Original link: https://www.latepost.com/news/dj_detail?id=1661
At the same time as the quarterly report was released on May 18, Ali announced the list of board members of all business groups and the listing and financing plans of some business groups. The most significant reorganization since the establishment of Ali has come to an end.
Zhang Yong is still the chairman and CEO of Alibaba Group. Ali Group’s board of directors has also set up two new committees to approve some of the most important matters of each business group, but they no longer interfere with specific business operations.
Ali’s transformation from a large group to a holding company, and the process of making the six major businesses independent lasted for more than two years. By the end of this reorganization, all businesses have become independent in an institutionalized form, and six CEOs are responsible for their operating results and compliance.
In Ali, which focuses on inheritance, the CEO has never had to consider only shareholders, and this time is no exception. Most of the newly appointed members of the board of directors of each business group are Ali partners. Some Ali veterans who have faded out for a long time also joined them.
Zhang Yong let go of the burden: an era is over
As the top manager of Ali Group, Zhang Yong has completely let go from business to management—including Taobao Tmall Business Group, which he has invested the longest time and has the deepest affection. This is regarded by some Ali people as the most important change in this round of adjustments.
Zhang Yong joined Alibaba in 2007, starting as the CFO of Taobao.com. Zhang Yong’s most important contributions during the first eight years in Ali include: the establishment and development of Tmall, the wireless transformation of Taobao, the launch of Cainiao and a series of investments in the logistics industry.
After Ali went public as a whole in 2014, Ali began to explore more effective governance methods. As one of the few diversified management talents in Ali, Zhang Yong became the CEO of Ali Group in May 2015.
In the next few years, one of Zhang Yong’s most important strategic actions was to lead the promotion of “big, medium and small front desks”. For the first time in the Internet industry, he proposed the concept of middle offices. The middle offices provide unified technical support for diversified businesses to improve efficiency, Avoid redundant construction, but its more important significance is that this strategy has completed the opening of Ali’s organizational system, and has successfully completed the data opening since then.
Another important strategic move by Zhang Yong is the exploration of new retail, the acquisition of Intime and RT-Mart, and the heavy investment in Hema. The transformation of Yintai and RT-Mart has invested heavily, but with little effect. It took six years for Hema to achieve its current revenue of 55 billion yuan from an innovative model.
At that time, AT, which existed at the two levels of China’s Internet, was like a magnet for iron filings, and a large amount of resources were attracted to Ali and Tencent. Zhang Yong, who has good capital operation ability, is at home in this environment. His acquisition of Ele.me and AutoNavi was successful, even at a high cost.
A former Ali executive commented, “Lao Xiao has no big theory but practical work.” Another person who reported directly to Zhang Yong said, “He has strong endurance, good physical strength, and is willing to do hard work with his hands and feet in the mud. Tired work.” Zhang Yong has joined Ali for 16 years, and he has not bought a house in Hangzhou so far. He lives in a hotel, goes to work when he wakes up, and returns to his home in Shanghai on weekends.
Ali entered the era of Zhang Yong, and also ushered in unprecedented centralization. For a long time, Zhang Yong had to take care of online retail, offline supermarkets, online wholesale, logistics, cloud computing and other businesses with completely different business models and team genes. He received direct reports from more than 30 people and became the busiest in China. CEO.
In October 2020, Ali’s market value reached its peak, and its stock price exceeded $300. Since then, Zhang Yong’s work has focused more on how to maintain the smooth operation of a multi-plate complex company.
The diversification and complexity of Ali’s business also reached its peak at this time. With the reduction of efficiency in the middle office and the slowdown of business growth, around 2020, Zhang Yong began to try to decentralize. He thinned the middle office and promoted diversified governance. Between himself and the president of the business group, he set up a new “big president in charge”. They are responsible for the four most important business segments of Ali, further reducing the number of reporting relationships to him.
But no matter how the organization is adjusted, many Ali management personnel believe that Zhang Yong and his president’s office are still making business decisions.
In the following three years, the epidemic came, anti-monopoly investigations began, and new opponents emerged. The two giants of Ali and Tencent are facing a common fate almost at the same time-there is no power to fight back when dealing with new competitors.
Data show that Ali China’s retail e-commerce revenue declined for the first time in the fourth quarter of 2021, and has declined for four consecutive quarters since the second quarter of last year. The group’s total revenue also declined for the first time in the second quarter of last year. “LatePost” learned that the combined GMV of Pinduoduo and Douyin e-commerce in 2022 will be nearly 4.5 trillion yuan, equivalent to more than half of Ali’s domestic e-commerce business.
Under the drastic changes inside and outside, at the beginning of this year, Zhang Yong planned this round of “1+6+N” major adjustments. An adjustment of this scale is unprecedented in the Group’s 24-year history.
Managing a group like Ali with distinctive corporate culture and complex businesses is bound to be difficult. Zhang Yong completely completed Ali’s cycle from points to points and then to points. He participated in and witnessed the whole process, some changes were started by him, and some things were also ended by him.
Zhang Yong, 51 years old this year, started another journey – Alibaba Cloud.
Alibaba Cloud’s current annual revenue is second only to Taotian Group, reaching 77.2 billion yuan, accounting for about 9% of Alibaba Group’s revenue. In the future, the business that Ali Group has invested tens of billions of dollars in will be completely spin-off and completely separated and independent. It is understood that Alibaba Group will no longer hold shares in Alibaba Cloud in the future.
Alibaba Cloud’s board of directors also has a significant difference from the other five business groups: there is no additional “activation” of retired partners, and all five directors work for Alibaba Group or Alibaba Cloud.
When asked by an analyst about the logic of splitting Alibaba Cloud, Zhang Yong said that another Alibaba can be extended from one Alibaba, making it from today’s small Alibaba to tomorrow’s big Alibaba.
This may be the most relaxing moment for Zhang Yong in these years. His management scope has shrunk and fewer people are managing, but what he is facing is a field with sufficient room for development and definite room for business development. Moreover, He will be the absolute boss.
Partners are reactivated
The board of directors is the governing body of a modern joint-stock company. Shareholders elect directors as representatives, decide on the candidates and remuneration of management, and make decisions on major matters such as acquisitions, mergers and acquisitions, and dividends.
When Ali Group became a holding company, many Ali investors who had retreated behind the scenes returned to the stage and directly served as members of the board of directors of various business groups. The newly announced boards of directors of the six major business groups of Ali each have 5 seats, a total of 30 seats, and are held by 19 people, 16 of whom are partners of Ali.
The partners are the spiritual leaders of Ali Group. They were selected in 2009 to ensure that after Ali went public, the direction of the company is still firmly in the hands of proven Ali members, adhering to the original culture and values, rather than completely following the interests of shareholders. Ali partners have the right to nominate more than half of the candidates for the board of directors, and then decide on the management candidates and major decisions.
Most of the 16 Ali partners who entered the business group’s board of directors this time were veterans who had already obtained this status when Ali went public. At that time, the chairman and CEO of Ali Group’s board of directors and CEO were Jack Ma. Only Yu Yongfu (2015), Zheng Junfang (2015), Wu Zeming (2017), Wen Jia (2017), and Zhu Shunyan (2021) were selected later.
All directors and CEOs of the six business groups are appointed and approved by the Alibaba Group Board of Directors.
Among them, three partners have quit Ali’s operation for a long time.
Wu Yongming became the chairman of Taotian Group, which is the most important business of Ali Group. At the same time, he also entered the board of directors of local life, international digital business.
Wu Yongming: Chairman of Taotian Group, Director of Local Life Group, Director of International Digital Business Group [Photo source: Yuanjing Capital official website]
In 1997, the year before Alibaba was founded, Wu Yongming followed Ma Yun to start a business. He used to be the technical director of Alipay, the general manager of Alimama (advertising business), the president of Yitao.com (rebate promotion platform), and briefly in charge of related businesses at the beginning of Ali’s transformation to mobile.
Wu Yongming withdrew from front-line business management in 2015 and served as Jack Ma’s special assistant and the chairman of Ali Health’s board of directors-retiring after 5 years. At the same time, he founded Yuan Jing Capital. According to the official introduction, the current management fund scale exceeds 10 billion yuan, and he has led the investment in projects in various fields such as Tuya Technology and Li Auto.
An insider told “LatePost” that after 2015, Wu Yongming will express key opinions and influence Jack Ma on various occasions within Ali, such as the organization department, partner meetings, and Fengqing Yang classes.
Cai Chongxin is the chairman of Cainiao Group and the director of Taotian Group. At the beginning of Ali’s start-up, he solved the company’s financing problems and determined the equity incentive model for the founding team. He is the only permanent partner of Ali besides Jack Ma.
Cai Chongxin: Chairman of Cainiao Group, Director of Taotian Group [Photo source: Alibaba official website]
Cai Chongxin served as the chief financial officer of Ali Group until 2013, and then took charge of strategic investment until he retired in 2019 and bought the NBA Nets. However, he has been serving as a director of Cainiao Group and was elected as the executive vice chairman of Ali’s board of directors in 2021.
Due to his experience and influence in the capital market, he is considered to be a key figure in Cainiao’s future listing.
Peng Lei serves as director of Local Living and International Digital Business Group. She is also the veteran of Ali, one of the eighteen founders, and one of the six members of the Ali partner committee.
Peng Lei: Director of Local Life Group, Director of International Digital Business Group [Photo source: Lazada related news photos]
She has managed Ant Group (Alipay) for a long time, and took over Lazada in 2018 to explore the Southeast Asian market, but returned the CEO position to the founder of Lazada in less than a year and became the chairman. After Jiang Fan took office in 2022 and took over the position of chairman of Lazada Group, Peng Lei will only be named as an honorary consultant.
Peng Lei has been in charge of local life and related businesses under the international digital business group, and is still on the list of Lazada’s leadership team.
An insider said that Peng Lei’s election to the board of directors of Local Life Group was a “two-way choice” between her and Yu Yongfu. In 2014, Yu Yongfu joined Ali following Ali’s acquisition of UC and served as the president of the UC mobile business group. At the inaugural meeting at that time, Peng Lei publicly supported him and said: “As long as the mission is the same, the culture of his business group is allowed to be inconsistent with Alibaba.”
Peng Lei is considered the spokesperson and guardian of Ali’s values and organizational culture. When Ali’s founder team confirmed the first version of values, she and Guan Mingsheng wrote the key words of these discussed values on the glass plate, and then Ali’s “Dugu Nine Swords” came into being. Peng Lei was Ali’s first chief human resources officer. To this day, she still has a strong prestige in the hearts of Ali people.
Another 2 partners have just stepped down from Ali’s management positions. Wu Wei retired from the position of chief financial officer of Ali Group in March 2022 and only served as a director of Ali Group. Tong Wenhong announced at the end of 2022 that she would step down as chief talent officer and only participate in Ali cultural operations as a partner of Ali. Both of them are the first batch of announced partners after Ali went public, and they both became directors of the big entertainment group.
“LatePost” learned from people close to Ali that the list of sub-group boards of directors is determined by the board of directors of Ali Group and the CEOs of each sub-group. The other Ali partners elected to the board of directors are all current managers of Ali Group.
The chairman of the cloud intelligence group (Aliyun, Dingding, etc.), the local life group (Amap, Ele.me, etc.), and the big entertainment group (Youku, Alibaba Pictures) are the CEOs of these three groups.
The CEOs of Taotian Group (Taobao Tmall, Taote, 1688, etc.), Alibaba International Digital Business Group (Lazada, AliExpress, etc.), and Cainiao Group serve as directors of their respective directors, and the chairman of the board is a senior veteran of Ali.
Six executives from Ali Group’s functional line also joined the board of directors, such as Wu Zeming (Chief Technology Officer), Zheng Junfang (Chief Risk Officer), Jiang Fang (Chief Talent Officer), Yu Siying (Chief Legal Officer), Wen Jia (Group Public Affairs Committee) President), Wang Jian (Chairman of Ali Group Technical Committee).
Dai Shan, Jiang Fan, Wu Zeming, and Jiang Fang have all entered the board of directors of more than one business group.
In addition to being the CEO of Taotian Group, Dai Shan also serves as a director of International Digital Business Group and Cainiao Group. She is one of the 18 founding members of Alibaba and the first batch of partners at the beginning of Alibaba’s listing.
The two businesses of the international business group, AliExpress and International Station, will be in charge of Dai Shan from 2017 to 2021, while Cainiao Group has many cooperation and synergies with Taobao and Tmall in terms of business.
Similarly, Jiang Fan has managed the Taobao Tmall business for a long time. After the spin-off, Taobao Tmall Group and Cainiao Group also had a lot of cooperation with Ali International Digital Business Group that he took over.
Wu Zeming serves as a director in the three business groups of Yunzhi, Taotian and Local Life. He was just promoted to CTO of Ali Group at the end of 2022, and concurrently served as the vice president of Dharma Institute. He was also the first post-80s among Ali partners. The spin-off of Ali Technology Center this year did not affect his management authority. At present, the technical leaders of Taotian and Local Life Group report to him. In addition, he also served as CEO of the newly established company “Ai Orange Technology”.
Jiang Fang is also one of the 18 co-founders of Ali. She was in charge of the “Integrity Department” at Ali, and officially took over Tong Wenhong as Ali’s chief talent officer earlier this year. After Ali Group’s various functional lines were split into business groups, she was still in charge of the organizational culture department and salary center, and the human resources of sub-business groups such as Cainiao were still in charge of her. Jiang Fang currently serves as a director in two groups, Cainiao and Alibaba Cloud.
The five returning partners are all among the first batch of partners announced after Ali’s listing, and three of the important partners are members of Ali’s founding team.
It is understood that the candidates for the board of directors of each sub-group are selected by the board of directors of Alibaba Group. The conditions for candidates are: have experience, have worked in related businesses, and have appeal in the employee group.
Another Ali management person commented that he was confused by the selection of some directors. For example, in the board of directors of Dawen Entertainment Group, only Fan Luyuan has managed specific businesses, and the other four directors are all women, and their experience is only in the functional line of Ali. For example, Wu Wei is the former CFO of Ali, Tong Wenhong is the former chief human resources officer, and Yu Siying is the chief executive officer of Ali. Wen Jia, the legal officer, has been on the Ali Public Affairs Committee.
Nearly half of the Ali partners who joined the board of directors have already faded out of the business, or only have functional experience, and it is difficult to say how much they have contributed to specific business decisions. The important thing is their common experience – out of the 19 people, 16 have personally experienced Ali’s entrepreneurial period or have been selected as partners by Ali’s veterans. Always remind CEOs where the company came from.
Jiang Fan speeds up, Yu Yongfu speaks up
Jiang Fan is the youngest of all sub-group directors and the only non-partner on the board of directors of the three business groups.
This time he was able to enter the board of directors of Taotian, International Business, and Cainiao Group because of his “experience, business relevance, and business ability”, which also proves that he has once again been recognized in the core management of Ali Group.
Jiang Fan was acquired into Ali in 2013 due to the entrepreneurial project Youmeng. Since then, he has led Taobao to break through new highs in users, and has been promoted to the president of Taobao, Tmall, and Ali Mama. In 2019, at the age of 33, he became Ali’s youngest partner. The following year, he was removed from the list of partners due to private life incidents, but his management authority was not affected.
Jiang Fan left the impression on employees on Taobao and Tmall that “product capabilities are strong”. Previously, some small innovations on Taobao, such as the 3D home furnishing venue and the sharing of shopping carts, were the result of his efforts. When he came to the international business sector, he gave some middle managers the feeling that he was “smart” and “strong in business thinking”.
A former Ali employee who had contact with Jiang Fan saw that Jiang Fan has a strong ability to expand resources. Unlike the image presented to the public, he is good at communicating with people and is willing to export his insights to influence others.
After the spin-off of Ali Group, Jiang Fan and Dai Shan participated in the earnings conference call for the first time to report their respective business progress. Among them, the overall revenue of the international segment increased by 29% year-on-year, which was the fastest growing among the six major business segments.
Jiang Fan’s partner, the chairman of International Business is a Canadian, J. Michael Evans (Chinese name Bethune). Like Jiang Fan, he is not a partner of Ali.
Before joining Ali, J. Michael Evans worked at Goldman Sachs for 20 years, serving as the global co-head of Goldman Sachs’ equity and securities departments. Before retiring, he was the vice chairman of Goldman Sachs and the global head of the growth market department. He joined Ali in 2014 and became the president of Alibaba Group the following year. Until 2022, he will be the head of Ali’s international government relations line, reporting to Zhang Yong.
Some Ali employees speculate that Evans’ role as chairman of the International Digital Business Group will help the group expand its business globally and handle government relations and investor relations. Evans is 65 years old.
Among the six major business groups, in addition to the completely independent Alibaba Cloud, Yu Yongfu also has more thorough control over the local life group in the role of chairman and CEO.
Yu Yongfu joined Ali in 2014 due to the acquisition of UC, breaking the practice of requiring partners to have 5 years of work experience in Ali, and became a partner of Ali in the second year. He has managed a number of businesses with large spans in Ali, but the overall situation has not been smooth. After Gaode was taken over by him, the number of daily active users went from less than 10 million to more than 100 million, becoming the industry’s number one.
When Ele.me and Koubei were handed over to him, they were also Ali’s hot potatoes. Over the past year or so, after clarifying strategies, adjusting organizations, and merging businesses, the entire local life group’s revenue increased in the latest quarter. 17%, the full-year revenue increased by 12%.
Compared with CEOs of other business groups, Yu Yongfu is probably the CEO who likes to shout to all employees and send letters to all employees. He has his own discourse system, and likes to introduce theories of war, football and other fields into business thinking. On May 10 this year—the original Ali Day, now on Ele.me Family and Friends Day, Yu Yongfu made another sharing with all members .
He summed up three major events in the past year: first, iterated the definition of “four vertical and four horizontal” (four vertical refers to operating capabilities, and four horizontal refers to business assets); second, in terms of business selection, he chose to improve efficiency instead of The scale of expansion; the third is to start the mechanism reform. The three things this year are to continue to build the “four vertical and four horizontal”, return to scale growth, and start cultural reform.
Yu Yongfu mentioned that Ali split from “one company” into multiple companies, which gave him a sense of urgency for reform. In terms of cultural reform, he hopes to turn Ele.me into a digital iron army, so he advocates iron blood culture-“iron will and bloody fighting”.
Ele.me and the other business teams of Local Life immediately adjusted their working hours. The working hours were advanced half an hour to 9:30; the noon break time was shortened from 2 hours to 1 hour.
Three companies are preparing for listing and one is preparing for financing
Hema: The first to go public, preparing for Pre-IPO financing
Alibaba expects Hema to go public within the next 6 to 12 months. Ali has invested in this new retail experiment for eight years.
“LatePost” learned that Hema will be listed on the Hong Kong Stock Exchange, and the currently confirmed underwriters are Morgan Stanley and CICC. In addition, we also learned exclusively that Hema is preparing for the final round of financing before going public. The leading investor currently in contact is Primavera Capital, and the follow-up investor has not yet been determined.
In the past year, Hema has tried many times to contact investors, and its valuation has dropped from US$10 billion to US$6 billion. This round of Pre-IPO financing is a key step before Hema’s listing—this round of valuation can serve as a value reference for the final pre-listing brokers’ pricing and investor subscription; the entry of external investors can also boost pre-listing investors Subscribe with confidence.
Among the currently listed supermarket companies in China, Yonghui Superstores (30.1 billion yuan, 4.3 billion US dollars) has the highest valuation. In the 12 months to the end of March this year, Hema’s revenue was about 55 billion yuan, equivalent to Yonghui’s level for more than half a year.
In 2015, Hema Xiansheng opened in Shanghai. It was considered a sample of new retail for a while, and it would help Internet companies enter fresh food consumption and win the last big market in daily consumption.
In the past eight years, Hema has not yet made a profit for the whole year. “LatePost” learned that in the 2023 fiscal year ending March 31 this year, Hema’s net loss was several billion yuan. However, the loss rate of Hema has been significantly reduced.
In April this year, Hou Yi, the founder of Hema, said in an interview with the media that Hema achieved full profitability in the fourth quarter of last year and the first quarter of this year. He believes that this shows that “new retail is not a money-burning model, but sustainable profitability. model”. At the same time, Hema’s revenue has also increased from 34 billion yuan to about 55 billion yuan in one year. This year, Hema has set a sales target of 100 billion yuan.
During this period, Hema continued to receive the support of Ali Group. Eight months ago, Ali’s subsidiary Darun announced that it would provide financial assistance to Shanghai Runhe Network Technology Co., Ltd., a subsidiary of Hema, and provide a loan of up to 100 million yuan.
A person from Hema said that around March last year, Hema changed the way it settles with suppliers, extending the billing period from 45 days to 60 days. Such adjustments will help Hema improve its cash flow.
The narrowing of losses is because Hema has reduced costs in all aspects in the past year. Hou Yi mentioned in his internal letter early last year that he should be “harder and harder” on himself and start “tightening up” early. Live in your belt.”
While reducing costs, Hema is still pursuing a larger scale and more new formats. This year Hema will launch two new formats: one is a boutique Hema store aimed at high-end elites, tentatively named Freshippo Best, and a warehouse-style shopping mall (FOD, Food Operation Delivery) similar to Metro’s self-service wholesale model, which is a cash-and-carry (C&C, Cash and Carry), for SME customers.
This will be the most important change since the establishment of Hema. The support it receives from Ali Group will be limited, and it needs to face the pressure of profit and loss.
Alibaba Cloud: The most potential business of Alibaba Group will be completely dismantled
Aliyun will be the most thorough business segment of Alibaba’s spin-off. After the spin-off, Alibaba Group will no longer hold Alibaba Cloud shares, and will distribute existing shares to Alibaba shareholders.
According to the internal letter of Alibaba Cloud CEO Zhang Yong, Alibaba Cloud will complete the spin-off and listing within the next 12 months, and introduce external strategic investors.
In the first quarter of this year, Alibaba Cloud’s revenue was 18.582 billion yuan, a year-on-year decrease of 2%. Now, Aliyun is the second business in the Alibaba system whose growth rate has declined, and the growth rate is only stronger than the -3% of China Business (Taotian Group).
Alibaba Cloud stands at a turning point in China’s cloud computing market. Goldman Sachs valued it at US$41 billion in May this year, making it the business with the highest valuation outside of Taotian Group in the Alibaba system. The market generally believes that Alibaba Cloud will have great development potential.
In the past few years, many of Alibaba Cloud’s old customers could no longer provide incremental growth, and some disappeared directly: the number of customers in the online education industry has decreased significantly, and the growth in the online game industry has been scarce. By 2021, it once accounted for nearly 1/3 of Alibaba Cloud’s revenue. Bytedance began to relocate. In 2022, Alibaba Cloud will have an operating loss of RMB 3.6 billion.
It is artificial intelligence that changes the prospects of Alibaba Cloud and even the entire Chinese cloud computing market. At the end of November last year, ChatGPT appeared, demonstrating the amazing capabilities of artificial intelligence large models, and also affected the cloud computing market.
In the past, cloud computing sold more basic resources such as computing power, storage, and bandwidth. These resources, especially bandwidth, are highly dependent on operators in China, and Alibaba Cloud also needs to rent related resources from operators. And each link of artificial intelligence development requires a large number of computing resources, AI capabilities and supporting software tools. Private enterprises are far better at providing these services than operators.
In April this year, Alibaba Cloud released an application similar to ChatGPT “Tongyi Qianwen”. Businesses such as DingTalk and Tmall Genie, which were assigned to Alibaba Cloud Group, began to test using large models to improve office efficiency and user experience. At the same time, Alibaba Cloud launched a series of price reduction measures to compete for the market.
Being independent from Alibaba Group will help Alibaba Cloud find customers. A large number of Internet industry customers are concerned about the vast business layout of Alibaba Group, and e-commerce and retail companies will avoid Alibaba Cloud when choosing a cloud computing platform.
Chinese government and enterprise customers are also more willing to choose operators for cooperation, rather than letting Internet platform giants customize infrastructure. A completely independent Alibaba Cloud will reduce customers’ concerns in this regard, and it will also have the opportunity to introduce relevant strategic investors to enhance trust.
On the evening of May 18, Zhang Yong sent a letter to Alibaba Cloud employees saying that Alibaba Cloud’s business model, customer characteristics and development stage are “hugely different” from other Alibaba businesses, and that “the split is for Alibaba Cloud to have a better future.” develop”.
Cainiao: The subgroup with the fastest revenue growth at present, more than half of its revenue depends on cross-border business
Cainiao, a logistics technology company, may be the third listed subsidiary of Alibaba Group after its split. Ali disclosed in its financial report for the first quarter of this year that it aims to complete the IPO of Cainiao in the next 12 to 18 months. According to previous media reports, Cainiao hopes to go public through listing. Raise $2 billion. Ali Group accounts for 67% of Cainiao shares.
“LatePost” learned that Cainiao will be listed on the Hong Kong stock market, and the underwriters include CICC and Citigroup. In an internal report in May this year, Goldman Sachs valued Cainiao at US$28.5 billion, which has declined compared to the 30 billion yuan valuation in 2020. However, if it can be listed at this valuation, Cainiao will It has become the second largest logistics technology company after SF Express (with a market value of about 35 billion US dollars).
Cainiao is also currently the fastest-growing business in Alibaba. As of the end of March in fiscal year 2023, Cainiao achieved revenue of 55.6 billion yuan, a year-on-year growth rate of 21%, higher than that of international business (13%) and local life services. (12%).
An investment banker said that before the listing, Cainiao positioned itself as “a complex supply chain that can determine delivery.”
Cainiao, which was founded ten years ago, has a complex business. Its five major business segments include: global logistics, consumer logistics, supply chain services, global ground network, and logistics technology.
Cainiao started in the ground network business. Around 2014, it leased logistics parks in many places, built warehouses and logistics equipment, and then sublet them to e-commerce companies and logistics companies. In 2017, Wan Lin, who used to work for Amazon, became the president of Cainiao. The company’s business focus has shifted to the logistics infrastructure of the whole society, and it has begun to vigorously improve the global supply chain capabilities of Cainiao Network, including international small parcels, international supply chains, and international terminals. network etc.
Currently, international business accounts for more than 50% of Cainiao’s total revenue.
The top three logistics companies in the world are UPS, FedEx, and DHL. In terms of order volume, Cainiao has already ranked fourth. In 2022, Cainiao’s annual average daily cross-border parcel volume will be more than 4.5 million, which is 23.3 million away from the first UPS. The package is still far away. The income gap is even wider, with UPS’s international business alone generating close to $20 billion in revenue, more than three times that of the Cainiao Group as a whole.
At present, Cainiao’s largest overseas customer is AliExpress, AliExpress, the overseas e-commerce platform of Ali. Last year, the conflict between Russia and Ukraine, the two advantageous regions of AliExpress, directly led to a large and significant decrease in the number of AliExpress in this region; in 2021, the European Union announced The cancellation of the import VAT exemption for products below 22 euros also led to a decline in AliExpress Europe’s orders, and the impact was ultimately passed on to Cainiao.
Next, Cainiao will open up its logistics capabilities globally. In addition to facing international giants, it will also directly compete with cross-border logistics companies such as SF International and Yuntu.
Cainiao has little room to grow its domestic business. Throughout 2022, China’s e-commerce turnover will only increase by 6.2%, the lowest on record.
Businesses such as the domestic supply chain and Cainiao Station are still losing money, and Cainiao has begun to reduce costs. Last year, Cainiao internally began to raise the target of overall business profitability. In the first quarter of this year, Cainiao’s adjusted EBITA loss was 319 million yuan, which narrowed by 65% year-on-year.
International digital business: the time to go public is not yet ripe, and a large amount of investment is still required
International Digital Business Group will not go public as quickly as the previous businesses, but it will also be more independent from Ali Group and begin to seek external financing.
The international digital commerce sector includes wholesale business Alibaba International Station, retail business AliExpress, Southeast Asian e-commerce retail platform Lazada, Turkish e-commerce retail platform Trendyol and South Asian e-commerce retail platform Daraz. Currently, CICC values the international business sector at US$39 billion, and Morgan Stanley also estimates US$29 billion.
In fiscal year 2023, when the overall business revenue in China fell by 1%, international digital business still increased by 13% year-on-year. At the same time, the loss has been significantly narrowed. In fiscal year 2023, its operating loss was 8.4 billion yuan, a year-on-year loss reduction of 26%. This is the result of Jiang Fan taking charge of international digital business for one year.
After Jiang Fan took office, he actively integrated business and improved efficiency. For example, the cross-border related supply parts are integrated to form a merchant platform. Merchants no longer need to operate in multiple Ali’s overseas channels, and only need to release products once. AliExpress has clarified its benchmark targets, Amazon and TEMU, and launched a “full managed service”, which has improved its sales.
Lazada, an e-commerce platform in Southeast Asia, is the business that Ali invests the most in international digital commerce and also contributes the most sales. In the past year, its combat effectiveness has increased. Rival Shopee has canceled its free shipping subsidy policy, while Lazada is still subsidizing shipping. At the same time, Lazada invests a lot of advertising resources in various shopping festivals to compete for users.
Lazada is also increasing its investment in the supply chain. In April last year, it added the position of chief logistics officer. This year, Lazada plans to invest tens of billions in the Philippines to establish hundreds of distribution centers.
Currently, in Thailand and the Philippines, Lazada’s platform traffic is close to that of Shopee.
Some investors said that apart from Taobao Tmall, they are most concerned about the business progress of Ali International Digital Commerce. Although the latter has made some progress, its momentum and scale are not as good as TEMU and SHEIN. It needs to obtain enough ammunition from the primary market to have any hope of victory.
There is no bigger problem than “big”
Alibaba and Tencent used to be the two-tier existence of China’s Internet, and they expanded the boundaries of commercial companies. If the entire business world is regarded as a cube, A and T back then, one wanted to be deep and control everything; the other wanted to be wide and connect everything.
Just because they get bigger doesn’t mean they take away the best opportunities. The three most important opportunities of the mobile Internet-short video, food delivery, and taxi-hailing were all taken away by start-up companies in the end. This is a double problem of AT strategy and organization, but at its root, the body of big companies is inevitably aging, while the small giants are younger.
Alibaba used to be proud of the “one company”, that is, in the state of already a large company, it is still able to make a hole and unite against the enemy. But this is against the laws of business, it is not sustainable.
Today’s Ali is a giant, and it has become almost impossible to fight together. An example is that in 2020, when Douyin has launched its e-commerce business on a large scale, Taobao is still vigorously cooperating with Douyin to sign the year frame, providing a rich selection of products, and helping Douyin shape live shopping habits. Today, when Taobao regards Douyin e-commerce as an opponent, Ele.me continues to cooperate with Douyin Local Life, which is ambitious to enter the food delivery market.
Zhang Yong himself concluded that “big” itself is the biggest problem.
He spent several years trying to correct it, such as introducing operating accountability, but it was unclear what the responsibility was and who would bear it. The management responsibility system also fails to solve the most important incentive problem, and when outstanding talents are lost, it is the beginning of a company’s downturn.
When Zhang Yong and his presidents were unable to solve Ali’s problems within Ali, great changes occurred. As an Ali executive commented, “It’s better to divide or reconcile than to be confused.”
Today, both Ali and Tencent are cutting businesses that have nothing to do with their main business, but the forms and difficulties are different.
Tencent, which used to be linked by investment and connection, cut it more simply and simply. For Ali, which tends to do or acquire large businesses by itself, this is a bigger and more painful project.
As for these cut-off businesses, at the moment they are thrown into the market, there are only two paths left: grow up, or die.
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