What drives Alibaba's relentless push in the e-commerce sector?

Produced by | Xinpinlue Finance

Author | Wu Wenwu

On May 10th, Alibaba celebrated its 21st Ali Day, with Jack Ma appearing at a lakeside cabin, a replica at Alibaba's headquarters, to inspire employees to persevere in entrepreneurship. Jack Ma's every appearance at Alibaba ignites a wave of excitement throughout the company.

The morning before Jack Ma's appearance, Alibaba Group CEO Wu Yongming also posted on Alibaba's internal network, urging all employees to return to their original aspirations and start anew.

Entering 2025, Alibaba, which had faced years of decline and pessimism, is now fully rejuvenated, displaying a formidable momentum of development.

In February of this year, DeepSeek surged in popularity, igniting an AI wave across various industries. Alibaba aggressively pursued AI and received favorable market feedback. Some market observers even believe that Alibaba's resurgence is due to AI.

In the past couple of months, Alibaba has made a series of significant moves in its e-commerce business, consistently unveiling bold strategies. It is evident that Alibaba aims to reclaim what it lost in previous years.

01 Alibaba's E-commerce Makes Bold Moves

In contrast to Alibaba's high-profile activities in AI, cloud computing, and other sectors in recent months, its frequent market moves in e-commerce are equally noteworthy.

Most recently, on May 10th, Taobao quietly launched a desktop client, adopting a comprehensive web browser-style layout. The left side of the interface integrates AI and Aliwangwang chat functions, while the top is a product tab, boasting split-screen display and smooth browsing.

The standout feature of this client is the introduction of the AI shopping assistant function, which integrates Qwen 3 and DeepSeek, primarily assisting users in product selection. Put simply: AI-powered shopping assistance.

In the view of Xinpinlue Finance, in the current era of mobile internet shopping, Taobao's launch of a desktop client is an attempt to tell a new story in e-commerce. Taobao wants to attract consumers with desktop AI functions.

To acquire new traffic and convert grassroots traffic, Alibaba and Xiaohongshu once again "broke down the wall" between them. Taobao, Tmall, and Xiaohongshu recently announced further open integration, connecting the entire link from grassroots marketing to purchase. This means that grassroots marketing notes on Xiaohongshu can now directly link to the Taobao app.

Data shows that in the past year, the click-through rate of grassroots marketing notes by Taobao and Tmall brand merchants on Xiaohongshu has increased by 20%, and the interaction rate has increased by 109%. Grassroots marketing notes and the commercial value behind them have become an important growth point for e-commerce platforms.

Alibaba needs the traffic conversion from Xiaohongshu's grassroots marketing notes, while Xiaohongshu needs to maximize the commercial value conversion of these notes. Thus, a mutually beneficial business alliance has been formed. It is undeniable that Alibaba's alliance with Xiaohongshu is indeed a significant move.

In the past two months, JD.com entered the food delivery industry and engaged in fierce competition with Meituan. Later, Meituan upgraded its flash sales business, and the food delivery war escalated into a new super instant retail battle. On the last day of last month, Alibaba, hand in hand with Ele.me, entered the food delivery war with high profile and directly upgraded Taobao Flash Buy, joining this new super instant retail battle.

Taobao Flash Buy only took 6 days to surpass 10 million orders, exceeding market expectations. No one expected that just as JD.com and Meituan were locked in a fierce battle, Ele.me and Alibaba would suddenly appear on the scene.

Alibaba does not want to miss out on the new round of food delivery wars, nor the new round of instant retail wars. In the world of Chinese internet e-commerce, Alibaba is still a major player.

02 Alibaba Aims to Reclaim Past Glories

Briefly reviewing Alibaba's development history, there have been stories of pride and triumph, as well as setbacks and dark moments.

Amidst the Asian financial crisis, Alibaba was born in 1999 to address the challenges faced by China's foreign trade enterprises at that time, developing a B2B business, namely Alibaba International Station.

Later, in 2003, amidst the SARS epidemic, offline commerce was hindered, prompting Alibaba to launch the C2C Taobao business. To solve the problems of e-commerce payment and online credit, Alibaba introduced Alipay in 2004.

To compete with JD.com and meet consumers' demand for quality and branded products, Alibaba launched the B2C Taobao Mall for brand merchants in 2008, which was later renamed Tmall.

Alibaba was undoubtedly a super winner in the era of PC e-commerce. At its peak, roughly from 2013 to 2014, Alibaba's market share in the entire e-commerce market reached 80%.

Taobao dominated the C2C e-commerce market for many years. According to data from iResearch, Taobao's market share reached 83.6% in 2007.

Entering the mobile internet era, Alibaba quickly followed suit and achieved good results in mobile internet e-commerce business. Alibaba is also a major player in Singles' Day, always at its peak and in the spotlight.

No one expected that Pinduoduo, a newcomer to China's e-commerce scene, would quickly become a competitor to Alibaba by adopting a rural-to-urban strategy and leveraging social fission effects.

Data shows that in 2017, two years after Pinduoduo's establishment, Alibaba's share of the entire e-commerce market fell to 70%. Pinduoduo grew stronger with each battle, causing significant pain to Alibaba.

Entering the era of short video shopping, Douyin began to aggressively pursue e-commerce business, focusing on live streaming and interest-based e-commerce in 2020, quickly posing a new threat to Alibaba.

In 2019, after Jack Ma's retirement, Alibaba entered a tumultuous period, with significant events such as the sudden suspension of Ant Group's IPO, leading to a sharp drop in market value and great challenges for its e-commerce business, entering a dark moment.

From the perspective of e-commerce business alone, Alibaba has lost a lot in recent years. According to institutional statistics, in 2024, China's e-commerce market share was distributed as follows: Alibaba's Taobao and Tmall accounted for 33%, JD.com for 17%, Pinduoduo for 19%, Douyin E-commerce for 18%, and the remaining 13% was shared by other players such as WeChat Video E-commerce, Xiaohongshu, and VIPShop.

In September 2023, Alibaba underwent a major management adjustment, with Joseph Tsai and Wu Yongming officially taking over as Chairman and CEO of Alibaba Group, respectively. Alibaba carried out a series of internal reforms, sorted out its business, and reshaped its business strategic priorities, achieving good results.

In the past couple of months, Alibaba has been making frequent moves in its e-commerce business, entering the food delivery war, upgrading Taobao Flash Buy, forming an alliance with Xiaohongshu, and most recently launching the desktop version of Taobao. The purpose is very clear: to focus on developing its e-commerce business and reclaim what it lost in previous years.

Alibaba's financial report data also reflects the recovery of its e-commerce business. According to the financial report released by Alibaba in February of this year, during the quarter, the overall revenue of Taobao and Tmall increased by 5% year-on-year to 136.09 billion yuan, with customer management revenue (advertising, commissions, etc.) increasing by 9% year-on-year to 100.79 billion yuan.

The explanation given by Taobao is that the main reasons behind the growth are the overall increase in GMV and the impact of increased penetration of new tools.

03 Alibaba's AI Dream Still Hinges on E-commerce

Since the beginning of this year, riding the DeepSeek wave, Alibaba has caught this unprecedented AI wave. Labeled with AI and large models, Alibaba has become a significant player.

On February 24th of this year, Alibaba Group CEO Wu Yongming announced that in the next three years, Alibaba will invest more than 380 billion yuan in building cloud and AI hardware infrastructure, exceeding the total investment of the past decade.

The huge investment amount of 380 billion yuan can be considered the largest-scale investment since Alibaba's inception. It is worth noting that Alibaba's net profit for fiscal year 2024 was 157.479 billion yuan, meaning that Alibaba is investing an amount equivalent to its net profit for two and a half years into AI.

Alibaba's bold proclamation of investing heavily in AI reflects its desire to secure a new ticket to the AI era.

Compared to its e-commerce business, Alibaba under the AI wave seems to attract more market attention. Some market observers even believe that AI is the future of Alibaba.

Indeed, Alibaba has achieved remarkable achievements in its AI business. Alibaba's large models have gained popularity, and the company has reached cooperation with Apple. In March of this year, Alibaba and BMW reached an AI cooperation agreement.

At the Ali Day event on May 10th, Alibaba Group Chairman Joseph Tsai said at the family and friends meeting that the company focuses on two core strategic directions: e-commerce and cloud + AI.

Judging from Joseph Tsai's latest statement, in terms of business importance at Alibaba, the e-commerce business ranks first at this stage and remains Alibaba's primary business.

According to Alibaba's 2024 financial report, Taobao and Tmall Group accounted for 43% of total revenue, indicating that Taobao and Tmall are still Alibaba's current core business. Now and in the coming years, or for a long time to come, Alibaba's e-commerce business will remain its foundation.

Joseph Tsai also said that Alibaba wants to integrate AI into every business and every aspect. In the next three to five years, all businesses should be AI-driven.

Interestingly, Jack Ma once talked about the development of AI at Ant Group's 20th anniversary event in December 2024, saying that the changes brought about by the AI era in the next 20 years will exceed everyone's imagination. But Jack Ma also said that while AI will change everything, it does not mean that AI can decide everything.

Alibaba can empower its e-commerce business through AI, giving it a slight advantage over other competitors. The newly launched desktop version of Taobao, with AI as its biggest highlight, illustrates this point.

Alibaba hopes to create e-commerce entry points through AI, not only to retain users but also to attract and increase more users.

Alibaba is also facing pressure from the continuous strain on its traditional e-commerce business and needs to stabilize its e-commerce business fundamentals to reclaim what it lost in previous years in e-commerce. Clearly, there is still much pressure.

At this stage, the focus of competition in the e-commerce industry has entered the era of instant retail, expanding from food delivery to a full range of products. Instant retail has become Alibaba's next important business breakthrough.

The 618 e-commerce promotion war has already begun, with JD.com firing the first shot. Alibaba has also been gearing up for it. Flash sales and the underlying instant retail are the competitive arenas for this year's 618, which is also crucial for the recovery and growth of Alibaba's e-commerce business this year.

The current achievements of Taobao Flash Buy are closely related to subsidies and discounts. Flash sales are a protracted battle, and Alibaba will need to provide more ammunition in the future. Additionally, although the grassroots marketing conversion with Xiaohongshu has broken the ice, the future commercial conversion path still needs continuous exploration.

Reviving and revitalizing the e-commerce business is crucial for Alibaba. Only when the e-commerce business develops well can it provide more ammunition for the AI business.