As in previous years, Alibaba's e-commerce sector embarked on a new round of organizational restructuring after the Double 11 shopping festival.

After promoting numerous young executives last year, Wu Yongming adjusted the organizational structure this year to further implement the focus on core businesses and integrate domestic and international e-commerce to form a new e-commerce business group.

Wu Yongming mentioned three core messages in an internal email.

One is the integration of e-commerce businesses such as Taobao, Tmall, International Digital Commerce, 1688, and Xianyu into the Alibaba E-commerce Business Group, with Jiang Fan appointed as the head. The email followed up with an explanation of the integration, emphasizing a "global approach" to supply chains, delivery capabilities, and consumer services. Additionally, Wu Yongming emphasized ongoing investments in AI for both B2B and B2C sectors.

The financial report released a few days ago revealed a 29% increase in revenue for the International Digital Commerce Group. During the recent Double 11, Taobao and Tmall also witnessed robust GMV growth and a record number of buyers following a series of business environment optimizations.

It is expected that the integrated e-commerce business group will form a synergy, further expanding the imagination of Alibaba's e-commerce business on a track of healthy competition and realizing the value return of Alibaba's e-commerce business and even the entire e-commerce industry.

Wu Yongming's Transformation of Alibaba

Since taking over as CEO of Alibaba in September last year, Wu Yongming has initiated a series of transformations. Sorting out the group's business priorities and clearly focusing on core businesses with decisive trade-offs have become the clear main thread of these transformations.

Centering on the strategy of "good products, good prices, good services," Wu Yongming has initiated a series of sweeping reforms for Taobao and Tmall. The first is to stop unnecessary trial and error and comprehensively combat intense internal competition within the industry, such as halting the race for absolute low prices, untying the constraint of only refunds, upgrading shipping insurance, and introducing an experience score, allowing the industry to fully return to healthy competition.

Under the advocacy of Taobao and Tmall, addressing the three persistent issues of unreasonable only refunds, high shipping insurance costs, and low-quality, low-price internal competition has become a landmark event in the value return of the e-commerce industry.

With a clear user-first and AI-driven strategy, Wu Yongming has also focused his transformations on user experience and AI e-commerce.

Shortly after taking over Taobao and Tmall, Wu Yongming initiated a continuous upgrade of 88VIP membership benefits, including changing the original membership system to three categories: lifestyle cards, shopping cards, and all-around cards, to operate users more refinedly. Subsequently, with the introduction of large coupons, automatic discounts, and upgraded return and exchange services, the number of 88VIP members increased by 14 million within a year, making it the largest paid membership system in the domestic e-commerce industry.

While strengthening membership, Wu Yongming also unprecedentedly increased official subsidies during the 618 and Double 11 promotional periods. Especially during Double 11, Tmall promoted growth with billions of investments and reduced costs with another billion, coupled with multiple business environment optimization measures, stimulating the enthusiasm of brand merchants to participate in Tmall's Double 11. Over 300,000 Tmall brand merchants actively participated, with the number of activity products exceeding expectations, including over 1.5 million top-quality products and over 20,000 super items.

It is worth mentioning that on the eve of Double 11, Taobao and Tmall also initiated a series of interconnections with the WeChat ecosystem. First, in September, Taobao enabled WeChat payments, and in October, WeChat supported in-app shopping on Taobao without redirection.

These transformations have brought steady growth to Taobao and Tmall. According to the Questmobile report, it is expected that Taobao's monthly active users will exceed 1 billion by 2025.

In addition to e-commerce, Taobao and Tmall under Wu Yongming's leadership have also made a series of key attempts in AI e-commerce.

Currently, Alibaba's AI e-commerce business logic has two threads. One is for C-end applications and some functions, including e-commerce applications such as Taobao, Tmall, and Xianyu, as well as functions like Taobao Ask and the existing search and recommendation system. Although these actions do not directly bring commercial value, they have extremely high strategic value: continuously improving user experience and enhancing user stickiness through AI.

The other part includes marketing tools and generative businesses represented by site-wide promotion.

As we mentioned in "How Long Will Taobao and Tmall Wait for Wu Yongming's AI Plans?", the core utilities of AI-generated functions such as digital humans, intelligent customer service, and marketing material generation are to help merchants reduce operating costs. AI marketing tools like site-wide promotion, on the other hand, focus on improving merchants' operational efficiency and certainty, which is also directly related to the commercialization of Alibaba's e-commerce.

Wu Jia, Vice President of Alibaba Group and President of the Taobao and Tmall User Platform Business Department, previously mentioned that they hope site-wide promotion can significantly reduce merchants' operating costs on the platform, allowing them to focus on product selection and improving products themselves.

As an important commercialization tool, site-wide promotion actually increases the certainty of merchants' growth and will gradually unlock its value in increasing transaction volumes over the next one to two years, further increasing Taobao and Tmall Group's revenue scale.

A Global Approach to Inventory?

Integrating domestic and international e-commerce will be the core focus of Alibaba's e-commerce business group. From a background and business logic perspective, there are clear signs of this integration.

After three special years, the differences between cross-border and domestic business flows have become increasingly negligible, with exports shifting to domestic sales and then re-exporting. In the second half of the year, Alibaba frequently tested a unified inventory approach for domestic and international e-commerce.

For example, in mid-July, Taobao partnered with Alibaba's overseas e-commerce platform to launch the "Global Free Shipping Plan for Apparel," featuring "0 returns, 0 refunds, 0 shipping insurance," with the platform providing shipping subsidies and marketing expenses.

Since then, the pace of Taobao apparel exports has accelerated, with projects launched in Singapore, Malaysia, South Korea, Hong Kong, Macao, Taiwan, Japan, Cambodia, Thailand, Vietnam, and Australia from August to October.

Among them, Hong Kong's actions were more significant. Before Double 11, Alibaba held a press conference in Hong Kong to announce that Taobao would invest 1 billion to turn Hong Kong into a free shipping zone. During the upcoming peak shopping season, Hong Kong consumers will enjoy free shipping on Taobao purchases over HKD 99.

It is worth noting that Taobao's apparel exports adopt a model with a very low level of semi-custody, where merchants are responsible for everything except cross-border logistics and customs clearance.

After several months of development, a preliminary model has been formed where Taobao is responsible for expanding the merchant pool, while Alibaba's overseas arm handles logistics and consumer operations, achieving a "unified inventory" domestically and internationally, initially verifying that integration can generate new growth. In fact, fulfillment is largely supported by Cainiao Global.

After Cainiao partnered with LG CNS Logistics in South Korea last year, they collaborated with AliExpress to offer a 5-10 day delivery service from over 30 warehouses in East and South China. This year, Taobao's apparel exports reused this logistics chain.

We speculate that with the development of AI e-commerce, the final form of integration may become closer to the existing model of Taobao Factory: The platform provides various SaaS tools for merchants and fulfillment services after products go overseas, while merchants are mainly responsible for inventory and operations.

The logic of Taobao Factory is to provide supply-side tools suitable for the C-end market through six service modules: digital product selection, intelligent pricing, marketing custody, supply chain optimization, logistics, and localized services. In the previous price competition environment, Taobao Factory instead output a relatively flexible pricing mechanism.

Photon Planet understands that for factory stores, Taobao Factory does not set fixed prices but provides a reference price range based on market data for stores to judge themselves. A Taobao Factory staff member said, "Merchants comprehensively consider whether they can keep up with manufacturing, marketing, inventory, and other costs. If they can, they adopt our plan."

Although targeting different markets, domestic factory stores face similar situations as cross-border merchants, so there is common ground between Taobao Factory's mechanism and International Digital Commerce.

If this logic develops as described, it will further accelerate the integration of business flows and logistics. This explains why Alibaba has frequently attempted to integrate domestic and overseas e-commerce over the past year. Currently, there is both a comprehensive integration of supply from apparel to the entire industry on the supply side and improvements in consumer experiences such as free shipping and English versions on the demand side.

The global economy also provides a favorable opportunity—recently, inflationary expectations have declined in European and American markets, and the trend of weakening consumption is gradually improving. Alibaba's current choice to fully integrate domestic and overseas e-commerce is actually taking advantage of the prevailing wind, which is currently propelling small and medium-sized merchants to accelerate their overseas expansion.