Alibaba Group is shaking things up inside its ecommerce business. CEO Eddie Wu will take charge of the Chinese company’s domestic ecommerce as the business faces growing rivals.
Alibaba owns the world’s two largest online marketplaces by gross merchandise value (GMV), Taobao and Tmall. Taobao ranks No. 1 in the Global Online Marketplaces Database, Digital Commerce 360’s ranking of the largest such marketplaces by GMV. Tmall ranks No. 2. Both outrank Amazon, the third-largest global online marketplace, according to Digital Commerce 360 research.
Changes at Alibaba
Wu took over Alibaba’s domestic ecommerce effective immediately, the Associated Press reported on Dec. 19. Wu became CEO of the Alibaba Group in September, when he also took on leadership of the company’s cloud division. He now heads the overall business, along with two of the most important sectors: ecommerce and cloud.
Wu took over ecommerce from Trudy Dai, one of Alibaba Group’s founding members. Dai will work in a new role focused on creating a new asset management company, says chairman Joe Tsai in an internal letter. Tsai also wrote that Alibaba needs a “brand-new strategy” with changes to the way business is organized.
“Eddie’s leadership of both Alibaba Cloud and [Taobao and Tmall Group] will ensure total focus on, and significant and sustained investment in, our two core businesses of cloud computing and ecommerce,” Tsai wrote in the letter, CNBC reported.
In March 2023, Alibaba announced plans to spin six of its divisions off into separate units, operating independently with plans to go public eventually. That was the biggest restructuring in the business’ 24-year history. Alibaba has since scrapped plans for spinning off the cloud business and appears to be reversing course, bringing two major sectors back into direct control of the company’s CEO.
Alibaba’s response to ecommerce competition
Alibaba’s latest announcement comes amid competition from other ecommerce retailers and marketplaces. Rival PDD Holdings Inc, which owns Pinduoduo and fast-growing U.S. marketplace Temu, recently surpassed Alibaba in market value.
Pinduoduo does not rank in the Digital Commerce 360’s Asia Database rankings because it operates through an app-only marketplace, without an ecommerce website.
Jack Ma, Alibaba’s founder, also recently praised PDD’s business strategy.
“Everyone can be successful. But only those willing to reform for the sake of tomorrow, and the day after that, and an organization willing to make any sacrifice needed, are considered respectable,” Ma wrote in an internal Alibaba forum, Business Insider reported.
Alibaba was once the most valuable company in China, and it handily dominated Chinese ecommerce. Since 2020, the business has lost market share to rivals including PDD. PDD’s growth in 2023 significantly outpaced Alibaba’s, with 94% year-over-year revenue growth in Q3, compared to 9% growth over the same period for Alibaba. Much of that difference is thanks to Temu’s explosive growth as the discount shopping app took off in 2023, also surpassing rival Shein Ltd. (No. 36 in the Asian database).
Bringing Alibaba’s ecommerce categories back into the main fold could be a way to return to earlier growth and keep up with PDD and other rivals in 2024.
Alibaba and rivals compete for consumers’ budgets
Chinese ecommerce retailers are in a fight for consumer spending, battling over who can offer the lowest prices and best discounts. In March, JD.com Inc. (No. 4 largest marketplace and No. 1 online retailer in Asia) started a price war with $1.4 billion in discounts to entice new customers. Alibaba responded with its own price cuts.
The trend is a result of declining consumer demand, according to McKinsey analysis. Third-quarter retail spending in China grew just 3% year over year, representing a slowdown from high growth quarters earlier. Consumer reluctance to spend can be attributed to declines in property sales, declining exports, and worries over geopolitical tensions, analyst Daniel Zipser says.
Do you rank in our database?
Submit your data with this quick survey and we’ll see where you fit in our next ranking update.
Stay on top of the latest developments in the ecommerce industry. Sign up for a complimentary subscription to Digital Commerce 360 Retail News. Follow us on LinkedIn, Twitter and Facebook. Be the first to know when Digital Commerce 360 publishes news content.Favorite