueprint ● The final showdown with Amazon 1. Introduction 2. Alibaba’s Businesses 3. The eCommerce Storefront 4. The Omni-everything Approach 5. The Seller Experience & Tools 6. Operations 7. Software 8. How they will go global
  181. 181. The focus is on being the infrastructure to global eCommerce • Jack Ma’s ambition is 100% global, but he wants to achieve it by laying down the pipes to connect others • This is fundamentally different from Amazon’s approach, which is much less inclusive - They do not allow carriers to easily plug into their network - They do not encourage their sellers to sell on other platforms - They try to kill brick and mortar rather than cooperating with them - They compete with their sellers through their retail business rather than partnering with them
  182. 182. Cainiao will be the backbone to this global expansion • Cainiao will only build warehouses when they need to.. “If its something that can be done by our partners, we will leave it to our partners” - Senior Cainiao Exec • Cainiao has partner warehouses in 9 countries: US, UK, Germany, Australia, Japan, Hong Kong, Australia, and South Korea - 10+ warehouses in the US Source: https://ecommerceiq.asia/cainiao-business-model-2/
  183. 183. Being asset light is also a key enabler of being able to globalize quickly ● By not owning infrastructure like warehouses, trucks and drivers, Cainiao has been able to scale operations much faster ● When rolling out FMCG delivery in China, they expanded from a single test market to 50 cities in less than a year ○ This would have been impossible if they owned and operated their own delivery network
  184. 184. Sections ● Global-to-global vision ● The railroad tracks to global ecommerce ● Chinese sellers are the locomotives ● Lazada as a blueprint ● The final showdown with Amazon 1. Introduction 2. Alibaba’s Businesses 3. The eCommerce Storefront 4. The Omni-everything Approach 5. The Seller Experience & Tools 6. Operations 7. Software 8. How they will go global
  185. 185. Chinese sellers and their products are the locomotives running on the tracks • Alibaba’s strength in China is the key pillar to their expansion abroad - China is already the manufacturing hub of the world - There are over 10m sellers in China - Chinese sellers are already successfully selling abroad to consumers (via Aliexpress) and businesses (Alibaba.com) for many years • These Chinese sellers will cut out the current middle men by undercutting them in price - Amazon 3rd party sellers are the perfect example. - More than 30% of the 3m Amazon sellers are selling direct from China now - It has become well known among US-based 3rd party sellers that it is next to impossible to compete against these Chinese sellers Taobao Collection is a selection of Chinese Taobao sellers’ products on Lazada (in SE Asia)
  186. 186. Sections ● Global-to-global vision ● The railroad tracks to global ecommerce ● Chinese sellers are the locomotives ● Lazada as a blueprint ● The final showdown with Amazon 1. Introduction 2. Alibaba’s Businesses 3. The eCommerce Storefront 4. The Omni-everything Approach 5. The Seller Experience & Tools 6. Operations 7. Software 8. How they will go global

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