Jack Ma: Alibaba Is Not A Retail Company, But A Data Company

Alibaba, regarded as the Chinese Ebay and Amazon, has even been recorded as a case study for the business courses in Harvard University. However, Jack Ma has publicly stated once again that such description is incorrect and he doesn't really know how to let the world understand Alibaba better: “All these explanations about Alibaba are not accurate. People just use standards abstracted from other companies and impose them on Alibaba.”

(Chinese Version)

On the Alibaba Investor Conference on June 14th, Jack Ma mentioned that the e-commerce sector should be considered as the fifth largest economy alongside with the U.S., China, Japan, and Germany. He also added that Alibaba’s GMV would catch up with Swenden’s GDP, which would make Alibaba into the chart of top 20 economies in the sense of countries.

Alibaba has found its place in the global market and is always seen as the Chinese Ebay and Amazon. Harvard University even recorded Alibaba as a case study. However, Jack Ma has publicly stated once again that such description is incorrect and he doesn't really know how to let the world understand Alibaba better: “All these explanations about Alibaba are not accurate. People just use standards abstracted from other companies and impose them on Alibaba.”

A data company, not a retail company

Although Alibaba, according to Jack Ma, is the largest retailing platform in the world, Alibaba is not merely just a retail company, but a data company. China boasts a population of 1.4 billion while 30% of it won’t use Alibaba’s products, therefore Alibaba has around 800 million to 1 billion users. It’s estimated that Alibaba’s user base will hit 2 billion by 2036.

“We need the other 1.2 billion users, global users,” Jack Ma admitted, saying that the globalization is like a grand game for giant companies while developing businesses and small companies have few opportunities. What Alibaba aims to do is support the development of 80% of these small companies around the world.

That’s why Jack Ma has been dedicating to the promotion of EWTP. EWTP is short for Electronic World Trade Platform. “Taobao covers 30 provinces in China, but we never make the 30 provincial leaders sit together and make any decision. The ecosystem of Taobao will develop on its own. So we are going to do EWTP and EROAD so as to use business models to change the world.”

The development and anti-knockoffs campaign have been on the go in rural markets

Whether it's Taobao, JD, or many other platforms in the industry are now focusing on the broad rural markets in China. In the past, it’s quite impossible for e-commerce to take off in the countryside for the fact there was a lack of infrastructure and mindset for online sales to thrive. However, as the rural areas further develop and start to show market potential, e-commerce platforms have subsequently started to eye on this lucrative sector.

As the leading figure among e-commerce platforms, Alibaba has earned a reputation in the global business world and has quite an influence. However, the bigger the scale, the bigger and more the issues and responsibilities. The knockoff issue has always been a major headache for Alibaba. What’s more, the IACC has terminated Alibaba’s membership just recently, a big blow in Alibaba’s face.

“From the perspective of sociology, there will always be a proportion of the total populations that will engage in illegal activities,” Jack Ma said. “We have 400 million people on our platform, and if 1% of them engage in illegal activities, then we have 4 million bad guys. We have 2000 people using technical methods to find the bad guys and fight with them. We are basically fighting the worst of the human nature. We are victims, but we never stop finding.”

The Internet has made trading more convenient. As for knockoffs, the Internet servers as a channel for them to reach the consumers. Big brands general adopt the OEM model and China has the largest pool of OEMs in the world. Sometimes the authentic products and knockoffs might even come from the same factory, therefore the final quality is pretty much the same while the price of the knockoffs is lower. With that come the challenges presented by a new business model, instead of merely intellectual property issues.

Alibaba has been publicly fighting against knockoff all along. According to Jack Ma, Alibaba had helped the police capture 300 knockoff manufacturers in the last three months and destroy 244 selling sites.

“On the matter of anti-knockoffs, we do better than any other company, organization, and government,” Jack Ma said. “We can even play a game and see how much knockoffs can be identified out of 1000 or 10,000 merchandise on the platforms of Tmall and JD,” Jack Ma considers Alibaba as a managing regulator of the platform that serves to protect intellectual properties and a leading global knockoff fighter.

What follows is the transcript of Jack Ma’s speech:

Every time I speak to investors, the market will tense up. To be honest, I am not good at talking to investors. I find entrepreneurs easier to talk to. Joe is like my interpreter who explains to everybody what I mean in my speech. So the company decides to let me focus on the strategic directions that the company is going for and put Joe in charge of communicating with the investors.

The market always compares Alibaba to other companies and labels us as the Chinese Ebay and Chinese Amazon. I don’t really know how to let the world understand Alibaba better. All these explanations about Alibaba are not accurate. People just use standards abstracted from other companies and impose them on Alibaba.

Harvard University has even made a case study on Alibaba. But that’s not Alibaba at all.

In 1971, Nixon visited Hangzhou. I could see him from the distance. Hangzhou was actually the first Chinese city that opened to the world back then. Even though my parents didn't really know English, it didn’t stop me from feeling passionate about learning English. My English back then wasn't that good, but I liked to understand people, understand western cultures. So I started to learn English as a child and eventually formed a global outlook.

In 1972, Nixon came to Hangzhou. I always wonder what would happen if chairman Mao went to the U.S. Deng Xiaoping went to the U.S. and started the reform and opening up policy after coming back.

In 1995, I visited the U.S., where I got to know the Internet, Silicon Valley, Seattle, and New York for the very first time. I tried to understand how Americans thought and the way they did business. I learned the concept of social responsibilities and values of enterprises.

Alibaba itself is a living documentary. From the very beginning of our entrepreneurial journey, 90% of the internal meetings and essential activities have been recorded in videos. We are probably the company with the most complete video records. We do this in the belief that Alibaba will become an important example for the world and that people would have video materials to learn about Alibaba.

From the very first day we have known that the biggest rivals of Alibaba are the brightest people in the world instead of domestic competitors. We Chinese people understand better US than US understands China. China has a deeper understanding of the U.S. than the understanding the U.S. has on China. We understand American companies and culture.

In contrast to that, the U.S. knows little about China. We know about the top 100 Internet companies in the U.S., we understand their business models, their CEOs. But the sad thing is the U.S. doesn't really know about the top 100 Internet companies in China. Americans find it hard to understand and they just quit making the efforts. They can always find excuses.

Somebody asked me if I could describe Alibaba’s business model in one sentence. The answer is no, I can not. Can I compare Alibaba to similar companies in America? NO. Am I worried about the stock price? Yes and no. We operate in China and very few overseas investors understand us.

In 2003, we launched Taobao. We knew we would achieve success back then, but little did us know that we would achieve it so quickly. It only took eBay around 3 years to finally decide to exit from China because they had other markets. However, we didn’t have alternatives. I met with a senior executive from Walmart 10 years ago and told him that we would surpass them in the future. And he said I was an ambitious man.

By 2020, Alibaba will attain a transaction volume of 6 trillion RMB (1 trillion USD). Our GMV last year, if it’s calculated in accordance with the standard of GDP, then the volume will be similar to that of the sixth largest province in China in economic terms.

More importantly, we are going to create 100 million job opportunities and help 10 million enterprises profit. A company should be motivated by its vision and missions. The truth is every company has its own mission, but very few of them actually believe in their mission. But Alibaba has faith in our mission. Every employee in this company does believe in what they are doing.

Globalization also means global sales. With a smart phone you can pretty much buy anything you want. To this point you can even enjoy the fruitful benefits generated by the sharing economy. Now you can sell potatoes directly to your neighbors or the world using the Internet. Your solar panels on the rooftop can provide power for the world.

It’s true that we have the largest retail platform globally, but it doesn't necessarily mean that we are a retail company. Alibaba is a data company. China boasts a population of 1.4 billion while 30% of it won’t use Alibaba’s products, therefore Alibaba has around 800 million to 1 billion users.

It’s estimated that Alibaba’s user base will hit 2 billion by 2036. We need the other 1.2 billion users, global users. The globalization is like a grand game for giant companies while developing businesses and small companies have few opportunities. What Alibaba aims to do is support the development of 80% of these small companies around the world.

Taobao covers 30 provinces in China, but we never make the 30 provincial leaders sit together and make any decision. The ecosystem of Taobao will develop on its own. So we are going to do EWTP and EROAD so as to use business models to change the world (not EWTO, EWTO is an governmental organization). Last month we have been on the road for 26 days. I believe you are going to fall in love with EWTP in 10 years.

I visit different countries not to shake hands with their presidents, but to lay the foundation for the plan for the future 5 years. We take our commitments very seriously. Many companies are only doing the present business, and we do the businesses in the future 5~10 years.

Some people develop overseas strategies targeting Malaysia, India, and Indonesia etc. Compared with that, I believe the rural markets in China are more essential. If you couldn't help domestic villages, how can you help countries? It’s true that the rural markets have been very difficult for online sales in the past. But if you pay a visit to the villages around Hangzhou, you would find that e-commerce is really changing the lifestyle there.

In 2009, Wang Jian asked me if I had even thought about the Alibaba in ten years. I told him exactly my visions. Then he asked me if I had thought about the cost of all the servers and data bases that were needed to realize my visions.

I did some calculation and found that the amount of money needed would cost us the whole company. At that time we decided to enter the field of cloud computing. It was a tough decision 7 years ago since nobody really knew about cloud technology. We named this project the Moon Landing. And Wang Jian said the name should be Moon Forwarding, which means that there’s no going back.

The conversation we had about this cloud technology revolution was like a religious war. We had a spirited argument in my office, with my chairs and desks ended up wounded during the process. It was hard. 7 out of 10 DBAs and Oracle ACEs eventually left the company.

It was a major loss since they saw slim chance of success for the fact that we were basically doing something that nobody had achieved before. Luckily, I am not a tech expert, so I held my ground and didn't back down. I believed we could pull that off, and if we did succeed, we would be able to help more small companies.

6 years ago we told the staff in a meeting that we were not a GMV company but a data company. People have been asking me how I make money with data. Even today we still don't know the answer. However, we know people can’t live without data in the near future. Walmart amasses data from its sales, and we do e-commerce and logistics for data. People keep asking me about GMV. But I am telling you now GMV is not our goal. We sell stuffs to collect data, which is different from Walmart.

It’s pretty similar to questions like how do we make money out of PV. Later PV became a popular indicator for enterprise assessment. But that’s not what we were looking for.

GMV should never be the standard of e-commerce. We gave the investors what they wanted, and it made GMV the standard. We always know that GMV is not the key indicator. What really matters is the fundamental business infrastructure. If you want to build a fundamental business infrastructure, you have to have e-commerce, logistics, finance, data operation and cross-border operation. Now a lot of governments are turning to us for such help.

Many people don’t understand us, just like 15 years ago. Almost every year we would have to argue with the investors for the very same reason. My philosophy is to think about the business development in 10 years. We want to survive 102 years. We build to last instead of building to sell like many Silicon Valley companies. For the 102-year goal, we will always have a plan for the coming decade when we do something.

One day, I realized the problems that Yahoo had. If an engineer needed almost half an hour to introduce a product to us, then there must be something wrong. Engineers should think about how to improve people’s lives with their products. At that board meeting, no one makes a decision, since there is no future direction to begin with

Taobao, Tmall, and Alipay weren’t created for the businesses we do today. No Internet model can survive three years. But here at Alibaba, our businesses have formed a formation and different products take turns. Alibaba’s numerous businesses sustain the prosperity of the company in every three years (the business that has already gone through the circle also continues to make contribution).

This is a circle that enables the company to preserve sustainable progress as a whole. Aliyun will reap the rewards in 2019 while the year for Cainiao will be 2023. These are the seeds we planted ten years ago.

If I have an idea that 90% of my staff would think highly of, then I would drop that, because I want to do something that other people would deem impossible.

My investors once stated that Alipay was going to cost us a lot of money and asked us to sell it. But we believed that data would be the future and we would like to hear from the users. We don't want to invent a concept just to appeal to the investors. We want to make contribution to our society.

Becoming the fifth largest economy in the world might sound extremely crazy, but in my opinion we are at least closer to our goal compared with the situation in 10 years ago. People think we are everywhere, which isn’t true. We focus on the double H industry (Health and Happiness). I have consulted many people about how to make a company last and how to preserve the creativity and passion of a company. Eventually I found the answer. To achieve that you have to solve social issues. The more you solve the longer you can survive and develop.

This is Alibaba’s mission. We dedicate to solving social issues. We also think forward to get a grasp of what social issues will occur in 10 years. That’s why we focus on the double H industry, Health and Happiness. A country with one billion people can’t even bring up a football team strong enough to defeat Maldives, can you imagine that?

China, a gigantic country with 1.4 billion people and as the second largest economy, is short of the sports industry. 90% of my staff are young people less than 28 years old who are the only child in their family. For that they lack team spirit. If they had more opportunities to participate in sports when they were young, they would have a stronger sense of teamwork. Team spirit is one of our values here at Alibaba. But America doesn't have such problems since the children there receive sports training which allows them to realize the importance of teamwork.

If you ask young people in China whether they watch TV, you would find that very few of them do. The TV programs today are just utter crap. What’s interesting is that people are watching online content. Why? Because the contents are in good quality, they make people happy. I invested in H.Brothers 9 years ago and I have a two-hour consulting session with them every quarter to help them make the transformation. I told him that in ten years, this industry will be huge, but not in today’s model. The money we pour in today will translate into something greater in 10 years.

In the end, I want to point out that when assessing a company, it’s important to understand its missions instead of its products. In the beginning of our entrepreneurial journey we couldn't find any employee. We only had 18 people in the team. The staff complained that nobody knew about our existence. Even our female colleagues couldn't find any boyfriend at that time and didn't have their parents’ support.

In 1999, we had to have some thinking. We couldn't just follow Sina and Souhu’s path. In 2006, Sina’s revenue was even larger than our income. In 2009 we finally caught up with Sina, Souhu and NetEase, and then Tencent emerged. Our annual income could only be compared to Tencent’s quarterly revenue.

During 2009, 2011 and 2012, Tencent was still bigger than us. We only caught up with Tencent in recent two years. It’s not like Tencent has been challenging Alibaba, like what people have been saying about. In fact it was us that have been challenging Tencent. Think about Apple and Google. Think about these two great companies. Think about the way you see the world and your choices for the future.

One day I will make our staff at Alibaba popular among men and women. And we will present our achievement throughout the year to the parents every year on the birthday of Alibaba.

Our rivals might have only one famous CEO. But here at Alibaba I can’t even make it into the top ten “generals”. One of our dreams is that one day most of our staff would be competent and able “generals” and that our company would have tons of beauties.

Today 40% of our staff, 34% of the management, 36% of the senior executives are female professional talents. Just look at all the intelligent women we have here at Alibaba, look at how many talented and able people we have in the company. Zhang Yong has already started talking about the fourth generation of the management team. The diversity of talents the company possesses brings us a unique voice. That’s why we invested so much time in nurturing talents.

In sociology, there will always be a proportion of the total populations that will engage in illegal activities. We have 400 million people on our platform, and if 1% of them engage in illegal activities, then we have 4 million bad guys. We have 2000 people using technical methods to find the bad guys and fight with them. We are basically finding the worst of the human nature.

We are victims, but we never stop finding. We are literally the very forefront fighter against knockoffs. The Internet has made trading more convenient. As for knockoffs, the Internet servers as a channel for them to reach the consumers. Big brands general adopt the OEM model and China has the largest pool of OEM in the world. Sometimes the authentic products and knockoffs might even come from the same factory, therefore the final quality is pretty much the same and the price of the knockoffs is lower. With that come the challenges presented by a new business model, instead of merely intellectual property issues.

Alibaba have helped the police capture 300 knockoff manufacturers in the last three months and destroy 244 selling sites. On the matter of anti-knockoffs, we do better than any other company, organization, and government. We can even play a game and see how much knockoffs can be identified out of 1000 or 10,000 merchandise on the platforms of Tmall and JD. Alibaba is just like a managing regulator of the platform that serves to protect intellectual properties. We have technicians on this battle, around 2000 fighters fighting this war, which makes us a leading global knockoff fighter.

…………………………………………………………………………………………………

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[The article is published and edited with authorization from the author @TMTpost-Chinese, please note source and hyperlink when reproduce.]

Translated by Garrett Lee (Senior Translator at PAGE TO PAGE), working for TMTpost.

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