Source | Bohu Finance (bohuFN)

Tonight, multiple media outlets, including LatePost, 36Kr, and Huxiu, reported that Alibaba CEO Wu Yongming released an internal letter announcing changes to the company's new organizational structure.

According to the internal letter sent by Wu Yongming: Alibaba will establish an "Alibaba E-commerce Business Group" encompassing core e-commerce businesses such as Taobao and Alibaba International. Jiang Fan will become the CEO of the E-commerce Business Group, responsible for Alibaba's core e-commerce business, reporting directly to Wu Yongming.

The reason for the organizational and personnel changes is: "By integrating all e-commerce resources within the group, we aim to unleash years of accumulated capabilities to better serve domestic and global consumers while helping more small and medium-sized enterprises expand their presence in both domestic and overseas markets simultaneously."

Jiang Fan's takeover of Taobao has been a recurring topic every so often. On the one hand, Jiang Fan's abilities are obvious to all. In 2015, under his leadership, Alibaba transformed Taobao Mobile in just one year, allowing it to board the express train of the mobile internet. In 2016, he led his team to incubate Taobao Live, resulting in daily active users exceeding 100 million. In 2019, Jiang Fan was promoted to President of Tmall and Taobao, becoming the youngest partner at Alibaba.

After taking charge of Alibaba's overseas business, some have commented that this marks a competition among Jiang Fan and two other "strongest post-80s in China" - Huang Zheng and Xu Yangtian. Over the past few quarters, while Alibaba's overseas losses have continued to shrink, its revenue growth has remained among the top two in the group.

On the other hand, domestic e-commerce competition remains intense, and cross-border e-commerce is in full swing. Alibaba needs a formidable general to stand out from the crowd. Five years ago, Alibaba was undoubtedly the dominant player in domestic e-commerce, with GMV exceeding the sum of all major competitors. However, the gap is now visible to the naked eye. According to Xiaoyao Investment Notes, Taobao's revenue excluding self-operated and wholesale segments was approximately 70 billion yuan in the third quarter, while Pinduoduo's domestic main station business, including online marketing, was close to 50 billion yuan. Considering that part of the main station's revenue and TEMU are included in transaction service fees, the income gap between Pinduoduo and Taobao may be even smaller.

To cope with competitive pressures, Taobao has undergone several significant changes over the past year. For example, to enhance service and supply, Taobao was the first to adjust its "only refund" policy, changing the logic of traffic allocation centered on price. Meanwhile, it recently chose to integrate with WeChat and JD.com Logistics, aiming to free the e-commerce business from all burdens and go all in.

The rule of the internet is that the winner takes all, be it Tencent in social media, Meituan in local life services, or Douyin in short videos. Apart from fighting hard, Alibaba has no other choice.

01 Taobao Unloads the Burden

In August this year, Alibaba was the first to unshackle "only refund" for stores with high experience scores and announced that starting from September, it would charge a basic software service fee, with a rate of 0.6% of the confirmed transaction amount per order. The annual fees of 30,000 and 60,000 yuan, which were previously charged only to Tmall merchants, were abolished, and the paid 2024 annual fees were refunded.

For Taobao merchants, this is obviously an additional expense, akin to draining a pond to catch fish. However, this needs to be viewed alongside two other adjustments.

In July, Taobao announced two other adjustments. Firstly, it de-emphasized pricing power and clearly established "experience score" as the core basis for traffic allocation. Secondly, it unshackled "only refund" for high-scoring stores.

The intention to correct deviations is evident.

The issues with "low prices" and "only refunds" lie in their simplification of merchant competition and the increase in merchants' operating costs. However, as a comprehensive e-commerce platform, Taobao serves a diverse range of customer order values. To maintain business richness and improve product sales efficiency, it cannot blindly tilt the scales towards consumers but must also consider merchant acceptance, achieving a balance between merchants and consumers.

Abandoning the overly consumer-biased "only refund" and "one-size-fits-all" management approach in favor of a more comprehensive merchant management system returns the initiative to high-quality merchants, allowing them to attract consumers. This will enable positive cycles in platform scale and profit growth.

Huatai Securities noted in a research report that in the first and second quarters of 2024, Taobao sacrificed profits for direct subsidies. While ostensibly stimulating traffic growth and mindshare recovery, the deeper motive was to drive merchant return.

Subsequently, Taobao completely unloaded its past burdens: integrating with WeChat and JD.com Logistics.

The former provided Taobao with new growth space. After fully integrating with WeChat, Taobao's monthly active users surged to a new high of 944 million. According to estimates by CICC and J.P. Morgan, Taobao gained 200 million new users, with J.P. Morgan optimistically predicting an increase of up to 30%, or 300 million new users.

The latter is the strongest moat built by JD.com over the years. For Taobao, the experience for merchants and users will be greatly enhanced. Previously, merchants' products on Taobao and JD.com were managed separately. In the future, there will be opportunities to integrate them into a single product line.

Before officially announcing the integration of its e-commerce departments, Alibaba had already been integrating its domestic and overseas e-commerce operations. At the end of July this year, Taobao Fashion announced the "Global Free Shipping Plan for Fashion," which is reportedly an all-in S-level project. A Taobao insider revealed that Taobao intends to further strengthen its overseas strategy, upgrading the original "Global Free Shipping Plan for Fashion" to the "Taobao and Tmall Overseas Growth Plan," expanding global free shipping from fashion categories to the entire industry.

Under the "Global Free Shipping Plan for Fashion," existing Taobao merchants do not need to open additional stores. By joining the plan, they can sell products globally through multiple apps such as the overseas version of Taobao, AliExpress, and Lazada. After receiving orders from overseas consumers, merchants only need to ship the goods to the domestic consolidated warehouse for confirmation. Meanwhile, merchants retain pricing and cargo rights. Taobao is responsible for merchant recruitment, while Alibaba Overseas handles operations.

Recently, the "Global Free Shipping Plan for Fashion" has made further progress, with the first phase covering Hong Kong, China, included in the free shipping zone. According to public data, the sales volume of free shipping fashion items on Taobao Hong Kong increased by 600%. According to 36Kr, going overseas has increased the overseas transaction volume of the Taobao fashion industry by nearly 40%, with participating merchants seeing an even more significant increase of nearly 90% year-on-year.

Integrating domestic e-commerce operations not only enhances business synergy and development efficiency but also gives Alibaba a strategic advantage. On the one hand, Alibaba's strength lies in the supply side, with 1688 connecting factories and Taobao connecting merchants. A key to selling globally is merchant resources. On the other hand, over the past few quarters, Alibaba Overseas and Cainiao have proven the importance of synergy in overseas markets. Both Douyin and Pinduoduo have overseas operations, but Taobao is the first to bridge the gap between domestic and overseas markets.

02 Everything is Ready, Just Waiting for Jiang Fan?

Before Jiang Fan took over the international business, Alibaba's overseas situation was not good.

Alibaba's overseas business started early, encompassing cross-border transactions to sell Chinese goods overseas (e.g., AliExpress and Alibaba International Station) and supporting overseas merchants in local markets (e.g., Lazada).

Lazada, heavily invested in by Alibaba and once Southeast Asia's leading e-commerce platform, saw many of its senior team members replaced during Alibaba's assimilation process in 2018, leading to a mass exodus of the founding team. Dissatisfied with Lazada's original backend, Taobao overwhelmed Southeast Asian sellers by introducing all the tools accumulated over the past decade.

An employee of Lazada commented that Alibaba's actions were equivalent to "installing a Boeing 747 engine on an old car."

Due to personnel turmoil and product upgrades, Lazada even halted its most important merchant recruitment efforts during this period. It was at this juncture that Shopee successfully overtook Lazada to become Southeast Asia's number one.

After taking office, Jiang Fan streamlined the overseas business.

Firstly, he distinguished between cross-border and local businesses, unifying cross-border operations across AliExpress, Tmall Global, and even Lazada. Some localized teams from AliExpress were also transferred to Lazada. Secondly, in selecting management teams for overseas local markets, he preferred local talent, with local business leaders often chosen for operations in markets like Lazada.

Over the past three quarters, Alibaba's overseas e-commerce business has maintained growth rates of 45%, 53%, and 29%, respectively, with revenue scale ranking second in the group.

Meanwhile, Alibaba Overseas is also the group's most rapid adopter of AI applications. In April 2023, Zhang Kaifu, head of the cross-border business industry, led the establishment of AI Business, which now has a team of over 100 people.

By November of the same year, the business launched "Aidge," an AI product with a suite of functions including translation, marketing, localized content, and design.

In November this year, Alibaba Overseas launched Accio, the world's first AI search engine in the B2B sector, at Web Summit, Europe's largest tech conference, open to global merchants.

According to LatePost, over the past year, Alibaba Overseas has released over 40 AI tools across various e-commerce scenarios, including product images and text, marketing, search, advertising, customer service, refunds, and AI products in vertical fields like design and painting.

As someone who has directly led both Taobao and Alibaba Overseas, Jiang Fan is destined to be the most suitable person for this crucial battle. When Pinduoduo's market capitalization approached that of Alibaba late last year, Jack Ma voiced his opinion on the company's internal network, stating that the era of AI e-commerce had just begun, presenting both opportunities and challenges for all.

Now, this new race has officially begun.

References:

1. Table Inside and Out: Taobao's "Interconnection" Business Philosophy: 150 Million New Users, 2 Trillion Incremental GMV

2. LatePost: Exclusive | Alibaba Integrates Domestic and Overseas E-commerce Businesses, Appoints New Leaders to Prepare for the Most Important Battle

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