Alibaba, China’s largest e-commerce giant and equivalent to Amazon, has so far reshaped the Chinese e-commerce market, as well as the country’s internet industry. The result is an impact on billions of customers in China. Alibaba is also conquering many of China’s consumption fields in the form of its digital payment platform, Alipay. On top of that, Alibaba’s investments and acquisitions have also contributed immensely to its leading position in other domains such as retail, cashless transactions, daily services, and others.
Let’s have a close look at Alibaba’s investments in three specific sectors: new retail, O2O (online to offline), and the sharing economy. We can learn more about Alibaba’s influence in more real-life cases, many of which we are already well accustomed to.New Retail
Ever since Alibaba raised the concept of “New Retail”, the company has sought to bring the concept to more businesses across various industries. In January, 2017, it took its first step in privatizing Intime Retail with USD 2.6 billion. Intime is a leading department store and mall operator in China. Alibaba said doing so would help pave the way for the digital transformation of old-school retail based on the “New Retail” concept in order to achieve its new model, which it calls OMO (Online Merges Offline).
A month later, Alibaba signed a partnership with Chinese retailer Bailian Group to explore new retail opportunities in the latest brick-and-mortar tie-up for the e-commerce giant. Under the agreement, the companies will develop new technology and take advantage of each other’s user data and technical resources to integrate offline stores, logistics, and payments platforms to boost efficiency. By the time Alibaba signed with Bailian, it had 4,700 stores across China.
Later that year, in what was part of a wider push into offline retail, Alibaba invested USD 2.87 billion for a major stake in China’s top hypermart operator, Sun Art Retail Group. The alliance targets opportunities in China’s USD 500-billion food retail sector, as Alibaba races to build big-data capabilities in the offline retail market where roughly 85 percent of sales are made.
Furthermore, Alibaba also backed Sanjiang Shopping Club with USD 290 million, purchasing about a third of the company’s shares, giving Alibaba standing as a strategic investor. Sanjiang is well known as a regional Chinese discount supermarket chain with more than a million loyalty members. Moreover, Alibaba even invested USD 4.6 billion in Chinese electronics retailer Suning Commerce Group as yet another step towards integrating online and offline shopping experiences.
By now, Alibaba has reached out into several retail sectors for food, vegetables, electronic gadgets, and so on. Meanwhile, all transactions are processed through its popular payment tool, Alipay.O2O
The battle between O2O enterprises has attracted attention from investors and customers alike over the past two years. Now the market has stabilized though, Meituan-Dianping and Ele.me having secured their leading positions in the food delivery market. Alibaba is now the largest shareholder of Ele.me, partly because food delivery services have became an indispensable service to our daily life.
Meituan and Dianping, China’s two largest on-demand platforms came together via a merger in 2016. In the early stages, Alibaba and Tencent both held stakes in the merged entity since Alibaba-backed Meituan and Tencent previously invested in Dianping. Alibaba first invested in Ele.me in 2016, and later it moved to sell its share of Meituan-Dianping in early 2017, leaving it free to double down on Ele.me to lead a USD 1 billion investment last year.
Ele.me consolidated its position as one of China’s largest food delivery platforms when it acquired rival business Nuomi from Baidu in August. Referring to its own delivery service, Koubei, Alibaba said that Koubei and Ele.me would divide their areas of work. Koubei will focus on restaurants, and Ele.me will focus on home delivery.
This makes the food delivery a perfect entry point for local life services and provides potential for competitors to take on Tencent. Alibaba of course, has competed with Tencent in various other tech sectors and will likely continue to do so here as well.
Additionally, Alibaba has an eye on how we use our spare time. Since creating content is not a particular strength of Alibaba, it is now entering these fields via acquiring and investments.
In 2015, Alibaba purchased YoukuTudou, which offers TV series, films, and other videos online intended to fill our spare time. Moreover, more and more users are listening to music via Alibaba’s Xiami Music, and are purchasing cinema tickets via Alibaba’s Taopiaopiao, and ordering programs from Damaiwang, which joined Alibaba in March, 2017.
Though Alibaba is not adept at creating original content, it is actively expanding its influence in consumption and entertainment fields.Sharing economy
The investors and participating startups of the bike-sharing industry experienced fierce competition last year. It even went further than the ride-hailing battle, and expanded into the food delivery “Subsidy War” as well. Off course, Alibaba didn’t miss the bike-sharing contest, and poured huge amounts of capital into the race.
During 2017, Alibaba’s financial subsidiary Ant Financial first invested in Ofo with USD 700 million for its Series D+ financing round in April, as well as its Series D+ round later in the same month. One month later, Alibaba doubled down with a USD 700 million funding to boost Ofo’s Series-E financing round. Just days ago, Ofo signed to mortgage its own bicycles in order to secure two loans worth USD 280 million from Alibaba’s affiliates.
Moreover, Alibaba’s Ant Financial contributed to the merge between Hellobike and its rival, Youon in October. Afterwards Ant Financial joined Hellobike’s USD 350 million Series D1 and its USD 152 million Series D2 financing rounds, taking on Tencent-backed Mobike.
As a tech giant, Alibaba is not only an e-commerce platform for online businesses, but also impacts all aspects of our daily life in ways we have summed up: food retail, electronic products consumption, entertainment, intelligent transportation and so on. Now we can complete most of our daily tasks and activities with Alipay, including purchasing a breakfast at KFC, renting a bike, and taking a bus or subway.
Tech giants like Alibaba and Tencent may eventually become a lifestyle as pervasive as water and air.
Kaikai Shi runs the Tech Financing columns for us. He holds a bachelor's degree in Biotechnology at Zhejiang University. His interests are in new technology and reading. Kai believes that new technology will change the world we live in, and is trying to engage himself in this process. Write to him: kai[at]alltechasia.com