Bumpy road

Says pure e-com­merce play­ers face daunt­ing ob­sta­cles, mov­ing to help them trans­form

China Daily (USA) - - FRONT PAGE - By MENGJING in Hangzhou mengjing@chi­nadaily.com.cn

Alibaba says pure e-com­merce play­ers will face chal­lenges.

In­ter­net gi­ant Alibaba Group Hold­ing Ltd said in a let­ter to share­hold­ers on Thursday that it saw pure ecom­merce play­ers to face “tremen­dous chal­lenges,” and in the face of that it was mov­ing to tap more growth by help­ing trans­form the busi­nesses in China and abroad.

Alibaba in­di­cated that its new group would carve out more growth by help­ing trans­form the tra­di­tional re­tail in­dus­try, which in the main­land is val­ued over $4.5 tril­lion.

China’s big­gest e-com­merce player said it is repo­si­tion­ing it­self as a ser­vice provider to build dig­i­tal and phys­i­cal in­fra­struc­ture for the fu­ture of com­merce.

This in­cluded work in the fields of pay­ment, lo­gis­tics, cloud com­put­ing, big data, mar­ket­places and a range of other ar­eas, ex­ec­u­tive chair­man Jack Ma said in the let­ter emailed to share­hold­ers.

“With e-com­merce it­self rapidly be­com­ing a tra­di­tional busi­ness, pure e-com­merce play­ers will soon face tremen­dous chal­lenges,” Ma said.

“This is why we are adapt­ing and it’s why we strive to play a ma­jor role in the ad­vance­ment of this new eco­nomic en­vi­ron­ment,” Ma added.

The Hangzhou-head­quar­tered com­pany has al­ready branched out to build new busi­ness pow­er­houses, such as cloud com­put­ing, entertainment and lo­gis­tic plat­forms, but the let­ter sent the first clear mes­sage that the e-com­merce gi­ant wanted a trans­for­ma­tion of the e-com­merce busi­ness.

Alibaba wit­nessed its fastest growth in the quar­ter ended in June, since its record ini­tial public of­fer­ing in New York in 2014. But the slow­ing econ­omy in China has none­the­less raised con­cerns about its growth mo­men­tum, as Chi­nese e-com­merce re­tail ac­counted for 73 per­cent of its rev­enues.

Sta­tis­tics from in­ter­net con­sul­tancy Analysys have shown that the over­all trans­ac­tions for the online re­tail mar­ket surged 33 per­cent year-on-year to 3.84 tril­lion yuan ($571 bil­lion) in 2015.

But the av­er­age an­nual growth of the mar­ket be­tween 2016 and 2018 is pred­i­cated to drop to less than 20 per­cent as the online shop­ping pop­u­la­tion in China closes in on reach­ing its ceil­ing.

Alibaba CEO Daniel Zhang said that the most im­por­tant op­por­tu­nity on the hori­zon is not grow­ing online sales in iso­la­tion, but rather in help­ing tra­di­tional re­tail­ers up­grade into a brand new re­tail model.

He said in a sep­a­rate let­ter to share­hold­ers that the 30 tril­lion yuan re­tail in­dus­try in China as a whole is ex­pe­ri­enc­ing a rad­i­cal dis­rup­tion driven by dig­i­tal trans­for­ma­tion.

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