China

Jack Ma Just Released Alibaba's Annual Investor Letters - Here're 5 Important Insights You Need To Know

Just hours ahead of Alibaba’s Annual Shareholder Meeting held yesterday at 9pm Hong Kong time, the e-commerce giant released the annual letters to shareholders from founder and chairman Jack Ma and CEO Daniel Zhang.

For those of you who want to read them in full, you may head to Ma‘s and Zhang‘s individual letters, but for those without the time, we’ve pulled out 5 important insights that we’d like to share.

1. E-Commerce On Mobile Is Bustling

While most of us would think of Alibaba shopping as a desktop sort of experience, Ma’s letter actually revealed that mobile was their main moneymaker in recent times.

“In the fiscal year prior to our IPO [on September 2014], mobile revenue accounted for a single-digit percentage of total revenue from our China retail marketplaces; in our most recent quarter, mobile contributed more than 75% of total revenue.”

Image Credit: Alibaba
Image Credit: Alibaba

Their monetisation rate from mobile now even exceeds that from the desktop.

While “Alibaba executives [have] admitted that the speed of this shift has surprised [them]”, it does seem like their ‘mobile-first’ strategy definitely paid off.

2. Millennials Make Up The Bulk Of Their Users

Image Credit: Forbes
Image Credit: Forbes

Zhang revealed that more than 75% of their users are 35 or younger, and “view [Alibaba] as an inseparable part of their lives”.

Asia is home to almost 60% of the world’s millennial population, and adding on to a “rapid rate of urbanisation”, it won’t be surprising if these young users are doing their transactions solely via mobile.

Alibaba stocks have also been identified in a Forbes article as one of the top favourites among investing millennials, due to “familiarity with Amazon.com, [along with] the added benefit of offering a way to tap growth in China”.

Millennials are literally the future, and Alibaba is making leaps to address that.

3. “Soon, Even E-Commerce Will Be A ‘Traditional Business'”

Alibaba has also been investing greatly into their cloud computing service, Alibaba Cloud.

Admitting that the move was “strategic”, they started investing in it as early as eight years ago, and at the moment, the Cloud hosts 35% of the total websites in China, alongside providing clients cloud computing and big data services.

Image Credit: Alibaba Cloud
Image Credit: Alibaba Cloud

What Alibaba Cloud looks to do is to “enable all businesses, large and small, to benefit from the greater operational efficiency and lowered costs that cloud computing can provide” – especially in light of the way disruption is constantly redefining how businesses need to be run in the future.

Identifying “computing power as the new ‘technology breakthrough’ and data as the new ‘natural resource'”, the group also predicts that soon, even e-commerce will be a ‘traditional business’, with “pure e-commerce players [soon facing] tremendous challenges”.

Their future development plans will also be highly focused on “how to leverage [their] expansive commercial ecosystem to provide an environment for large scale application of new technologies – such as artificial intelligence, augmented reality, virtual reality, Internet-of-Things – and ultimately help drive the birth of new business models as new technologies mature”.

At the moment, the group also revealed that they are incubating initiatives like AutoNavi, Alitrip, DingTalk, Xianyu, and Internet-of-Things (IoT) operating system YunOS, in a bid to nurture and grow them into “next generation businesses”.

4. Rural Villages Are A Key To The Massive Chinese Market

A village selling items via Rural Taobao
A village selling items via Rural Taobao

Even with the rapid urbanisation of China, there are still many rural villages who are left out.

Alibaba wants to change that with the Rural Taobao partners programme, which, as of March 2016, has coverage in over 14,000 villages.

What the programme does is to give rural villages and farmers a means to connect with their urban counterparts without the need to leave their villages – most of which are far off from the cities.

Through e-commerce, these rural dwellers can not only have access to more goods and services – they can even find new buyers in urban markets for their products.

Image Credit: Alibaba
Image Credit: Alibaba

Zhang stated that the programme not only benefits companies in China, as even “more and more global brands are taking advantage of the Rural Taobao network to quickly and effectively penetrate the vast China rural market.”

The group plans to establish service centres in 100,000 villages from 1,000 counties in the next 3-5 years.

5. Never Leave Out Logistics 

In both letters, logistics has constantly been identified to play an important role in current and future business models, with Ma stating, “We anticipate the birth of a re-imagined retail industry driven by the integration of online, offline, logistics and data across a single value chain”.

Logistics has been an underrated, yet vital player and the group realises that.

In that light, Zhang mentions that they have been actively participating in the development of logistics and local services “through investments in Cainiao Logistics Network and Koubei respectively”.

The former, which processes “more than 40 million packages a day on average” focuses on the creation of a smart logistics network, and covers express delivery, warehouse and distribution and last mile.

This was made possible by the Network’s “180,000 delivery stations through [their] logistics partners”.

Without a reliable and effective logistics service, even the best e-commerce platform will fail – hey, even local entrepreneur Elim Chew of 77th Street fame saw this, and has since pivoted to this very promising industry.

The letters more or less confirmed what we’ve already been getting acquainted with, but to see a confirmation of these trends and predictions via Alibaba’s top honchos – now that’s the most important takeaway.

Feature Image Credit: Wall Street Journal

 

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