Alibaba founder Jack Ma |
Jack Ma signed off as executive chairman of Alibaba Group Holding Ltd. on Sept. 10 in typically flamboyant fashion: dressed as a reggae-rock star while singing the Josh Groban-popularized tune "You Raise Me Up" at a glitzy ceremony celebrating his farewell and Alibaba's 20th anniversary.
That the teacher-turned-billionaire sang in a duet with his successor, current CEO Daniel Zhang, is significant. As Ma said in his farewell speech, his departure does not signal a clean break with the past but the beginning of a "legacy of transition."
Zhang, a former accountant who has been CEO of Alibaba since 2015, is the mastermind behind the wildly successful Singles Day shopping festival, which recorded a gross merchandise value of $30.8 billion in November 2018, about five times the sales of Black Friday in the same year.
He will now take charge of a $455 billion internet giant with a footprint that has grown far beyond its marketplace beginnings to span digital payments, cloud computing and entertainment.
"Jack Ma has been taking a back seat for a few years. He hasn't been the CEO for the last six years," David Dai, senior analyst at Bernstein, said in an interview. "The current CEO has been there for four years. He has proven himself. That's why Jack Ma is comfortable and willing to step down because he trusts Daniel to lead Alibaba to where the company is getting to."
"Mr. Zhang is not as colorful or as public a leader as Jack Ma but he has been and will be the driving force behind the company's development of 'New Retail,' its globalization and its ongoing reinvention of itself," said Michael Zakkour, vice president for Asia strategy and digital commerce at consultancy Tompkins International.
Alibaba's shares closed 1.57% lower Sept. 10 despite a buy rating issued by Jefferies analyst Thomas Chong.

Ma may have long since left the day-to-day running of the business to Zhang, but at home and abroad, he likely will continue to be the face of the Chinese e-commerce pioneer that coined terms such as "New Retail," a concept that seeks to remove the boundaries between online and offline retail.
Furthermore, Ma will remain a presence at Alibaba. As a lifetime member of the Alibaba Partnership, Ma is part of a 36-partner committee that has the right to nominate a majority of directors in the company's board. He will also be a member of Alibaba's board until its 2020 annual general meeting.
His final speech as chairman gave some insight into what he wants Alibaba to achieve.
"In the next 20 years, our mission is to make the best use of resources, talent, technology, in order for the world to be greener, more equal and sustainable," Ma said at the ceremony.
International aspirations
It is no secret that Ma has always had far-reaching ambitions for Alibaba, stating a goal for the company to generate half its sales from outside China by 2025. Zhang said he will continue to pursue this target, according to an interview with Bloomberg News prior to taking up his new role.
Alibaba CEO Daniel Zhang |
Zhang in September 2018 set another bold target for the company: 2 billion users on its platforms by 2036. Given that the company reported 674 million annual active users on its China retail marketplaces for the year ended June 30, 2019, Zhang and his team will have to look beyond their homeland to achieve this goal, even if Alibaba's robust domestic user growth continues.
Alibaba has spread its influence across the globe, to varying degrees of success.
Paytm, the Indian e-commerce platform that Alibaba invested in in 2015, has come up against stronger players such as Amazon.com Inc. and Walmart Inc.-owned Flipkart and suffered huge losses. The company's latest attempt to gain traction in India involves launching an e-commerce business through its subsidiary, UCWeb, a popular browser among Indian internet users.
Singapore-headquartered Lazada is one of its biggest bets. Alibaba has invested $4 billion in the Southeast Asia-focused marketplace. It is facing increasing competition, notably from another Singaporean operator, Shopee, but Bernstein's Dai believes that Alibaba's move in March 2018 to double down on Lazada is promising. According to its June quarter results, the platform posted 100% year-over-year order growth for three consecutive quarters.
"Outside of [Southeast Asia], I think [Alibaba is] just being opportunistic. They don't have a natural pathway to get to European, Indian and the Latin American consumers," said Jeffrey Towson, professor of investment at Peking University.
Towson noted that the company has more of an international presence in the business-to-business market, rather than as a business-to-consumer operator.
"The one area that they are very international is on the merchant side. That's the source of international revenue, but it's mostly about merchants who want to sell to Chinese consumers," he added.
Starting in 2019, Alibaba began allowing merchants from a number of European countries to sell to Chinese consumers through its AliExpress marketplace. It has also opened up its B2B Alibaba.com platform for U.S. merchants to trade with their Chinese counterparts. The $2 billion acquisition of Chinese import e-commerce platform Kaola announced Sept. 6 is the latest example of the scale of these ambitions.
Jack's Daniel
Shareholders can expect to learn more about the plans of the new leadership when Zhang hosts the company's investor day Sept. 23-24.
According to Towson, some investors will be interested to see whether Zhang follows Ma's tradition of laying out a 10-year plan for Alibaba. The last plan focused on developments in financial services, payments, logistics and cloud computing.
On home turf, Alibaba is seeking growth beyond its retail and marketplace strongholds. It acquired food delivery platform Ele.me in a $9.5 billion deal in April 2018 to take on Meituan Dianping,
During the June quarter earnings call with analysts, Zhang said the company will continue to invest in strategic areas including local consumer services, which includes the on-demand Ele.me platform. Local consumer services contributed 5% to Alibaba's revenue for the quarter ended June 30, while its Chinese retail marketplaces accounted for 66% of revenue.
"Daniel is very open with what he's doing with new retail, what he's doing with [the] Hema [supermarket] … he is very open about local services being the key pillars of new retail," said Towson, who emphasized that local services are crucial to the stickiness of the Alibaba ecosystem.
"Ultimately, [Alibaba does not] want [consumers] to buy products from them but go to Meituan Dianping for services. They want to be the ultimate consumer portal for users to get all their products and services," said Towson.
There are signs Alibaba may not be able to continue to grow at such a furious pace. The company's revenue growth for the quarter ended June 30 was impressive at 42%, with sales totaling 114.92 billion Chinese yuan, but slower than the 61% recorded in the prior-year period.
Meanwhile, total online retail sales of physical goods in China increased 20.9% year over year between January to July 2019, compared to 29.1% during the same period in 2018.
However, Bernstein's Dai believes Alibaba will be able to weather any macro slowdown in the Chinese market. "There are more tailwinds rather than headwinds for Alibaba's e-commerce business, because there is the trend that people are buying more online," said Dai.
As of Sept. 10, US$1 was equivalent to 7.11 Chinese yuan.


