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| Ashley Dudarenok |
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| Ashley Dudarenok |
Shoppers at (Alibaba's) Hema experience a seamless integration of its online and offline stores. Customers ordering groceries online for home delivery will have a staff member going through the supermarket’s aisles, bagging groceries, and passing the orders onto a conveyor belt to the deliverers. To date, it has opened more than 100 stores in China. Retail experience is taking on a new form in China.
“So essentially in China these giants are actively merging offline spaces into the online environment. It’s not like offline to online or online to offline. It’s more like [both] becoming one experience. So it’s much deeper than omnichannel and all these other concepts that we’ve been aware of and trying to implement for the past 15 years in the West,” said Ashley Dudarenok, founder of Alarice, a digital marketing agency in Hong Kong.
Alibaba’s grocery stores are an example of digitizing and integrating inventory, supply chains, logistics, payments, delivery, and order fulfilment of retail.
In the bigger scheme of things, what’s happening in the retail landscape is another manifestation of technological changes, especially due to development in AI. “This ‘new retail’ is the integration of the technological advancements that has been happening for the past 20 years. Retail is just one aspect very close to businesses — we all understand we buy services and products,” Dudarenok said.More at CFOinnovation.
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| Matthew Brennan |
[T]he latest update seems to fit with Tencent’s aim to make mini-programs easy to use. It’s “very much in line with what they said they would do,” says Matthew Brennan, co-founder of China Channel.
“The whole mini-program initiative is about helping startups, helping more businesses,” Brennan told TechNode. That applies to e-commerce as well. Just a few years ago, WeChat “wasn’t a very natural environment” for online shoppers, said Brennan. Now the whole in-app retail experience has become much smoother thanks to pushes from Tencent.
Brennan doesn’t see the company’s e-commerce initiative as a direct competitor to Alibaba. Instead, like the “runaway hit” platform Pinduoduo, WeChat is finding new models “to let social e-commerce flourish.”
And fast-growing mini-programs, launched in January 2017, happen to be a convenient tool for alternative means for growth. As of the second quarter of 2018, Tencent reported that WeChat hosted over 1 million mini-programs on its platform, a 72% jump from the same period in 2017. Total users reached 600 million, with close to one half accessing them four to six times a day.More at TechNode.
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| Mark Schaub |
In the latest draft, Beijing dropped language that would have invalidated the so-called “variable-interest entity” structures employed by Chinese tech giants from Alibaba Group Holding Ltd. to Tencent Holdings Ltd. But it’s also proposing to scrap special laws governing Sino-foreign tie-ups -- a move that could force them to re-examine longstanding contracts, lawyers say.
Those twin strands emerged from China’s Foreign Investment Law, intended to govern every aspect of the world’s No. 2 economy for global investors. This particular edict has gained newfound significance as tensions flare between Beijing and Washington; the revisions to VIEs and JVs were little-noticed amid an array of other moves that span curbs on forced technology transfers to leveling the playing field for foreign firms.
In the case of VIEs, the missing language assuages concerns about a corporate structure that circumvented foreign-ownership restrictions. The model has never been formally endorsed by Beijing but has been used by tech titans such as Alibaba to list their shares overseas.
Pioneered by Sina Corp. and its investment bankers during its 2000 initial public offering, the VIE framework rests on shaky legal ground and foreign investors were thus nervous their bets would unwind overnight.
The original version of the legislation was dubbed by a number of “hysterical commentators as ‘the VIE killer,’” said Mark Schaub, a partner at King & Wood Mallesons.
“However, as its successor has dropped any reference to VIEs, we believe it should be business as usual. China’s regulatory position on VIEs may still evolve, but we do not believe there will be a U-turn, ” Schaub said...
Foreign firms that control their ventures may take advantage of the new regime to eradicate “inflexibility,” King & Wood Mallesons’s Schaub said. He cited the need to secure directors’ unanimous consent to amend company articles, adjust capital, or even just to dissolve the venture. “Likely, the Chinese partners may also seek to adopt the new law if they are in a controlling position.”
Companies are still studying the potential effects and aren’t yet sure how it would impact existing ventures, said Xu Heyi, chairman of Daimler AG’spartner Beijing Automotive Group Co. Changan Auto, which is allied with Ford Motor Co., said a half-decade should be more than enough time to avert disruption.More in Bloomberg.
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| William Bao Bean |
William Bao Bean has been active in startups and investing in Asia since 2004, and he says in the last few years there has been dramatic consolidation - similar to what has happened in other technology sectors - that has left three dominant players: Alibaba, Tencent and Ctrip.
“This makes it challenging to be a startup,” he says.
“It’s almost like the mice trying to run around while three elephants are walking around. And every once in a while they’ll accidentally - or maybe on purpose - step on the mice and there’s nothing the mice can do about it.”
To survive in what he says is one of the most competitive markets in the world, startups must provide something that is truly unique and useful.
“Going back five or 10 years, all you needed to do was show up and run faster than the next guy and you could build a pretty decent business,” Bean says.
“Whereas now you need to actually provide an order of magnitude better service in order to make a play.”
But even with a superior product, survival is not guaranteed. Companies trying to reach a meaningful segment of China’s more than 1.4 billion residents need deep marketing budgets to pay for exposure on WeChat, Baidu and other mobile platforms.
“Everywhere in the world customer acquisition cost is high, but in China it’s really, really high,” Bean says.
“In the U.S. you might be able to spend $2 or $5 to get a user. In China, to get a user to download an app and open it once, it’s between $5 and $100.”
So where are there opportunities for travel startups in China? Bean sees potential in areas such as experiences, particularly those offering unique, specialized products, and for startups that can create benefits for existing travel suppliers.
One example that SOSV has invested in: U.S.-based Portier Technologies, which puts mobile phones in luxury hotel rooms, giving guests access to free data and minutes and giving the hotels a cut of revenue from services booked through the phone.
But for non-Chinese companies such as Portier to succeed in that market, Bean says they need local market knowledge.
“So if you are a big global player, you basically have to have a China play. But the issue is the infrastructure, the market, how you advertise, how you retain. Everything in China is a bit different,” he says.
Bean cites Airbnb, a company his firm has worked with to understand the Chinese market, as an example of the learning curve. “Chinese culturally generally do not like being hosts. They really, really do not want some random person in their frickin’ house,” he says.
"But the funny thing is, Chinese are perfectly willing to go live in somebody else’s house - especially if it’s in a nice neighborhood, in Los Angeles, in the hills. They love that. So Airbnb has not done particularly well signing up hosts, but they’ve been very successful at signing up Chinese who are traveling abroad.”
Bean says the very large outbound market of travelers wanting new, unique and local experiences provides many opportunities for innovation.
“As an investor, will I do another online travel agency? No. But there is still a lot of opportunity around travel, and there is still a lot of money to be made.”More in Phocuswire.
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| Matthew Brennan |
Tencent does not sell access to user-data to third parties, such as advertisers. The data of the Chinese app is to all intents and purposes the handsets of the users. “It would have been possible to compare We Chat to Facebook, Baidu to Google or Alibaba to Amazon ten years ago, but that’s no longer possible today,” insists Matthew Brennan a consultant specializing in Chinese IT...
The most widely used of WeChat’s secondary functions is WeChat Pay. Until recently, Chinese people’s attachment to paying with hard cash was the norm. Nowadays, e-commerce represents 14% of all retail sales, against 8% in France. With WeChat Pay, you can use your phone to settle a bar tab or pay an electricity bill. Even the famous hongbao red envelopes Chinese use to exchange monetary gifts are being replaced by the application. During the 2017 Chinese New Year period, 14 billion transactions were carried out using the app. “Tencent has taken advantage of the lack of a developed baking sector in China, where the use of credit cards is not commonplace,” adds Brennan. By cannibalizing all the different services available on smartphones, WeChat has become a killer app, which the competition find impossible to match.
Tencent is the big winner from the success of WeChat. Not only does the company take a percentage of every transaction made using the app, but it has developed its own content for the platform. “WeChat does not monetize data, but it is a growth lever for other businesses in the Tencent group. It’s a bit like iOS or Android in that regard,” stresses Brennan. Via WeChat Tencent can commercialize other businesses, such as Tencent Video or Tencent Music. In total the average mobile phone user spends 55% of their time on a Tencent service. The case of streaming services is particularly instructive. Thanks to WeChat, Tencent has managed to increase the subscriber base of its VOD platform Tencent Video, seizing a quarter of the Chinese market. The company claims to have more subscribers than Netflix even.
Between 2016 and 2017, Tencent made 318 investments in startups and diversified number of sectors it is involved in in order to propose more services on WeChat. Tencent has invested in Karius, a platform specializing in the diagnosis of infectious diseases, and branched out into the connected agriculture sector.More in Leadersleague.
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| Shaun Rein |
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| Ben Cavender |
JD's change comes at a time when investors are concerned with the company's corporate structure in which CEO Liu Qiangdong controls nearly 80 percent of all voting rights, WSJ said. The company's board cannot meet without his presence unless he recuses himself, and this became a more notable issue after the executive was briefly arrested in Minneapolis on suspicion of rape.
The Chinese company's move to change its structure could be seen as an attempt to "change the narrative" surrounding the company, China Market Research Group's Ben Cavender told WSJ. From a public relations point of view, the restructuring move following Minneapolis authorities declining to press any charges against Qiangdong is encouraging, he said.
Some uncertainty remains over what the revamped JD structure will look like, and it "doesn't change the fact that [Qiangdong] has the voting rights and power at the end of the day," Cavender said. Other analysts told WSJ they are skeptical the CEO will diminish his influence on JD behind the scenes.More in Benzinga.
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| Andy Mok |
This year's event in China has been rechristened as the 11.11 Global Shopping Festival. While superficially it appears similar to Black Friday, underneath the hood it is quite different and the implications for the future of retail are profound.
The goal of Black Friday is quite simple: move merchandise so American retailers can book more sales. However, while 11.11 started with the same goal it has since evolved to achieve much more sophisticated objectives. According to Daniel Zhang, Alibaba CEO, the company's goal is not to dominate e-commerce but achieve the complete digitization of retail, both online and offline, which it dubs “New Retail.”
Rather than just boost sales by offering extreme deals, brands participating in 11.11 now see it as a way to acquire new customers and strengthen customer engagement. One way brands do this is by promoting limited edition products instead of big discounts with 180,000 brands from inside and outside China participating.
As part of its New Retail vision Alibaba has launched a business like Hema, an integrated retail experience combining a brick and mortar supermarket, restaurant and distribution center that delivers within a three-kilometer radius, and an automobile vending machine concept that allows prospective buyers to try out new cars before ever interacting with a salesperson.
According to Zhang, 11.11 has now become an important platform for showcasing these emerging capabilities for new retail. Also, this edition of 11.11 includes 200,000 mom-and-pop stores powered by Alibaba's Ling Shou Tong to provide online sales promotions and augmented reality-based red packets that offer discounts at 3,000 “Tmall Corner Stores.” Furthermore, through Lazada, its Southeast Asian affiliate, Alibaba hosted its 11.11 Shopping Festival across Singapore, Malaysia, Thailand, Indonesia, the Philippines, and Vietnam.
More at the CGTN.As the above examples show, 11.11 has evolved to be much more than just a shopping day and is now a key component of how a Chinese company is leading the way in creating the future of global retail. Perhaps before too long, we will see Amazon and others adopting similar approaches to keep pace and Black Friday and Cyber Monday may start exhibiting Chinese characteristics.
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| Ashley Dudarenok |
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| Ashley Dudarenok |
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| Ashley Dudarenok |
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| Shaun Rein |
Analysts say while Alibaba has some of the best executives in China’s tech world, it will be difficult for its next-generation leaders to fill Ma’s shoes.
“Ma is critically important to the company,” said China Market Research's Rein. “He is the strategic driver. He is the face of the company. He makes governments and businesses comfortable with working with it.”
“Daniel Zhang does not create the same warm and fuzzy feelings,” Rein said. “Consumers trust Jack Ma. It is part of their loyalty towards Alibaba.”
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| William Bao Bean |
“The China startup scene wouldn’t exist in the same way without Jack Ma,” said William Bao Bean, a Shanghai-based partner at venture capital firm SOSV. “The celebrity of Jack Ma and the success of Alibaba made startups an acceptable career choice, which has fueled one of the biggest technology markets in the world."
Ma wasn’t just successful. He broke the mold for China’s business leaders, typically faceless chiefs running mammoth state-owned enterprises like PetroChina and China Mobile. He dressed up like Michael Jackson and tried the moon walk. He wore a three-foot feather Mohawk and makeup to perform at a company party. And he dispensed Yoda-like axioms that were collected in dozens of management books.
"To many he’s the face of China’s internet -- no one really knows what Pony Ma looks like," said Bean, referring to the CEO of Tencent Holdings Ltd.More at Bloomberg.
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| Shaun Rein |
Shaun Rein, managing director at China Market Research Group in Shanghai, said the announcement shows that Ma "is empowering Zhang and giving an orderly transition." Rein called the move "very smart" because it "reduces uncertainty over who is in charge to make decisions" at the company.
"Ma won't loom over Zhang for years," he said.
"This is the way to inform business partners and government officials that Daniel Zhang and other leaders are the right people to talk to because, right now, everybody wants to talk to Jack Ma," Rein said.
"By doing this, he is empowering his successors, which is important because Alibaba has a really strong team and it's time for them to take on more power as Alibaba has moved into other countries, like India, and moved into new divisions, like cloud computing and finance," Rein said. In his letter, Ma said he wants to return to education, "which excites me with so much blessing because this is what I love to do." Ma graduated from Hangzhou Normal University in 1988 and continued to teach English there for several years.More in the Nikkei Asia Review.
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| Rupert Hoogewerf |
Ma, who turned 54 on Monday, has long flagged plans to step back, insisting that Alibaba management should be relatively young and his retirement is not expected to affect the running of the company.
But it is still extremely rare for a founder of big and transformative tech firm, especially one with a cult-like status like Ma, to retire so early.
"There's only Bill Gates who has done the same. No other tech founder in the world has just resigned like that at the top," said Rupert Hoogewerf, Shanghai-based founder of the Hurun Report, which publishes an annual influential list of China's richest people.
Hoogewerf added that in China, Ma was a figure like no other, with friends ranging from movie stars to billionaire moguls, though he often outshone them all. "He's the big one, he's the one that brings them together."
Ma will give up the chairman role in exactly one year on Sept. 10, 2019 and complete his current term on Alibaba's board of directors following the company's annual general meeting in 2020, the company said. He relinquished the role of chief executive in 2013.More in US News.
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| Shaun Rein |
“The initial success of Taobao was as much due to the failure of EachNet and eBay’s American management teams, as to the success and savviness of the Alibaba management team,” said Shaun Rein, the managing director of China Market Research Group and author of The War for China’s Wallet: Profiting from the New World Order.
More at the South China Morning Post. Shaun Rein is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.“A lot of Americans complain that Western tech companies cannot succeed in China because of the government, but in fact a lot of the failures were due to the management teams, from eBay to Google.”
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| Mark Schaub |
GM has chosen Alibaba-owned AutoNavi for its Super Cruise driver-assistance system on Cadillacs it plans to sell in China. SAIC Motor Corp., the country’s biggest carmaker, bought shares in license holder Wuhan Kotei Informatics Co. and formed a joint venture to develop driver-less mapping. Didi Chuxing, the country’s largest ride hailing startup, obtained a license in 2017 and has a team working on maps and driver-less technology. Even online retailer JD.com has applied for a HD mapping license as it works on driver-less delivery trucks.
The lure of the Chinese market is likely to keep foreign carmakers lining up for local partners and give the domestic players an edge, said Mark Schaub, a partner at King & Wood Mallesons in Shanghai who specializes in foreign investment in China.
“It’s true these guys do have an advantage already,” he said.More in Bloomberg.
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| Shaun Rein |
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| Sara Hsu |
As the U.S. tech sector regained some of its footing Tuesday, last week's tech sell-off continues to undermine some of China's tech bellwethers Tencent and Alibaba.
Sara Hsu, economist and associate professor at SUNY New Paltz, said that unlike Facebook and Twitter, hamstrung by slower-than-expected user growth, Chinese tech stocks have more serious investment hurdles ahead.
"There are concerns of a trade war, that it could possibly dampen investment from the United States," Hsu said in an interview Tuesday with Cheddar. "Particularly for Tencent and Alibaba which have a lot of interest in the United States, in terms of trade and investment." The trade spat between Washington and Beijing has not only quelled investors’ appetites, it has also discouraged Chinese tech giants from expanding internationally.
Alibaba's Founder, Jack Ma, had pledged to create 1 million jobs in the U.S. and increase the amount of goods that ship from America to China.
Hsu said that China's tech stocks are also faced with tightening liquidity and currency depreciation.
"There are depreciation pressures on the Chinese currency which is going to affect the earnings report for companies that are listed on the New York Stock Exchange," she said. The Chinese Renminbi has slipped in the past two months and hit its lowest level in more than a year, despite measures by central bankers in Beijing to support China’s currency.More in Cheddar.
