The long-term race of major online retail platform providers positioning for global dominance made a potentially subtle turn last week. Jack Ma, the founder of China-based online services and E-Commerce provider Alibaba announced his pending departure. What does the announcement imply going forward?
Ma, who founded China’s largest online retail platform 19 years ago and serves as Executive Chairman, announced that he will hand over the reins in September of 2019 to planned successor, Daniel Zhang, the company’s existing Chief Executive Officer. Ma indicated that he wants to pursue added philanthropic interests and that he would remain on the company’s Board until Alibaba’s 2020 Annual Shareholder meeting.
In a letter to shareholders and employees, Jack Ma described his decision to step-aside as a sign that points to a company that relied on individuals to one that sustains itself on processes, systems organizational and talent management. He described Zhang’s contributions as follows:
“His analytical mind is unparalleled, he holds dear our mission and vision, he embraces responsibility with passion, and he has the guts to innovate and test creative business models.”
From our lens, that basically describes the go-to executive to get things done.
Whether that implies a new visionary remains to be observed.
Zhang is noted to be an accountant by training and a workaholic by nature, putting in long work days including weekends. He has been Alibaba’s chief operating officer since 2015 and is credited to aide efforts to sustain current explosive growth.
He joined Alibaba in 2007 as the CFO of Taobao, the then E-commerce web site, and later led the transformation of Tmall to what the Taobao Global platform is now. According to reports, Zhang was further the key architect behind Alibaba’s ongoing new physical retail initiatives that integrated online and physical retail fulfillment capabilities, along with turning Singles Day into a national online shopping holiday.
International business media has been quick to note that while Alibaba has had a formal succession plan in-place, there hasn’t been a cohesive business model to build upon. Rather there have been a number of various broad-based initiatives, external investments and seed monies invested in different areas of finance, added content or technology Cloud services.
Many note that the company’s business model remains primarily anchored as a marketplace intermediary, selling ads, matching sellers, and buyers, offering financial services, and added content. The consequence, similar to Amazon’s prior early performance has been that operating margins have been falling rather than rising.
Alibaba has further aggressively invested in logistics and last-mile fulfillment capabilities, primarily through its subsidiary, Canaio. As we all know by now, this is an area that continues to be expensive as order volumes rise, particularly during peak periods. Last year’s Singles Day annual shopping event resulted in over $25 billion in online sales in a single 24-hour period. Added global-based online customer fulfillment expansion implies increased scale in logistics, transportation, and other services, whether owned or contracted.
Another Potential Factor
The Wall Street Journal reported today that Ma utilized an artificial intelligence forum held in Shanghai to perhaps send a further subtle message regarding his planned departure, namely that technology markets should be allowed to oversee how new technologies are developed for commercial purposes.
According to the report, some observers believe that Ma’s announced departure has something to do with the ongoing fallout of the Chinese government’s increasing hold on that country’s existing Internet and E-Commerce companies. In recent weeks, the government has reportedly tightened its grip on videogame providers, cracked down on financial services providers such as Ant Financial on protections of personal data, and inserted increased oversight of ride-sharing services.
Some can likewise interpret such efforts as a natural extension of regulatory control of booming markets.
What It Means
From a Supply Chain Matters lens. the announcement of Jack Ma’s pending departure from China’s Internet and E-Commerce sector is perhaps a sign of increased friction that is occurring from unbridled, enthusiastic, and perceived deep-pocketed tech companies where the sky may be endless, to the pragmatic notions that growth requires a detailed five-year plan.
There should be little doubt that E-Commerce, online and Cloud-based services are going to be a component of China’s strategic planning for future domestic and global economic growth. Because some of these tech companies are listed in global equity markets, there will likely be growing frictions on strategy and direction.
Where all of this leads to in any race for global retail platform dominance can perhaps take on new dimensions.
While time will tell the real story, Jack Ma’s announcement is indeed a signpost of pending changes
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