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Household spending in the United States drives two-thirds of the economy, but in China it barely accounts for one-third.
Alibaba is at the forefront of this shift. Its most popular website is Taobao.com, China’s third most visited website and the world’s twelfth. A common saying today in China is wanneng de taobao,6 meaning “you can find everything on Taobao.” Amazon has been called “the Everything Store.” Taobao too sells (almost) everything, everywhere. Just as Google is synonymous with searching online, in China to “tao”7 something is shorthand for searching for a product online.
Alibaba has a much greater impact on China’s retail sector than Amazon does in the United States. Thanks to Taobao and its sister site, Tmall, Alibaba is effectively China’s largest retailer.
Alibaba’s e-commerce edge is also honed by another of its websites, Tmall.11 If Taobao can be compared to a collection of scrappy market stalls, Tmall is a glitzy shopping mall. Large retailers and even luxury brands sell their goods on Tmall and, for those customers not yet able to afford them, build brand awareness. Unlike Taobao, which is free for buyers and sellers, merchants pay commissions to Alibaba on the products they sell on Tmall, ranging from 3 to 6 percent depending on the category.12 Today Tmall.com is the seventh-most-visited website in China.
Tmall hosts three types of stores on its platform: flagship stores, run by a brand itself; authorized stores, set up by a merchant licensed to do so by the brand; and specialty stores, which carry the goods of more than one brand.
In addition to Taobao and Tmall, Alibaba operates a Groupon-style15 site called Juhuasuan.com.16 Juhuasuan is the largest product-focused group-buying site in China. Buoyed by the huge volume of goods on Alibaba’s other sites, it has signed up more than 200 million users, making it the largest online group-buying site in the world. Together, Taobao, Tmall, and Juhuasuan have signed up over 10 million merchants, offering more than one billion individual items for sale.
Groceries are another popular category because, as Jack explained, “supermarkets in China were terrible; that’s why we have come out on top.” Already more than 40 percent of Chinese consumers buy their groceries online as compared to just 10 percent in the United States.
Young men can hire a fake girlfriend to attend social events, or outsource a breakup with their real girlfriend to a specialist on Taobao. Wives worried about a straying husband can subscribe to a counseling service offering techniques to fend off a mistress.
Over half of the package delivery market in China is carried out by just four companies, known as the “Three Tongs, One Da”: Shentong (STO Express), Yuantong (YTO Express), Zhongtong (ZTO Express), and Yunda.
Alibaba has invested together with these companies and others in a firm called China Smart Logistics, or “Cainiao.”22 The combined hauling power of the fifteen logistics partners in Cainiao is staggering. Together they handle more than 30 million packages a day and employ more than 1.5 million people across six hundred cities.
Alibaba’s principal e-commerce competitor, JD.com,28 is pursuing an “asset-heavy” strategy, investing directly in its own logistics infrastructure. JD’s mascot is Joy, a gray metallic dog, chosen no doubt to give symbolic chase to Tmall’s black cat. Today JD has built up the largest warehousing capacity29 of any e-commerce company in China, offering speedy delivery services including same-day30 delivery in forty-three cities. JD.com runs a truly end-to-end system, controlling its own procurement, inventory, distribution, and warehouse systems, with goods delivered to customers by uniformed
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From some 30 million packages on a typical day at present, Alibaba expects it will generate more than 100 million packages of orders a day by 2020.
By far the most popular online payment tool in China, Alipay handles more than three-quarters of a trillion dollars a year in online transactions,31 three times the volume of PayPal and one-third of the $2.5 trillion global online payments market.
The “big four” state-owned banks—the Industrial and Commercial Bank of China (ICBC), Construction Bank, Bank of China, and Agricultural Bank of China—control about 70 percent of the market.
Alibaba’s Yu’e Bao online mutual fund proved so popular when it launched in 2013 that it stirred China’s stagnant financial service industry into a frenzy of activity.
Prior to the fund’s launch Jack took the unusual step, for a private sector entrepreneur, of penning an opinion piece in the Communist Party journal People’s Daily arguing, “The finance industry needs disrupters, it needs outsiders to come in and carry out a transformation.” Soon after, the SOE empire struck
Because it has access to the entire trading history of its customers, Alibaba is in a much better position to assess credit risk than the banks. A new business, Sesame Credit Management, provides credit ratings on consumers and merchants to third parties.
One of the most circulated images of Jack on the Internet is a photo of him sporting a Mohawk, nose ring, and makeup, including jet-black lipstick. On that occasion, a celebration of Alibaba’s tenth anniversary, Jack sang Elton John’s “Can You Feel the Love Tonight” to a stadium full of seventeen thousand cheering employees and ten thousand other spectators.
Jack combines a love of showmanship with a relish for defying stereotypes.
Jack’s ability to charm and cajole has played an important role in attracting talent and capital to the company, as well as building his own fame. Jack has a unique Chinese combination of blarney and chutzpah. One of his earliest foreign employees3 summed up for me his qualities in two words: “Jack Magic.” In this respect, Jack shares a characteristic with Steve Jobs, whose charisma and means of getting his way were famously described by a member of the original Apple Macintosh design team as a “Reality Distortion Field.”
“Jack today is still one of the only international businesspeople who is as attention-grabbing in both English and Chinese.”
“Customers first, employees second, and shareholders third.” Jack describes this as Alibaba’s philosophy.
One of his favorite messages to them, and a “bit” in his comedy routine, is “Today is brutal, tomorrow is more brutal, but the day after tomorrow is beautiful. However, the majority of people will die tomorrow night.” The goal for Alibaba to survive for 102 years might seem weird to outsiders but not to his employees, especially the Aliren (the “Ali People”)—those with more than three years of service—for whom it is an accepted part of the Alibaba culture.
Jack is a keen reader, particularly of titles by the Hong Kong–born martial arts writer (Louis) Cha Leung-yung, known in China by his pen name Jin Yong. His works are featured in the library along with classical works and the latest books on management theory or Silicon Valley icons like Steve Jobs and Elon Musk.
A sense of subjugating one’s own needs for the interest of the customer is a cornerstone of Alibaba’s corporate culture.
Alibaba has codified its own company values in something it calls the Six Vein Spirit Sword. The term originates in the work of Jack’s favorite novelist, Jin Yong. The sword he writes about is not an actual weapon, but the art of building up one’s own internal strengths in order to defeat any opponent. In Alibaba’s case, the strengths that form the Six Vein Spirit Sword are akin to those outlined in the “Mission, Vision, and Values” of Jack’s favorite corporate guru, Jack Welch, the former CEO of General Electric (GE).
The “Six Veins” of Alibaba’s “Spirit Sword” are “customer first, teamwork, embrace change, integrity, passion, and commitment.” Generic-sounding as they are, the company treats them very seriously. Commitment to the Six Vein Spirit Sword accounts for half of employee appraisals.
By breaking it down into phases, each day could be dedicated to one key step in the process—and eventually you wouldn’t be far off from your goal.”
Compared to other firms, “people at Alibaba are more passionate about their work, more honest, and more hardworking.”
“Former Alibaba employees are closely connected, as if there is a bond linking us together. The club serves as a very important platform for us to communicate and exchange ideas.”
a “Long March” culture, an ambitious management ethos that involves personal sacrifice, and huge investments of personnel and time.
Every morning she would close her eyes to meditate before practicing tai chi, “listening to the sound of flowers blooming.” Today Jack often travels with a personal tai chi coach.
Normally he would have been relegated to a two- to three-year associate’s degree course,4 but Hangzhou Teachers College had a few spaces left for male students, and Jack squeaked in. The college was not a prestigious one. Jack recalled that “it was considered the third or fourth class of my city.” In his public appearances, Jack often speaks of his twice failing the gaokao as a badge of honor.
Jack has never shown any hint of shyness toward foreigners.
Today in China, Wenzhou is synonymous with wealth.
Today the city is home to the largest wholesale market in the world and its population has shot up to over two million people.
Without knowing it, a huge amount of what we consume in the West has passed through Yiwu.
More than 60 percent of the world’s Christmas decorations are manufactured in the city.
Since 2014, Yiwu is the start of the longest freight railroad line in the world. Taking twenty-one days to traverse end to end, the 8,111-mile line links Yiwu with Madrid.
These single-product towns can represent 80 percent or more of the production of individual commodities—not just in China but worldwide. Shaoxing is “textile city” and Yongkang is “hardware city,” churning out 30,000 steel doors and 150,000 motor scooters every day. Taizhou is known as “sewing machine city” and Shenzhou as “necktie city.” Haining calls itself “leather city.”
“The total number of over eight million Zhejiang entrepreneurs might be the largest business association in the world.
In an earlier speech to the Zhejiang Chamber of Commerce, Jack summed up the dynamism of his home province: “As entrepreneurs from Zhejiang, our greatest advantages are that we are hardworking, courageous, and good at seizing opportunities. We have these excellent qualities because we were given nothing.
To support his venture, Jack started peddling goods on the streets of Hangzhou, including some he sourced from Yiwu. His translation company also became a trading company. Hope Translation Agency started to sell gifts, flowers, books, and even plastic carpet, a range of items that foreshadows Taobao. Jack recalled, “We did everything. This income supported the translation agency for three years until we started to make ends meet. We believed that as long as we kept doing it, we would definitely have a future.”
His mission for the Tonglu government was a failure. But the trip would give him his first exposure to the Internet, and he would return to China a changed man.
For Jack the visit to Seattle was a transformative experience: “It was my first trip to the States, the first time in my life I touched a keyboard and computers, the first time in my life I connected to the Internet, and the first time I decided to leave as a teacher and start a company.”
Stuart, who developed a love of tai chi from Jack—he still practices in Atlanta today—recalled Jack as intensely focused on work. “We’d go down to the office, we’d do our work, then we’d get something to eat, go back home maybe do more tai chi and it was just that way . . . every day. No extra curricular activities.”
Back in Hangzhou he set about building his concept of an online yellow pages. He named the business China Pages. In this, his second venture, he would dive headfirst into the entrepreneurial sea, leaving his teaching days behind.
There, He Yibing gained exposure to the Internet. When Jack returned from Seattle with a dream of building an Internet company, the two decided to work together.
To win more clients, as with Hope Translation beforehand, Jack called on his former students to spread the word and bring in business. Two of them duly obliged.
Jack Ma tapped into his student network to recruit people to work for his start up
Jack had lost control of his pioneering venture: “At that time I called myself a blind man riding on the back of blind tigers. Without knowing anything about technology or computers, I started the first company. And after years of terrible experience, we failed.”
