In less than 20 years, e-commerce giant Alibaba has revolutionised how people buy, pay, sell and market products in the world’s most populous nation. Jihee Junn travelled to its headquarters in China to see Alibaba’s complex ecosystem in action and find out how New Zealand companies are using it to leverage their entry into the Chinese market.
A three hour drive from the glittering megapolis of Shanghai, Hangzhou is a picturesque embodiment of peaceful, verdant greenery. Tourists, particularly within China, flock to Hangzhou to walk the tree-lined walkways of West Lake before heading to the markets to buy up local specialities: white chrysanthemums, colour-glazed porcelain, vibrant silks, and Longjing tea.
This is the picture you get from the travel books and tour guides trying to sell Hangzhou as a place of idle leisure. But the reality is that the city is far more than that: it’s one of the most populous cities in China (almost twice as many people live in its urban area than in all of New Zealand), was a G20 summit host in 2016, was once a pioneer of the largest bike sharing system in the world, and is home to more than 32 billionaires (that’s more than even Paris or San Francisco).
One of these billionaires is Jack Ma, founder of Asia’s biggest internet company, Alibaba. Valued at more than $39 billion US, the 53-year-old entrepreneur often likes to refer back to his humble origins as a Hangzhou native: honing his English skills giving free tours to foreigners at West Lake, founding a translation agency at the age of 29, and perhaps most amusingly, how he once sent in an application for a job at KFC and was the only one out of 24 applicants who didn’t get hired.
Legend has it that in 1999, Alibaba was born on the Great Wall of China when Ma – a junior staffer at the economic ministry in Beijing at the time – took Yahoo! co-founder Jerry Yang there on a tour where they bonded over discussions on the future of the internet. Several months later, Ma’s vague plans to connect Chinese businesses with the rest of the world became a reality. He called it Alibaba for the name’s universal appeal, taken from the Arabian folktale One Thousand and One Nights.
Today, Alibaba still calls Hangzhou home, employing more than 20,000 people across the city’s five campuses. At its main corporate campus – which emulates a layout not unlike those used by its US tech counterparts – employees walk and bike leisurely past the clusters of low rise buildings, reflective pools, and contemporary humanoid sculptures. Accents of Alibaba orange punctuate the landscape’s sleek, modern build, while traditional Chinese elements dominate a walled garden at the centre of campus. There’s even a house there set aside just for Jack Ma, albeit gated away from prying eyes.
Next year will mark the 20th anniversary of Alibaba’s launch – just one-fifth into Ma’s vision to create a company that lasts 102 years: one year last century, one hundred years this century, and one year next century. But even in that short timeframe, Alibaba’s rapid and unprecedented growth has been nothing less than impressive. In its latest quarterly results, the company reported that its retail marketplace had reached 580 million mobile monthly active users, 515 million annual active consumers, and a 56% growth in revenue year-over-year.
For its most celebrated shopping day, 11.11 (aka Single’s Day), Alibaba amassed more than $25 billion US in 2017 – a 40% jump from the 2016 figure. It also processed 812 million deliveries worldwide, received just under 1.5 billion payment transactions in 24 hours, and had over 140,000 different participating brands and merchants. It’s by far the biggest e-commerce festivity in the world – bigger than Black Friday and Cyber Monday in the US combined.
E-commerce has always been the driving force behind Alibaba’s business. But in the same way Amazon dabbles in things like virtual assistants (Amazon Alexa), cloud computing (Amazon Web Services) and consumer electronics (Kindle) to supplement its core business, Alibaba’s interests also reach far and wide. In fact, much more so than the US tech giant, as Alibaba’s complex digital ecosystem encompasses everything from video, film and social media, to travel, supermarkets and food delivery.
When it comes to its core business of e-commerce, there isn’t just one platform businesses and consumers have to choose from. There are the business-to-business (B2B) platforms like 1688.com and Alibaba.com which allow businesses buy products at wholesale prices. Then there’s Taobao, Alibaba’s consumer-to-consumer (C2C) platform that can be best described as China’s version of eBay. Finally, Tmall, Tmall Global, AliExpress and Lazada are all business-to-consumer (B2C) platforms designed for different kinds of markets. Tmall, for instance, gives Chinese consumers access to imported goods, while AliExpress services the international market which includes bargain-hunting, bulk-buying Kiwi consumers.
Underneath all that is a network of logistics, marketing, cloud computing and financial services that keep the whole machine well-oiled and running. Alibaba Cloud, the world’s third-biggest cloud computing arm in the world behind Amazon Web Services and Microsoft Azure, serves as the brains of all this data and tech, while Ant Financial runs the mobile payments side of things with Alipay – a cashless, QR-code based form of payment that’s about as ubiquitous in China and EFTPOS is here. Since 2016, tourist hubs like Auckland and Christchurch Airport also offer Alipay in New Zealand as a way to encourage spending by Chinese visitors.
“This is the beauty of the Alibaba ecosystem,” says Yi Qian, global business development director for Tmall Global. “In the US, for example, you have to search on Google, sell on Amazon, social media on Facebook and Twitter. But in China, that’s all in one ecosystem, and when you have everything available in one place, it’s much easier for a brand to invest.”
When it comes to New Zealand brands, A2, Anchor, Comvita, Fonterra and Anmum lead the pack on Alibaba platforms. But the scope for New Zealand companies to carve out their own market share in China has widened over the years, with a variety of retail (Countdown, Kathmandu, New Zealand Post), cosmetics (Trilogy, Ecostore, Antipodes), supplement (Healtheries, Go Healthy, Thompson’s) and food and beverage brands (Whittaker’s, Sanitarium, Watson & Son) establishing their own storefronts on Tmall and Tmall Global in recent years.
“What we see is Chinese consumers wanting more varied products from our region,” says James Hudson, marketing chief for Alibaba Australia and New Zealand. “Previously, it was very dominated by supplements and infant formula, but it’s diversified a lot. People are looking for a lot of other categories. There are boutique fashion retailers and even some different small businesses selling accessories through Alibaba platforms.”
“But the big growth segment that we see for New Zealand products is in the fresh food sector. New Zealand’s pretty famous for its dairy, seafood and fresh fruit… [and since] Chinese consumers are looking for cleaner, greener products, they’re getting more experimental with their product choices,”
At Hema, Alibaba’s online/offline supermarket arm, an employee is busy fishing out a live lobster. There’s a small plastic panel emblazoned with a QR code perched on top of the tank which, if you scan it, will tell you where the lobster’s from (it’s from Russia – a popular source of seafood for the country), when it was caught, and how it arrived at the store.
Everything at Hema is freshness at its peak. Its ‘Daily Fresh’ programme, which includes things like fruit, vegetables, dairy and meat, is full of food packed and sold on the day. It uses data to calculate the right amount of food to include – a number which differs from location to location – in an effort to reduce waste but still provide as much fresh product as possible.
In a lot of ways, Hema encapsulates Alibaba’s ‘New Retail’ philosophy in its purest form, merging online and offline shopping experiences via a range of innovative tech. And for New Zealand companies specialising in ‘fresh’, Hema signifies their main gateway into this new, emerging system with the supermarket already stocking New Zealand cheese, butter, fruit, oysters, mussels and black-lipped abalone, as well as packaged goods like beer, ice cream and powdered milk.
“We also sometimes partner up with foreign companies to help build their brand, like Fonterra, for example, where we now do a ‘Daily Fresh’ programme of Anchor milk.” says Sheng Cong, chief financial officer of Hema. “That way, we endorse each other’s brands and customers have more confidence because they see two big brands cooperating together.”
The import industry is still in its infancy with Chinese consumers, and while New Zealand makes up just a small part of that, our country’s clean, green image (whether you agree with it or not) gives companies a powerful starting point to market themselves. And as e-commerce giants like Amazon start to creep into the Asia-Pacific, Alibaba is starting to double down on its relationships in this part of the region. Last week, Alibaba Group chief executive Daniel Zhang was in town to meet with business leaders and government agencies, while Ma himself managed to slip into New Zealand incognito in March to check on his latest Kiwi investment and try his hand at milking a cow.
Currently, there are more than 400 New Zealand brands on Tmall and Tmall Global, but that number is set to significantly increase over the coming years, particularly in light of Chinese president Xi Jinping’s commitment to importing more than $8 trillion US worth of goods in the next five years. More recently, that commitment’s been reaffirmed against the backdrop of rising trade tensions with the United States as Xi ushered in a “new phase of opening up” which would involve “significantly broadening” market access, easing restrictions on foreign firms, lowering import tariffs, and creating a more attractive investment environment.
“The government is starting to open the door [and] this is the golden opportunity in China for the next five years. If businesses are looking for a place to expand, then China is the place to go” says Yi, adding that China will host its first ever import fair in Shanghai later this year with Alibaba slated as a major strategic partner.
“The goal is to show the rest of the world that China is open for business. Come to China to come capture this opportunity. Establish a business in China, sell it to the Chinese consumers.”
Jihee Junn travelled to China courtesy of Alibaba.
The Spinoff’s business section is enabled by our friends at Kiwibank. Kiwibank backs small to medium businesses, social enterprises and Kiwis who innovate to make good things happen.
Subscribe to Rec Room a weekly newsletter delivering The Spinoff’s latest videos, podcasts and other recommendations straight to your inbox.