Jiang Fan "went to sea"

Image source @ Visual China

Wen | Pai Finance, the author | Chen Qingzhi Editor| Pai Gongzi

A few days ago, the enterprise check APP showed that Jiang Fan no longer served as the legal representative, chairman and general manager of Zhejiang Taobao Network Co., Ltd. and Zhejiang Tmall Network Co., Ltd., and no longer served as the legal representative and chairman of Alibaba Xunxi (Hangzhou) Digital Technology Co., Ltd. In other words, Jiang Fan no longer serves as the legal representative of any Taozhi company.

In fact, this change is not unexpected. As early as last December, alibaba group chairman and CEO Daniel Zhang issued an internal letter announcing the upgrading of the diversified governance system. In terms of overseas business, it integrates the two overseas businesses of AliExpress and International Trade (ICBU), as well as a number of subsidiaries such as Lazada for overseas markets, forming an "overseas digital business sector" and increasing the "globalization" strategy, which is managed by Jiang Fan, former president of Tmall Taobao.

For Jiang Fan, this is undoubtedly a huge challenge, and it is also the best opportunity to prove his strength again and achieve a reversal of wind evaluation. This battle not only determined the upper limit of Ali's future development, but also determined the gains and losses of Jiang Fan's own position as "prince" to a certain extent.

01 Ali must go to sea

Alibaba may never have had such a strong desire for traffic and growth as it does now.

The just released Ali's third quarter of fiscal 2022 (October 1, 2021 to December 31, 2021) financial report shows that Ali's operating income in the quarter was 242.58 billion yuan, an increase of 10% year-on-year; operating profit was 7.068 billion yuan, down 86% year-on-year, as Ali's profit pillar, the revenue growth rate of Taoshi e-commerce fell to 10%. Even in the "Double 11" support of the e-commerce peak season, the customer management revenue of the Tao system increased by negative 1% year-on-year.

Of course, such data comes from antitrust supervision, but more because of the depletion of domestic traffic dividends. According to Alibaba's financial report, Alibaba's Chinese market consumers increased to 979 million as of December 31, 2021, and it is expected that the target of 1 billion annual active consumers in China by the end of this fiscal year will be completed as planned. But 1 billion consumers also mean that domestic Internet users, in addition to the old, weak, sick and disabled, have almost all become Ali's consumers, and if they want to take a step forward, they can only exchange high investment for low growth.

According to the financial report, the revenue of the Commercial Part of China in the quarter was 172.2 billion yuan, and the core business accounted for 71% of the overall revenue, an increase of only 6% year-on-year. In this part of the business, the GMV of Taobao and Tmall only achieved slow growth and only achieved single-digit data growth.

Not only that, but the grab of new competitors such as Pinduoduo, Douyin, and Kuaishou has also made Alibaba feel threatened. In February this year, Kuaishou E-commerce issued an announcement that due to the change of the cooperation agreement between the third-party e-commerce platform and Kuaishou, from 0:00 on March 1, 2022, Taobao Alliance, Jingdong Alliance, etc. will not be able to release products in the Kuaishou live broadcast room. Earlier, Kuaishou had already rejected Ali to get more shares.

Exactly the same story, in fact, as early as 2018 on Douyin has already happened once, at that time, just involved in e-commerce Douyin has begun to plan the layout of its own e-commerce ecology, until 2020, Douyin began to build a closed-loop e-commerce inside, cut off the third-party source of goods in the live broadcast room of the external link, increased the support for Douyin's own businesses. By the end of 2021, Douyin directly pulled out the Douyin box App, aiming directly at Taobao.

The story of Pinduoduo and Jingdong is quite well known to the outside world, the end of the traffic is e-commerce, all these players are standing on the opposite side of Taobao, when the tool attributes are full of Taobao, in the face of new forms of social e-commerce, distinctive content e-commerce, most of the time can only retreat again and again.

Traffic peaked and new rivals rose, and Taobao's life in China was not good. According to the GMV and public data released by various e-commerce platforms, in 2021, the market share of Taoshi will be 52%, the market share of JD.com, Pinduoduo, Douyin and Kuaishou will be 20%, 15%, 5% and 4% respectively, and the remaining 4% market share will be divided by Suning Tesco, Vipshop, Dewu and other platforms. In 2015, Tao also accounted for 75% of the domestic e-commerce market, and in 2018, this figure was 70%.

In fact, this problem has long been on Ali's table.

As early as 2010, Alibaba began to shift its attention overseas, successively establishing AliExpress and investing in overseas e-commerce companies such as Lazada. In terms of strategy, in 2014, Ali also proposed three major strategies of globalization, rural e-commerce and big data, and reaffirmed it as globalization, domestic demand, big data and cloud computing in 2019. No matter how it changes, globalization is a strategy that Ali has never changed.

However, from a practical point of view, of the three major strategies, globalization is still the weakest link. According to financial report data, Alibaba's overseas market consumers were 301 million as of December 31, 2021, and it is still far from its vision of serving 2 billion global consumers. However, Ali has not given up its vision for overseas business, and Daniel Zhang also said at the 2021 fiscal year results release call that he hopes to "double the base of overseas consumers as soon as possible in the next few years."

Now, this heavy responsibility fell on Jiang Fan's shoulders.

02 Arima loses his front hoof

For Ali now, the international business is indeed a bit of a mess. According to the latest financial report, in the fourth quarter of 2021, Alibaba's international retail business (including Lazada, AliExpress, Trendyol and Daraz) had Q4 revenue of 11.606 billion yuan, an increase of 14% year-on-year and 11.86% quarter-on-quarter.

In the long term, Alibaba's international retail business has exceeded 10 billion yuan in revenue for 3 consecutive quarters, but this still cannot hide the general dilemma of the overall growth rate of the business. The data shows that the business growth rate in this quarter is the worst quarter of 2021, directly from 77.39% in the second quarter to 14%, down 63.39 percentage points.

This situation is believed to be difficult for Ali and investors to accept no matter what.

Since 2010, Ali's actions to go to sea have not stopped, investment, acquisition, self-construction... Ali's determination to deploy overseas is getting stronger and stronger. Up to now, the international retail business mainly includes subsidiaries such as Lazada, AliExpress, Trendyol and Daraz, of which AliExpress focuses on the Russian and European markets, Lazada focuses on Southeast Asia, Trendyol is the largest e-commerce platform in Turkey, and Daraz focuses on operating in Pakistan and Bangladesh south Asian countries.

Among them, the one that was once most optimistic and potential by Ali was Lazada in Southeast Asia.

At present, the Southeast Asian market has more than 600 million people, of which 350 million are mobile-based Internet users, the population base is huge, and the population under 30 years old is more than 50%, the young population structure and the rapid development of the economy are conducive to the development of the online economy. At the same time, its e-commerce penetration rate is only 11%, and the future space is huge. As a result, some refer to Southeast Asia as "half a China a decade ago" – just as China was a decade ago, with a population size close to half a China.

In 2012, Lazada was founded in Singapore in such a hot land, at the beginning of its establishment, Lazada advertised in Indonesia, the most important market in Southeast Asia, and for a time the streets of Jakarta were lazada advertisements, and people knew for the first time what online shopping was. It also learned from Alibaba, launching the online shopping festival Harbolnas in Indonesia (December 12), and just three years later, Lazada became the largest e-commerce platform in Southeast Asia with a $1.3 billion GMV.

Just when Lazada began to fall into the trouble of growth, the "savior" arrived, holding $2 billion, Ali directly controlled Lazada twice in two years, followed by Ali's many years of e-commerce operation experience, capital and technology.

After the holding agreement was reached, Ali immediately sent a technical team of more than 300 people to fully upgrade Lazada's technology platform to Alibaba's technology engine through the "Voyager" project, including wireless terminals, search links, users, shopping carts, orders, refunds, fulfillment and other systems, and migrated all the data to the new system, realizing the reconstruction of Lazada's entire site.

Of course, Lazada is the largest of Alibaba's e-commerce layouts, but it is not the only one. In recent years, with reference to the domestic e-commerce system, Ali has also invested in Indonesian e-commerce companies Tokopedia, Paytm Mall and Bukalapak, as well as the Vietnamese online shopping platform CrownX; in the logistics field, Ali has invested in Singapore logistics companies NinjaVan, SingPost Singapore Post and Thai logistics company FlashExpress, and Cainiao Network has led the investment in CWF; in the payment field, Ali has invested in Singapore V-Key, India's Paytm, Thailand's Ascend Money, etc., Ant Financial invested in Myanmar's Wave Money.

Similar to many Domestic Ali acquisitions, Ali, which has a strong desire to control, began to send his own people to various key positions as soon as he gained control, and in March 2018, Peng Lei, CEO of Ant Financial Group, known as "Ali's sister", became the CEO of Lazada, and at the same time, a total of hundreds of former Ali middle-level cadres followed Peng Lei to Lazada.

The first thing Peng Lei did when she came to Lazada was to clean up the accounts, even at the expense of suspending promotion, seeing the expansion of opponents; the replacement of personnel in key positions brought about the departure of Lazada's co-founders and chief marketing officers and the panic of the people up and down the company; the change of technology made Taobao's functions accumulated for more than ten years such as through trains, coupons, detailed decoration, and customer service IM tools quickly launched, but it also made it difficult for Southeast Asian sellers to adapt for a while.

Under the combination of various factors, Lazada's work once came to a standstill, and Shopee, a latecomer with Tencent background, lost no time in seizing the opportunity to achieve a counter-overtaking.

In March 2018, Shopee, led by CEO Feng Zhimin, became acutely aware of Lazada's chaos and began to take the initiative to attack. The first step is to advertise, inviting filipino national treasure boxer Pacquiao and Malaysian national singer Sitie Noharisa, etc.; the second step is "ultra-low price" subsidies and social network penetration, and the goods are even more than 10% cheaper than Lazada; the third step is to implement thorough localization.

According to a report by iPrice, a Southeast Asian e-commerce price comparison and data website, since March 2018, the number of visits to Shopee and Lazada has shrunk from three or four times to one very close. By the second quarter of 2019, Shopee had overtaken Lazada across the board, and in Indonesia, Southeast Asia's largest economy, Lazada had fallen behind Shopee and tokopedia in local markets, ranking only third.

At present, the struggle between Southeast Asian e-commerce companies is still continuing, and this state still plagues Lazada and Ali. But Lazada, which has lost the lead, has had a hard time pulling back a round, and in the third quarter of 2021, iPrice's report data shows that Shopee's monthly visits in Southeast Asia are firmly in the first place, and it is already more than 4 times that of second place Lazada.

Reflected in the financial report, in the fourth quarter of 2021, the outside world can see that the overall orders of Ali's international retail business increased by about 25% year-on-year, ali explained that it was mainly affected by Lazada and Trendyol recorded a year-on-year increase of 52% and 49% respectively. But even so, Alibaba's international retail business still recorded only 11.606 billion yuan in the quarter, an increase of 14% year-on-year and an increase of 11.86% month-on-month.

This can only show a problem, Ali's overseas investment is far from over, the low-price competition strategy of input for the market has brought considerable order growth to Ali, but it has not brought corresponding revenue and profits, and the price war is still the main means of competition between Ali and opponents.

But it has to be pointed out that new opponents are bringing new challenges to Ali.

03 Jiang Fan's test and chances

Just when Lazada was caught in a protracted struggle and Jiang Fan was about to go overseas, ali's overseas business, AliExpress, another leg, began to transform and change.

According to the data, AliExpress is a cross-border B2C platform to help global brands go global, launched in April 2010, born from the Ali B2B business group's cross-border B2B platform Ali International Station, in 2013 completed the evolution from C2C model to B2C model, by April 2021 cumulatively exceeded 150 million users, the main markets are Russia and Europe.

From November to December 2021, AliExpress released a number of adjustment policies, including prohibiting individual merchants from settling in; raising the entry threshold for large clothing categories, implementing invitations to settle in or qualified professional sellers; and increasing assessments, real-time assessment of stores, removal of zombie stores, and sales assessment of stores for more than one year.

In addition, AliExpress has also strengthened the assessment of merchants in categories such as large clothing. The first assessment date is January 14, 2022. According to media news, taking the large clothing category as an example, the old merchants who have opened the store for more than 2 years need to have an annual transaction volume of more than 10,000 US dollars; while the new merchants who have opened a store for more than 1 year but less than 2 years need to have an annual transaction volume of more than 5,000 US dollars.

There is no doubt that AliExpress is now moving towards "Tmall" by sacrificing small sellers and guiding brand merchants.

You know, aliexpress's initial success stemmed from the seller taking an ID card to open a store directly, and since then a benign situation of sellers and buyers circulating with each other has been formed, but it is also the same as the early Taobao - fake goods are rampant.

In order to change this situation, as early as 2016, AliExpress has repeatedly copied Taobao's experience to try brand transformation, the most recent one was in early 2020, AliExpress through the "reduced commission" way, to encourage more European small and medium-sized enterprises to settle on the platform, but some big brands are not cold.

At that time, AliExpress had approached well-known brands such as Mango, Benetton and Cortefiel's parent company, Spanish fashion group Tendam, hoping that these big brands would be able to enter the platform, but the results were not satisfactory. An executive at a major fashion company claimed that their brand needed a more "aspiring playing field", apparently believing that moving into AliExpress was detrimental to its brand image.

Whether the aliexpress transformation can be successful this time is undoubtedly a major test for Jiang Fan. Of course, the tests jiang fan faced were far more than that.

In April 2010, Jiang Fan, who had just graduated, founded the mobile developer service platform Youmeng, and three years later, Ali acquired it and Jiang Fan joined Alibaba. In 2013, Ali proposed "all in wireless", and Jiang Fan was entrusted with the heavy responsibility of Daniel Zhang - taking over the mobile phone Taobao and bringing Ali from the PC era to the mobile Internet era. In 2017, Jiang Fan led the Taobao product team to complete the integration of Taobao and mobile phone Taobao, and served as the president of Taobao that year, and less than two years later, Jiang Fan also served as the president of Tmall.

Jiang Fan's strength is obvious to all, according to public media reports, Jiang Fan has the title of "Ali Traffic King" within Ali: in 1 year, the daily active life of mobile phone Taobao has increased from 30 million to 110 million, and its 2016 layout of Taobao live broadcast has brought new growth points to Taobao traffic and sales.

However, Ali's traffic king will inevitably compete head-on with another traffic king, TikTok, in overseas markets, compared with AliExpress and Lazada, which is Jiang Fan's biggest challenge.

According to media sources, TikTok Shop (small shop) has recently added thai, Vietnamese and Malaysian sites, which have been opened to merchants. According to the registration guidelines for merchant centers, as in the previous Indonesian and UK small shop policies, the newly added Thai, Vietnamese and Malaysian small shops only accept local registered merchants. Cross-border business accepts Chinese mainland and Hong Kong merchants, and is currently facing the UK market.

Compared with Lazada and AliExpress, which have strong tool attributes, the key advantage of TikTok e-commerce is its natural and self-contained huge traffic. Last December, Cloudflare, a cloud infrastructure company that tracks internet traffic, released data showing that TikTok was the world's most visited internet site in 2021.

The huge traffic will naturally attract the attention of many brand merchants, and the fast fashion brand SHEIN has received tens of billions of high-intensity exposures on TikTok through a series of cooperation and activities. The next story, of course, is monetization. Domestic vibrato has actually been rehearsed, vibrato from 2018 began to get involved in e-commerce, in 2020 to achieve about 500 billion GMV, according to the official data of vibrato, from January to September 2021, vibrato e-commerce GMV increased by 7.9 times year-on-year, is growing at a rate far beyond Taobao, Pinduoduo.

Not only is the traffic crushed, Tiktok's overseas e-commerce also shows a different side from the big factories going to sea. One TikTok employee once said that their team first recruited employees with an international background, followed by extensive field research. They do not rely entirely on the research reports and data of third-party data companies, but do the research of each user in the field.

On the other hand, Lazada and AliExpress, which bear the heavy responsibility of Ali to go to sea, are still in the stage of copying domestic experience.

An industry insider engaged in the overseas business once said that many giants go to the sea team lacks the understanding of the local people's culture and environment, and most of them go to the new market by quickly throwing money and laying resources, if there is no obvious result, they will quickly change their strategies, and there are very few deep ploughing to investigate the market. "And the big factory only KPI on heroes, strict assessment, a period of bad performance will shrink back, resulting in swinging play." A cross-border e-commerce veteran said.

From Peng Lei before that to successor Lazada co-founder Pierre Peng Long, Alibaba's former B2B business group chief technology officer Li Chun, and then to Dai Shan, Lazada has never cured the chronic disease of empiricism. To what extent can Jiang Fan change this situation? At the same time, in the face of the impact of TikTok with the momentum of traffic, how will Jiang Fan be hard-hitting and recreate his own traffic myth?

These are the most difficult problems in front of Jiang Fan.