A year after the change, Ali is betting up
It's been the first anniversary of the change, and Ali is undoubtedly still in a period of adjustment.
This can be seen in the change in the stock price.
On March 28, 2023, Daniel Zhang, then chairman and CEO of Alibaba, issued an all-staff letter to launch the "1+6+N" reform. The previous day's closing price was $86.12, while on March 27, 2024, the closing price of Alibaba US stock was $71.59.
Alibaba's U.S. stock price
The biggest change in Ali's 24-year development history began with Daniel Zhang's "self-denial" "dismantling the middle platform", but was then revised to "strengthen the core" by Wu Yongming, who succeeded him.
JD.com, a typical case before a successful spin-off, also saw its stock price fall from $39.78 to $27.23 on the first anniversary of Alibaba's transformation. The decline is bigger than Ali's.
Douyin, Pinduoduo, and even Amazon internationally, are all centralized.
This is the reason behind Ali's big turn in reform.
Standing at the starting point of the first anniversary, what are the "new" forces within Ali?
1. Core business
In addition to the six major business groups such as Alibaba Cloud, Taotian, Local Life, Cainiao, International E-commerce and Big Entertainment, "N" companies, including Freshippo, Fliggy, Antelope, etc., are allowed to "fend for themselves".
But Ali now does not mention "1+6+N" both internally and externally.
Because the veterans of Alibaba, who have returned to power, obviously believe that such reforms are not focused enough, Wu Yongming proposed on the earnings call on November 16, 2023 that "Alibaba will sort out the priorities of existing businesses and define core and non-core businesses according to market size, business model and product competitiveness." ”
At that time, this left a question for all investors and Alibaba employees: what is Alibaba's core business?
The answer soon came out: Wu Yongming, who is also the CEO, Taotian and Alibaba Cloud, as well as the first batch of four strategic innovation businesses he mentioned, 1688, Xianyu, DingTalk and Quark, are undoubtedly the core.
Do the remaining members of the Big Six still have core businesses?
By all indications, the international digital business group is too.
Alibaba's latest financial report for the fourth quarter of 2023 shows that international business, with a year-on-year increase of 44% in revenue, is undoubtedly the biggest bright spot for the entire group.
After the implementation of the core focus strategy, Alibaba first restored the free flow of personnel between Taotian and the international digital business group.
This is actually to facilitate Jiang Fan, who has not long been Ali's youngest partner again, so that he can more freely take away people who are easy to use from Taotian.
Taotian is Jiang Fan's old army. He became the president of the company in 2019 before the merger of the two, and worked until 2022.
In the past two years, Wei Meng, the former head of Taobao Shopping, Li Guangguang, the financial head of Taotianyuan, and Chen Xi, the head of Taotianyuan Tmall clothing, have all gone to sea to defect to Jiang Fan.
In addition to the international business group, Cainiao, which previously submitted a listing application on the Hong Kong Stock Exchange, was also officially announced as a "core business" on March 26.
At the same time, the announcement withdrew Cainiao's listing application and announced the acquisition of shares of minority shareholders and employees for $3.75 billion, relieving the previous public opinion crisis.
Whether it is the domestic business that is slowing down, or the international business that represents the future, rookies have to rely on the development of Ali e-commerce.
Attached to the core, it naturally becomes the core business.
At the same time, judging from the information officially revealed by Alibaba, it is AI that runs through these core businesses.
In November last year, Wu Yongming, who attended the earnings call for the first time as the CEO of Alibaba Group, announced three major directions for the next decade: technology-driven Internet platform business, AI-driven technology business, and global business network.
When Ma Yun surpassed Ali in the market value of Pinduoduo at the end of November last year, he also mentioned on the intranet that "the era of AI e-commerce has just begun".
However, this round of AI based on large language models can indeed improve productivity, but the business model is hardly said to have run through, and there is a lack of killer C-end applications.
AI does have the potential to improve merchants' ability to produce e-commerce content and match consumers more accurately. But is this improvement enough to hinder Pinduoduo's progress?
As a result, in addition to technology, e-commerce, as the core of Ali's core, has also launched a comprehensive battle for traffic.
At the end of last month, 1688 launched a comprehensive entry into Taobao to compete for C-end traffic; Taobao Live announced at the content e-commerce conference on March 28 that live broadcast e-commerce users increased by 100% and GMV increased by 80%; Xianyu opened an offline store, and Zhang Xiaohui entered Taobao......
Only when e-commerce is stabilized, Ali can be stabilized.
2. Same origin and different lives
What about beyond the core?
Yu Yongfu, chairman of Local Life Group and CEO of Ele.me, will retire on March 31, putting a question mark over Alibaba's core identity as a local life.
Wu Yongming also announced the four new chairman and CEO candidates of Ele.me and AutoNavi.
The first and second positions of AutoNavi are still the original Liu Zhenfei and Guo Ning, but Fuzheng has become the chairman and CEO.
Both of them are post-70s, which does not seem to be in line with Ali's current trend of employing younger people. But under the leadership of Yu Yongfu, they first surpassed Baidu to become the first place in the map market, and then took advantage of the short time window brought by regulation to win 30% of the market share of the online car-hailing market in a year and a half.
Left: Didi Taxi, Right: AutoNavi Taxi
This fully shows that Wu Yongming still attaches importance to combat effectiveness.
Therefore, AutoNavi should be a well-deserved core business.
It's hard to say if you're hungry.
Although Ali denied the rumors of "selling Eleme" in its latest earnings call on February 7 this year, the wording is just "a very important asset in the near field", which sounds far from the "core".
Although it is the two core businesses of the local life group like AutoNavi, the market position of Ele.me, which has been continuously suppressed by Meituan, is really embarrassing.
From the perspective of personnel appointment, the new CEO Han Liu was born in 1988, which is in line with the trend of youth. However, Chairman Wu Zeming is also the CTO of Alibaba Group, the CTO of Taotian Group and the CTO of Local Life Group.
The core business that Ali really wants to focus on is unlikely to make such a decentralized deployment.
Take a look at Wu Yongming, CEO of Alibaba Group, who is also the chairman and CEO of Taotian, as well as the chairman and CEO of Alibaba Cloud, and then look at Jiang Fan, who is also the chairman and CEO of the International Digital Business Group.
That's what a core business should look like.
Chen Weiye, COO of Ele.me, was also transferred to Taotian by Wu Yongming at the end of last year, responsible for Taobao Business Division, Taotian Merchant Platform Department, and Customer Satisfaction Department.
The cadres will give priority to supplying Taobao, and the status of Ele.me can be imagined.
3. Return to the Internet
Fliggy, which originally belonged to one of the three major businesses of the local life group's "Flying High", was classified as "N Company" when it was "split into six" a year ago.
This is because Fliggy has decided to shift from matchmaking to fulfillment services.
Determination is good, after all, Meituan's case of marginalizing 58 in the field of local life shows that light is better than serious.
The reason why Fliggy, or Ali behind it, has not been able to make this decision for a long time is because it needs to add more resources to do heavy work.
It's good to do heavy work, but it's better not to do it if you add it and can't do it.
Looking at it this way, Ali's current strategy is in response to Jack Ma's proposal to "return to the Internet".
Ali N Company, which has a heavy business, also has Freshippo.
Hema founder and CEO Hou Yi and Yu Yongfu also left.
The new CEO, Yan Xiaolei, turned out to be the CFO of Freshippo, and his task was to reduce costs, increase efficiency, and pursue profits. Although Hema has debunked rumors of a sale to COFCO, according to LatePost, Hema has been actively bringing in new strategic investors.
Hema is the benchmark of Daniel Zhang's new retail, and even after the implementation of the operating responsibility system in 2021, it still receives a lot of resource support from the group, and part of the operating costs and procurement costs will be subsidized.
When it was announced early last year that Hema would go public in the next six to 12 months, Ali had been working on the project for eight years.
Now, it seems, the quest is far from over.
In order to compete with Sam's, Hema reduced SKUs from more than 5,000 to more than 2,000, and began piloting a 20% price reduction for all online and offline categories in Beijing, Nanjing and Changsha from February 18.
But on November 16 last year, Alibaba's financial report announced the suspension of the Hema IPO.
The biggest reason behind this is that Freshippo's current valuation has dropped from $10 billion in 2022 to $3.7 billion.
In the local retail space, Alibaba's power is quite fragmented. Previously, Taoxianda and Taocaicai merged to form Taobao Buy. But Tmall Supermarket and Taobao Grocery in Taotian, AutoNavi, Eleme, Koubei in the local life group, and Hema are all in this crowded market.
If integration cannot be achieved, it is not impossible for Hema to be abandoned as a non-core business. After all, at the latest earnings conference, Alibaba said, "If you exclude businesses with physical retail operations such as Sun Art Retail, Hema and Yintai, Alibaba will perform better in terms of revenue and adjusted EBITA margin."
According to Tiger Sniff, Sun Art Retail and Yintai are both on Alibaba's sale list, and RT-Mart and Hema have indeed packaged and asked COFCO for a price.
Abandoning offline business allows Ali to travel lightly, and the reason why he is hesitant about Ele.me is related to trends. The fierce battle between Douyin and Meituan's local life seems to indicate that there is still an opportunity here.
In order to get this opportunity, it is necessary to do a good job of live broadcasting, and all this ultimately comes down to doing a good job in e-commerce.
And doing a good job in e-commerce depends on the bet of AI, if the effect is not good, it will lead the whole body, which is the price of all in.
What is certain is that Ali will usher in a new round of change.