Original link: https://www.latepost.com/news/dj_detail?id=1715
When Ali Group announced the independence plan of various departments on May 18, it has clearly indicated that Zhang Yong will step down from the position of Ali Group.
As analyzed in the report of “Wandian Finance” that day , as the chairman and CEO of Alibaba Group, Zhang Yong only appeared on the board of directors of Alibaba Cloud Intelligent Business Group, and his partners were either former direct subordinates or still Group frontline work. The boards of directors of the other four important business groups have nothing to do with him, joining the early Ali partners who have not been involved in the business for a long time.
When Ma Yun retired in 2019, he said that he “hoped to change the arena”, and Zhang Yong wanted to “create a new arena” this time. He took away the business with the most growth potential within Ali, promoted its complete independence from the group, and listed it in a place with stricter supervision. As he himself said, considering the company’s standardized governance requirements, it is not appropriate for him to concurrently serve as the chairman and CEO of the group and Alibaba Cloud.
Ali employees were not surprised by Zhang Yong’s resignation. Most of them left only the comment “M” under Zhang Yong’s open letter on the intranet—just marked it to show that they had seen, participated in, and witnessed history. Some people also posted group photos, sent blessings, and expressed their gratitude. The most repeated words in the comment area were “See you again, Ren Xiaoyao” at the end of Zhang Yong’s open letter. Few people expressed their real feelings and thoughts in the form of their real names.
Some employees told “LatePost” that although Zhang Yong failed to suppress Pinduoduo in Ali, everyone still thinks that he is “a person who is smarter and more diligent than you” in private, and recognizes the Tmall he made and the wireless network. The Times kept Ali in place. “A CEO with military exploits” is the consensus among the old Ali people.
Zhang Yong has worked in Ali Group for 16 years. He has seized the general trend of consumption upgrades in the past, allowing Ali Group’s annual sales to exceed one trillion U.S. dollars, and accumulated hundreds of billions of dollars in cash. It once became the company with the highest market value in China and brought huge returns to shareholders. It was also during his tenure as the CEO of Ali Group that Ali ignored the changes in the consumption situation, and its challengers grew rapidly and formed an imminent threat.
Just like an investment banker felt when he saw today’s news, the end of Zhang Yong’s curtain represents the end of the era of Internet consumption upgrades (new retail, online shopping, O2O, etc.).
Consumption upgrade, Zhang Yong’s success and dilemma
Zhang Yong joined Alibaba in 2007, starting as CFO of Taobao.com, and took over as CEO of Alibaba Group 8 years later. In the eight years before becoming CEO, his most significant contribution was the establishment of Tmall, which made brands willing to sell goods and advertise on Ali.
After taking over as CEO, Zhang Yong promoted the establishment of a “big and middle platform” to allow various businesses to share data and technology, trying to make the Ali Group work together to fight against the enemy. He himself has also become a gathering point for decision-making, and he always does it himself. At the busiest time, he received direct reports from more than 30 people, and at the same time took care of business models and teams such as online retail, offline supermarkets, online wholesale, logistics, and cloud computing. Genes are a whole different business.
In the past 8 years, Ali Group has roughly continued Tmall’s previous successful strategy and further bet on consumption upgrades:
- Tmall has captured the international brands that flocked to Alibaba after its IPO. For a long time, foreign brands such as Apple, Uniqlo, and L’Oreal, which carefully control their channels, only opened online stores on Tmall.
- Acquired Intime and RT-Mart, hatched and invested heavily in Hema, trying to integrate e-commerce and offline retail, build “new retail”, and capture the most frequent fresh food consumption in life.
- Acquired Ele.me, invested in O2O, and entered every market where Meituan is located to meet the consumption needs of the new middle class.
Cainiao invests in logistics, Ele.me delivers food, and Tmall sells branded goods. All the big investments of the Ali Group have a common expectation – as the economy develops, more Chinese people will become rich and willing to spend more Get better goods and services.
When Taobao Travel changed its name to Fliggy in 2016, the announced brand positioning was “mainly focusing on young people’s overseas travel”. In 2017, Zhang Yong and Ma Yun went to Hema to explore the store. King crab, Boston lobster, and black hair pork were placed on the table.
Before 2018, Ali’s profit scale and growth rate continued to increase and stabilized at more than 20 billion yuan in a single quarter. At that time, people’s book assets expanded rapidly in the wave of rising housing prices, their consumption desire was greatly stimulated, and the consumer confidence index climbed at an unusually steep slope. In the routine questionnaire survey conducted by the central bank at the end of 2018, 28.6% of the respondents tended to consume more, a record high since the financial crisis.
Under such an environment, it seems reasonable for China’s largest online retailer to pursue consumption upgrades and enter fresh food retailing. However, after 2018, with the Sino-US trade friction and the three-year epidemic, consumption upgrading has gradually turned into consumption differentiation. A small number of people are not affected and continue to buy luxury cars, LV and Hermes, but the so-called middle-class consumer group has not continued to grow. People have shifted from longing for a better and more expensive lifestyle to cheap and practical consumption.
“New retail” quickly ran into trouble. “New retail” is easier to reach consumers through offline entities, but it also needs to pay higher costs than e-commerce, and can only wait for the upgrade of consumption power.
Hema was founded 8 years ago, invested tens of billions of yuan in subsidies, opened stores, and built a supply chain. It still sells higher quality, but it is more expensive than vegetable markets and ordinary supermarkets. In 2022, Hema’s revenue will be 55 billion yuan, accounting for less than 1% of Ali’s GMV, and it has just begun to turn losses in recent quarters. The transformation of RT-Mart and Intime has had little effect.
The industry structure of e-commerce has also changed due to the consumption environment. When consumers prefer cheap alternatives, when merchants have a backlog of inventory and are looking for clearance channels, the extremely low prices that Pinduoduo has always pursued are even more attractive.
Ali noticed this fast-growing threat when Pinduoduo went public in 2018, ranking it as the number one competitor above Meituan and JD.com. In 2019, Jiang Fan, then president of Tmall Taobao, integrated products such as Juhuasuan and Tiantian Special Sale into one entrance, focusing on low prices. A Juhuasuan employee at the time said, “It’s just to play Pinduoduo.” But Tmall and even the entire Taobao app are already upgrading consumption at this time, and it is impossible to reserve the best position for low-priced products.
No matter how successful Ali’s consumption upgrade is, it will be difficult for it to turn around and face Pinduoduo. Brands don’t want the clearance of discounted out-of-season products to affect their new product sales. Offline, they let the Ole discount store open dozens of kilometers away from the directly-operated store. Online, they sell more cleared goods on Pinduoduo, and they don’t want cheap goods to affect the sales of Tmall Future Ship Store.
In the past, Ali Group would decisively block all potential competitors, whether it was large channels such as Baidu and WeChat, or traffic aggregators such as Meilishuo and Mogujie that had grown up on the platform, even if it affected sales growth. After the listing, Ali Group’s business has more connections through the middle office, but they are also willing to cooperate with the group’s long-term competitors for short-term performance.
After the outbreak of the epidemic in 2020, Byte established the e-commerce business department, clearly listed e-commerce as one of the main commercialization methods, and began to win over the top-ranked merchants on Taobao and Tmall. However, Taobao still signed an annual frame with Douyin and used Douyin to divert traffic. Taobao has sold more products in several years of cooperation, but it has also used its complete supply of goods to help Douyin cultivate users’ consumption habits. Now Douyin e-commerce has banned third-party external links such as Taobao. 98% of the top 2,000 brands in terms of sales on Taobao and Tmall also sell on Douyin.
In 2019, Pinduoduo’s GMV just exceeded 1 trillion yuan, only 1/7 of Ali’s; at that time, Douyin did not have its own e-commerce, and it was Ali’s sales channel. Three years later, Pinduoduo’s GMV exceeded 3 trillion yuan, and Douyin’s e-commerce GMV exceeded 1.6 trillion yuan. The GMV of the two companies is equivalent to more than half of Ali.
The new CEO, Wu Yongming, does not only need to manage a holding company
In late May of this year, Ma Yun called a meeting of the business leaders of Taotian Group. At the meeting, Jack Ma directly pointed out that “Ali has not innovated for ten years.” “Who is Ali? Focus on Pinduoduo and Douyin. Why should Ali learn from (them)?”
He believes that the next opportunity is Taobao, not Tmall, and Ali e-commerce should “return to Taobao”.
Ali has a new goal, to regain competitiveness with products and means more suitable for the new environment, and to attract small and medium-sized businesses and low-priced products. This requires the top business leaders to have stronger management skills, product awareness and determination to reform the original model-in 2022, 70% of Taobao Tmall’s revenue will come from brand merchants.
In moments of corporate crisis, it is not uncommon for founders to return. Zhang Zhongmou, the founder of TSMC, Liu Jingzheng, the founder of Uniqlo, and Mike Dell, the founder of Dell, have all come back. Starbucks’ Howard Schultz stepped down as CEO for the third time this year. But Ma Yun has not chosen this path at present.
Ali also chose not to seek a CEO from the outside. The precedent is Baidu. Li Yanhong strongly invited Lu Qi to join Baidu as president and COO in 2017. He promised to give Lu Qi trust and authorization, and hoped that he would lead Baidu, which had fallen behind from the BAT, to make major changes and return to the top. But in less than 18 months, Lu Qi resigned from Baidu.
This generation of Internet companies, regardless of China or the United States, cannot find CEOs from the outside. The essence is that the founders and founding teams are still young, and their influence, personality, and every move have a profound impact on the company. Unless the founder is willing to really let go. However, for a large company like Ali that is in business decline, fierce competition, and internal forces are deeply intertwined, it is almost impossible to succeed in airborne CEO.
As a result, two core members who had worked in Ali in the early days of their business took over Zhang Yong’s position respectively.
Cai Chongxin, who took over the chairman of the board of directors of Ali Group, joined Ali in 1999, when Ali was just established for one year. He was in charge of several rounds of important financing negotiations in Ali’s early days, including the acquisition of China’s Yahoo in 2005 and the large investment of Yahoo. For a long time, Cai Chongxin was the chief financial and investment director of Alibaba Group until Alibaba went public in the United States in 2014.
Investment bankers told “LatePost” that Cai Chongxin is highly praised in the capital market because he is especially good at telling Chinese stories to overseas investors.
Wu Yongming, who took over as the CEO of Ali Group, is more senior than Cai Chongxin. He joined Ma Yun’s “China Yellow Pages” in 1996, and became a member of “Eighteen Arhats” three years later. He played an important role in the early research and development of several key products, and successively served as the chief technology officer of Taobao and Alipay.
After 2007, the focus of his work shifted to commercialization, making the prototype of Ali Mama, a money-making tool for Ali. After 2014, Wu Yongming gradually faded out of the front line of business, and more energy was invested in Yuan Jing Capital, which was founded in 2015. So far, he has invested in more than 130 projects, including ideal cars, Tuya Smart, Mobike, Xiaodian Technology and other star projects , There are also delisting targets such as Daily Fresh.
Many people in Ali believe that Wu Yongming took over as CEO of the group after being away from the front line for many years, perhaps not because of his outstanding ability, but because of the constraints of Ali’s internal selection, he is the only one who is the most suitable: deeply trusted by Ma Yun, has prestige, and can coordinate the overall situation. Have a sense of front-line business, understand products and technologies.
Except for Wu Yongming and Cai Chongxin, other partners appointed by the board of directors of the group or subgroup, such as Yu Yongfu, Zheng Junfang, Wu Zeming, etc., are often only responsible for a specific business and do not coordinate the overall situation. Peng Lei, one of the “Eighteen Arhats”, is definitely experienced, but has limited product and technical experience.
“Wu Yongming is the only one who meets these conditions.” An Ali source said.
Before the official announcement as the CEO of the group, Wu Yongming was already the person who served as the most directors in Ali’s “1+6+N” organization, including the chairman of the board of directors of the most profitable Taotian Group, and the director of Ali International Digital Commerce and local consumer service companies.
In the communication between Ali and investors this afternoon, an Ali executive analyzed that the current Ali Group CEO should not only think about investment or capital allocation, but also how to develop long-term and diversified business. People like Wu Yongming who have both operating experience and investment background are very suitable.
Another former senior executive of Ali also told us that under the “1+6+N” decentralization structure, the CEO will not be as important as before, but he will not only do holding things. The fighting spirit of the sector must also attract talents and seek breakthroughs. This process requires leaders to have sufficient vision and prestige.
He commented that the advantages of Wu Yongming are that he is young, energetic, has a broad vision in his past investment experience, and is very keen on the combination of technology and business. More importantly, he is one of Jack Ma’s most trusted people.
An insider said that after 2015, Wu Yongming would still express key opinions on various occasions within Ali, such as the organization department, partner meetings, and Fengqing Yang classes, and Jack Ma would also listen to them.
It is understood that after returning to Ali to take charge of the business, Wu Yongming will face three major tasks:
- The holding group will then become the back end of the six major sub-groups, and he and Cai Chongxin need to coordinate resources among them to ensure that the rights and interests of the Ali Group are also safeguarded;
- Let six subsidiaries and N companies continue to grow;
- Inside Ali Group, incubate and explore new models and new products.
Ma Yun himself once said that the roof should be repaired when it is sunny. And now it’s rainy for Ali. Wu Yongming wants to initiate changes in Ali’s most important and profitable business today. It is not enough to be the CEO of Alibaba Group or the chairman of Taotian Group. Perhaps broader changes are already in the pipeline.
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