In 1999, when former English teacher and fledgling internet entrepreneur Jack Ma (real name Ma Yun)—now the richest man in China, with an estimated net worth in excess of US$39 billion—decided to set up his own e-commerce company, he picked the name Alibaba. “Alibaba opens sesame for small-to medium-sized companies,” Ma told CNN’s Talk Asia in 2006 [1]. Now, some 19 years later, Ma’s company is as famous as the tale that inspired its name and sense of purpose.
In September 2014, Alibaba Group cemented its place in the annals of business history when its IPO, priced at US$68 per share, raised US$25 billion on the New York Stock Exchange, making it the biggest in history. Its shares increased in value by 38% alone on their first day of trading.
The rise has continued to be meteoric, and in January 2018 Alibaba Group joined the likes of tech titans Amazon, Alphabet, Apple, Facebook and Microsoft when it achieved a market valuation in excess of US$500 billion, only the second Chinese company to be granted membership to this elite club, following in the footsteps of internet giant Tencent Holdings.
“What Jack Ma has been able to accomplish is nothing short of astounding,” Gil Luria, Director of Research at DA Davidson & Co., told CNBC in November 2017. “It’s as impressive as, or more impressive, than the works of Messrs. (Jeff) Bezos, (Mark) Zuckerberg and (Elon) Musk.”[2]
Like Jeff Bezos’ Amazon, Alibaba Group’s success has allowed it to move into other fields. In China it is the market leader in cloud computing, with revenue for its cloud computing division hitting US$553 billion in Q3 2017, a 104% year on year increase. Other interests include YouTube-style video site Youku Tudou; ticketing agency Damai and film production company Alibaba Pictures, a partnership with Steven Spielberg’s Amblin Partners.
But the company has stayed true to its original goal, to facilitate access to the Chinese market for SMEs, in much the same way that Amazon has done in the West. Its main focus is still to connect buyers and sellers through its numerous platforms such as Alibaba.com (business-to-business), Taobao.com (consumer-to-consumer) and Tmall.com (business-to-consumer).
Like Amazon, Alibaba is offering a full service solution to SMEs, from the marketplaces to payment providers (Alipay, which holds a 53% share of China’s US$12.8 trillion mobile payment market) to fulfilment logistics (Cainiao) and cloud computing that reaches beyond China’s notorious firewall.
Amazon gets top billing on the global stage, but in China, Alibaba Group is the biggest player by far, with 60% market share and its platforms accounting for 11.8% of total retail volume [3] in the country. This dominance is in part due to innovations such as the annual Singles Day shopping holiday, which has become the biggest shopping event in the world. On Singles Day last year, Alibaba Group raked in a record US$25 billion.
The growth potential for e-commerce in China is strong. Online penetration increased from 4% in 2011 to 16% in 2017, while online shopping penetration stands at just 54% of users compared to 70% in Western Europe, meaning there is potential for it to grow significantly as infrastructure improves.
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