Alibaba | Electric Thoughts in a Digital Era

The E-commerce Stepchild – Logistics

I have spent a large amount of time in 2020, researching and writing about logistics. In a recent project, I have had a front-row seat to see its strain on brands. The stepchild of e-commerce is not flashy and visible by consumers but can make or break customer perception. The final mile has an enormous impact on consumers’ experience, and in Q4 2020, it will become more critical.

Logistics is somewhat opaque currently, and in most cases, it can lead to many breaking points. Amazon has changed customer perceptions based on speed. On-demand startups such as Darkstore, FLEXE, and Flowspace also add complexity, which the customer does not see.

The sector is a low margin, capital intensive part of commerce that is due for innovation. It’s a topic that is not cool, nor does it get the attention it deserves.

Why I am changing my thesis on Chinese ecommerce

Over the last 18 months, I have been reading, researching and talking to ecommerce investors about China. Why? I am fascinated by the market as Chinese ecommerce is both unique and a look to the future.

China is unique

GDP growth

Economically China in my mind is bordering on a miracle. 6% growth consistently over 25 years which some years growing even more. I have realized that China has moved from being a factory based economy to a market that is reliant on consumption. The consumption has lead to the creation of businesses that are huge economically and only focused on creating wealth for their shareholders and the Chinese population. These businesses have to toe the line with the Chinese government.

If the GDP growth slows, Chinese consumption would have grown $2.3 Trillion by 2020.

Alibaba vs Amazon – 2014 Edition

When I wrote my first post on Amazon in which I looked at the competitors it will face; back 2012, I had 7 major ecommerce businesses that could destabilize Amazon’s domination in ecommerce:

Amazon is and still is it’s own biggest concern
Apple
Alibaba
eBay
Walmart
Rakuten
Regional players (Netretail, Ozon, MercadoLibre)

Fast forward 2 years and a variety of changes (global economic changes, investments and the rate of offline and online retail convergence) – the above list changes considerably. The growth in single global brand ecommerce businesses has grown remarkably primarily through the globalisation of ecommerce.

Let me be clear – I am of the opinion that regional ecommerce competition is a less of a factor now as the global competitors can at any time launch in a market. Global ecommerce businesses (Amazon, eBay, Rakuten etc) have the potential to invest significantly in a market through funds and staff.

The ShopRunner story – and why it is important

It is not often that an entrepreneur has a successful business twice. Most entrepreneurs have one major exit and then they become Angel investors. While they are building their business for the second time they either take money off the table from investors or the take their companies public. Michael Rubin in my opinion is one of the most unmentioned commerce entrepreneurs there is currently. However don’t let the lack of press coverage fool you – he is a serious heavyweight from Philadelphia.

Rubin sold his enterprise commerce business to eBay for $2.4 billion. GSI commerce as it was called then had some serious retailers as clients. eBay had a massive weakness in the enterprise space and fixed that by acquiring Magento and GSI Commerce.

Rubin pioneered an innovative pay-for-performance business model that fueled GSI’s organic sales growth, which he then complemented in recent years with 11 strategic acquisitions. GSI became one of the largest publicly-traded Internet companies, facilitating billions of dollars of merchandise sales for its customers, with 2010 revenues of $1.4 billion and more than 5,000 employees. As part of the transaction, eBay divested certain assets to Kynetic, specifically all of GSI’s online licensed sports merchandise business (Fanatics) and 70% ownership in Rue La La and ShopRunner.

Magento for me is the trojan horse for eBay as that business is used globally and has commerce partners in emerging markets. GSI Commerce was and still is the big success that Michael Rubin had. How he convinced eBay to spin ShopRunner, Rue La La and Fanatics into a new business (Kynetic) is worth a book. I hope Rubin decides one day to write a book..

Alibaba Names Jonathan Lu As New CEO, Replacing Founder Jack Ma

Yesterday, was a significant day in the history of Alibaba. Jack Ma announced to the world that he will be succeeded by Jonathan Lu Xaoxi. Does the new heir apparent seem to be a new unknown? I tend to think so but Lu is Ma’s choice and that speaks volumes.

Lu, is like Ma one of the few Alibaba executives that has experience and knowledge of all 25 Alibaba businesses (a brief summary of the Alibaba holdings is seen below). That is significant as he will need to manage all of these holdings after they were all realigned to be separate businesses.