Cashback News – July 13: What’s the magic to Alibaba’s global e-commerce success?

Cashback News – July 13: What’s the magic to Alibaba’s global e-commerce success?

- in E-Commerce, Slider

Emperor of e-commerceLike Amazon, Alibaba is a global e-commerce powerhouse. As with its competitor, Alibaba’s success is primarily driven by its CEO Jack Ma. It’s a fascinating company to analyze and we’ve got a roundup of recent news to keep you up-to-date on Alibaba’s growth, strategic directions and acquisitions. One of Alibaba’s key strategies is its “Iron Triangle” combining e-commerce, logistics and finance into a formidable foe. An internet car? Alibaba’s new $22,300 RX5 sport utility vehicle is an audacious new product launching in August.

Amazon’s new $3 billion investment in India shows Alibaba, Flipkart, Snapdeal and others that e-commerce competition just got serious. AliExpress’s marketplace is making progress in Russia despite the business and logistics challenges and a market where e-commerce is only 2% of retail sales. The Chinese government’s new tax on search advertising will impact profits at Alibaba, Baidu and other Chinese e-commerce companies.

In response to an SEC investigation into accounting practices, Jack Ma says the company has complied with regulations so “sue us.” Alibaba’s merger mania means it has a prominent place in the daily e-commerce lives of most online consumers in China after spending between $30-$40 billion in more than 100 investments and acquisitions since 2010.

Alibaba introduced a new counterfeit detection tool – Intellectual Property (IP) Joint-Force System – it hopes will reduce product counterfeiting and illegal sales. In India, Alibaba investments in Paytm and Snapdeal are introducing some of the global company’s business practices. Finally, Jack Ma is no longer the richest man in China, dropping to third place with an estimated wealth of $24.5 billion. Just when things were going so well!

How will Alibaba move in India? Its ‘Iron Triangle’ strategy is the key this month, FactorDaily’s Editor-in-Chief Pankaj Mishra wrote about why he thinks one of the most sensible outcomes in the Indian e-commerce war would be Alibaba acquiring Flipkart, merging it with Paytm and possibly acquiring a logistics player.

I am continuing that thread of conversation here. To understand why this Alibaba-Flipkart-PayTM combine is really how it will play out, it’s important to understand Alibaba’s approach to ecommerce. Jack Ma, the CEO & Co-founder of Alibaba Group, calls this the Iron Triangle.

What is the “iron triangle”?
Alibaba’s iron triangle is a combination of e-commerce, logistics and finance. It all hinges on the massive amounts of commerce data that Alibaba generates. All this data is stored and processed on what is called the Alicloud.

With the help of commerce data — who bought or sold what, when, where, how on Alibaba’s various platforms — the company is able to create a de-risking framework, which in turn is used to underwrite its financial products like loans to small and medium businesses. Via

The importance of Alibaba’s new ‘Internet car’

Alibaba’s new Internet carChinese e-commerce giant Alibaba introduced its first automobile last week, the RX5 sport utility vehicle, set to be delivered to customers in August.

The company called the vehicle, made with Chinese carmaker SAIC, the first “Internet car” in a news release. It will run software developed by Alibaba’s YunOS division to connect with other smart devices, the company said. It will retail for 148,800 yuan, or $22,300.

Alibaba in its announcement said the car will use the company’s own e-commerce platform to deliver such services as finding parking spaces, locating gas stations or making restaurant reservations. Drivers will also be able to pay for services from the car using “Alipay.”

Different drivers and passengers will be able to use their own Alibaba accounts, similar to accounts, for individual access to services and payment. The car will also use those accounts to recommend services such as music or destinations. Via

Amazon’s extra $3 bn India play: Jeff Bezos sends signal to Flipkart, Alibaba Jeff Bezos’s $3 billion cheque for India comes with a message, it is that Amazon’s not about to be cowed down by Alibaba’s presence here. The Chinese e-retailer has deep pockets and the financial muscle to play catch-up in whichever way it chooses—whether by setting up shop on its own or by buying up incumbents. But Amazon is clearly going for the kill, confident of its India play and having already committed $2 billion. Bezos has a penchant for drama—somewhat akin to Richard Branson, though undoubtedly a lot more tempered—and timed the announcement to coincide with prime minister Narendra Modi’s visit to the US.

The businessman would probably be hoping to win a few concessions—Amazon wants some restrictions on inventory-led business models lifted—and there’s no better way to do this than by putting money on the table.

But even otherwise, the salvo has been fired at a time when, by all appearances, the American e-tailer is fast forging ahead of rivals Flipkart and Snapdeal, forcing them onto the back foot. To be sure, much of the evidence is anecdotal and based on customer feedback but not entirely so—Amazon has been moving up in some of the website rankings.

The story of e-tailing in India so far has been one of ratcheting up what’s called the gross merchandise value (GMV) by offering customers chunky discounts. Amazon hasn’t been doing it very differently. Unfortunately, however, to keep the business afloat until shoppers are hooked to the platform and can be weaned away from discounts, takes a lot of staying power. In the meanwhile, the government has disrupted the business model by banning marketplaces from influencing, in any manner, prices of products on their platforms. In other words, it has put an end to the huge discounting which was the bait for bringing in customers. Via

Alibaba highlights hurdles in Russia’s pivot east

Alibaba and RussiaAlibaba’s experience shows Russia’s pivot east is far from straightforward. Under President Vladimir Putin, Moscow wants deeper economic ties with China, so it can deal less with an unfriendly West. But Russia’s poor business climate makes life hard for Chinese companies, although they are used to draconian rules at home. Even e-commerce giant Alibaba has only made modest inroads.

In theory, Russia should be a big opportunity for China’s online retailers. It’s a big, neighbouring market, whose consumers are always on the lookout for bargains, and one where the prices of global titans like Amazon are less competitive. There should also be plenty of growth. Online retail comprises only 2 percent of Russia’s retail market, according to Data Insight, versus 11 percent in China. And while many customers for now prefer to pay in cash, payment systems like Alipay – operated by Alibaba affiliate Ant Financial – could also catch on in future.

Hence, Alibaba already takes Russia seriously. Boss Jack Ma attended the St. Petersburg International Economic Forum in June, and his company has investment from local billionaire Alisher Usmanov.

Ma’s AliExpress unit, a marketplace connecting foreign consumers to Chinese companies, has slashed Russian delivery times from three months to 15 days – no small feat in the world’s biggest country. And Russia is now AliExpress’s second-largest foreign market after the United States – though overall international retail revenue of over 2 billion yuan ($342 million) last year was still less than 3 percent of Alibaba’s total retail revenue…. Via

Baidu, Alibaba Face Profit Hit From New Rules on Search Ads Group Holding Ltd. and Baidu Inc. could face a hit to earnings from new regulations in China that will tax search advertising.

China’s State Administration for Industry & Commerce last week issued new rules on the classification of Internet ads. From September, paid searches will be treated as Internet advertising for the first time and that revenue could be subject to an additional 3 percent tax.

Such a move could force Baidu, operator of China’s most popular search engine, to cut its earnings for fiscal 2017 net income to 16.3 billion yuan ($2.4 billion), according to analysts at Daiwa Capital Markets led by John Choi. That’s about 4 percent below the average of estimates compiled by Bloomberg. About 50 percent of Alibaba’s revenue in the first quarter would be affected, suggesting a 2.4 percent hit to earnings, he wrote. Via

Jack Ma says lawsuits, probes help Alibaba to be understood and investigations are an opportunity for Alibaba Group to be better understood, founder and executive chairman Jack Ma said in an interview on Saturday.

The Securities and Exchange Commission (SEC) launched a probe earlier this year into the Chinese e-commerce firm’s accounting practices to determine whether they violated federal laws. Questions about Alibaba’s growth rate and its relations with affiliated companies have dogged the firm for years.

“If you want to sue us, sue us,” Ma said. “It’s an opportunity for us to let them understand what we’re doing,” he told Reuters, saying he had complied with SEC requests but did not know when the U.S. agency would respond with a finding. Via

Alibaba’s merger mania makes it hard for Chinese to avoid

Alibaba everywhereIf you live in China, chances are you can’t avoid Alibaba. The e-commerce giant offers a dizzying array of services that are designed to make it indispensable to Chinese consumers as they go about their daily routines.

It’s a network that is growing rapidly thanks to a slew of ambitious acquisitions. Alibaba has spent between $30 and $40 billion on over 100 investments and acquisitions since 2010, according to Dealogic and Internet Retailer.
“Alibaba is aggressive — they want to literally build an online society to match wherever the consumer is consuming offline,” said Nicole Peng, China director at technology research firm Canalys. “Whatever you can do offline, you can do online too — that’s such a big thing.”

Typical urban residents can wake up and find the day’s weather forecast on UCWeb, nosh on fresh fruit purchased from, pay for a cab to work with Alipay, and procrastinate on the job by sneaking a peek at Youku videos. After work, they can head home to sleep in sheets bought off the Taobao marketplace. Via

Alibaba rolls out new counterfeit detection tool e-commerce giant Alibaba has rolled out a new system for detecting counterfeit items for sale on its e-commerce marketplaces.

Dubbed the Intellectual Property (IP) Joint-Force System, the tool partners with brands to give them priority access to Alibaba’s counterfeit reporting tools when an item for sale is fake. Brands that have already been subjected to counterfeit infringement are being assigned an Alibaba account manager to work directly with them. If a dupe is spotted for sale, the brand can notify Alibaba directly, and have the listing taken down.

Alibaba’s e-commerce marketplaces like Taobao and Tmall have long been flooded with counterfeit items, and outside parties are beginning to raise concerns. In December 2015, the Office of the United States Trade Representative issued a statement saying that it is growing “increasingly concerned” about Alibaba’s negligence in policing counterfeit goods on its e-commerce sites. Via

To embrace Alibaba, be more like it is not only ‘Made in China’ products that e-commerce companies such as Paytm and Snapdeal sell on their platforms. Their business model is also being imported from that country.

Wanting to woo Chinese online major Alibaba for a technical and financial collaboration when it directly enters India, home-grown players are changing their business model. For instance, both Paytm and Snapdeal are following Alibaba’s business template, called ‘iron triangle’. The format refers to Alibaba’s watertight business model, of e-commerce, logistics and payments.

While Paytm has said it is open to having its marketplace vertical merged or acquired, Snapdeal has made it clear that it would be open to a collaboration with Alibaba. According to sector insiders, with US giant Amazon marching ahead with big-ticket investments here, Indian competitors are looking for a possible alliance with Alibaba to help them combat it.

Paytm, this country’s largest in mobile wallets and in which Alibaba Group is the largest shareholder, with investments amounting to $680 million, has been following the iron triangle for some time. The Vijay Shekhar Sharma-led company gets technology and knowledge transfer from Alibaba, beside funding. Via

Dethroned: Alibaba’s Jack Ma is no longer China’s richest man

Jack Ma Number 3 wealthiestAlibaba Group Holding Ltd’s Jack Ma is no longer China’s richest man, according to a report on Tuesday, with the top spot snatched by Li Hejun, a solar energy entrepreneur whose Hanergy Holding Group Ltd has come under fire for its intragroup dealings.

E-commerce tycoon Ma and his family slipped to No. 3 in China, and No. 34 globally, on the Hurun Global Rich List, with a personal wealth of $24.5 billion. He was pipped by Li with a net worth of $26 billion. The No. 2 spot was held by Dalian Wanda Commercial Properties Co Ltd’s Wang Jianlin and his family.

Li’s Hanergy Group has been the subject of analyst concern over what the Financial Times last week called “unconventional practices” between the firm and its $19.7 billion Hong Kong-listed subsidiary Hanergy Thin Film Power Group Ltd. Via

The Emperor of E-commerce

Though he has global competition from Amazon Jeff Bezos, Jack Ma is definitely the Emperor of E-commerce in China. It’s fascinating to watch as the company grows in China and around the world. Watch for fireworks and heavy competition in India and we’ll keep you updated on Alibaba’s strategic investments and acquisitions around the globe.

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