• Transform magazine
  • June 16, 2019

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Open Sesame!

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Once upon a time (in fact, only fifteen years ago towards the height of the west’s first dotcom boom), was the beginning of a modern-day fairy tale to rival 1001 Arabian Nights.

Jack Ma, a school teacher from Hangzhou, near Shanghai, founded a new web business, Alibaba, connecting local Chinese manufacturers with potential buyers overseas. Few outside of China have heard of Hangzhou, the capital of Zhejiang province in eastern China – even though it’s population of almost 10m is bigger than any city in Europe – but you’ll hear a lot more of Alibaba over the next few years.

From a modest business to business idea that began in his home town, Ma’s company expanded quickly in the next few years. It moved seamlessly into two complementary spaces: a C2C offer, Taobao, similar to eBay, was established to help consumers connect with each other; while in the B2C space, TMall was formed in response to retailer demands for a piece of the action on the Alibaba portal. Both platforms have been remarkably successful. On China’s Singles Day in November 2013 –the equivalent of Cyber Monday in the States – shoppers on the Taobao and Tmall sites spent almost $6bn in that single day. The company also makes money by charging Tmall’s shops commission fees on transactions or by charging Taobao merchants for advertising.

Alibaba is a treasure trove bigger than eBay and Amazon combined. In fact, Alibaba’s customers spent more than $250bn last year – most through the firm’s Alipay online payment system. So steep has been Alibaba’s growth that the different companies in the group account for about one-half of all online payment transactions in China and about 60% of all parcel deliveries.

Alibaba, China’s largest e-commerce platform is set to IPO in New York. The move will change the landscape of Chinese mobile e-commerce and communications and may have an affect on that of western countries as well. Andrew Harrison is on BrandWatch

Western investors are now going to be able to get a piece of the action as Alibaba is set to become the largest-ever initial public offering (IPO) in America. The firm unveiled its prospectus to list in New York earlier this month. Analysts estimate the IPO could raise an initial $15 bn, valuing the company at more than $100bn. For Alibaba, that’s quite a return in just 15 years of operation.

It’s meteoric growth can be accounted to a few factors. Alibaba has quickly developed an interlinked network of related operations. Strategic moves into the complementary B2B and B2C spaces facilitated a self-reinforcing network of companies that serve each other – so the group sweeps together a single corporate offering that has not just eBay and Amazon on its radar but also PayPal and WhatsApp in its sights. Second, Alibaba has hit the sweet spot of market growth: the spectacular rise of China’s economy in general has been supported by a second surge to become the world’s largest e-commerce market.

Now is the chance for western investors to see the Chinese dragon up-close with Alibaba the first of a number of companies – like Tencent (which owns Weibo, China’s leading social network) and Baidu (China’s market-leading search engine in a Google-free market) – set to change the shape of global branding.

The key question – like that posed to its western competitors – will be who wins in the market transformation to mobile commerce. This is particularly acute in China which features a mobile market with more than 1.4bn consumers. Alibaba’s IPO is the first designed to secure a future leadership in mobile e-commerce by freeing up funds to invest, especially in the social networks that are changing the communications Chinese communications landscape.

One thing is for sure, the backbone of the web – comprised of Google, Amazon, Facebook and Apple and the like – will now face its biggest competitive threat. Indeed, it’s open sesame for China’s great brands to redraw the global league tables of brand valuation and reset the rules of brand architecture for the future.

Andrew Harrison is development director Asia-Pacific for WPP’s Brand Union.