Chinese e-commerce giant Alibaba is poised to reclaim its position as a leading market force following a period of challenges, according to co-founder Joe Tsai in an exclusive interview with CNBC’s Emily Tan on Friday. Questions surrounding Alibaba’s trajectory have arisen amidst internal restructurings, the cancellation of a cloud computing IPO, and intensifying competition in its core e-commerce sector.
The stalwart of China’s online retail landscape has encountered heightened competition in recent years, with budget-conscious consumers turning to lower-priced offerings from PDD Holdings and the surge of live streaming sales on Douyin, China’s equivalent of TikTok, owned by ByteDance.
“Now with the restructuring and with the new management in place, we feel a lot more confident in placing as one of the top e-commerce players in China,” Tsai remarked. “Where we didn’t feel as confident as before, we felt the competitive pressure, but now we’re back.” He also anticipates that e-commerce penetration in China will surpass 40% within the next five years, a significant increase from the current level of 30%.
Tsai, who has been with Alibaba since its inception in 1999, assumed the role of chairman in September as part of a leadership reshuffle. Eddie Wu took over as CEO concurrently, succeeding Daniel Zhang, who had also served as chairman. In December, Wu assumed leadership of the Taobao and Tmall e-commerce division from Trudy Dai.
The management realignment followed a restructuring of Alibaba’s operations last year, dividing the company into six business units with the intention of eventually taking them public, starting with the cloud division. However, Alibaba shelved plans for a cloud IPO in November, citing restrictions on U.S. chip exports. Zhang, who was slated to continue leading the cloud business, unexpectedly resigned from the company in September.
Tsai noted that a cloud IPO would have been more viable with more favorable investor sentiment. “Markets haven’t been great,” he observed. Regarding an IPO for Alibaba’s Cainiao logistics arm, Tsai mentioned the company is awaiting opportune timing. Cainiao filed for a public offering on the Hong Kong Stock Exchange in September but has yet to go public.
In recent months, Tsai and fellow co-founder Jack Ma have collectively purchased over $200 million worth of Alibaba shares. Alibaba’s U.S.-listed shares have remained relatively unchanged for the year, trading around $76 — a fraction of its price of approximately $300 in November 2020.
During the same month, the IPO of the company’s fintech affiliate Ant Group was abruptly halted by Chinese regulators. Subsequently, Beijing fined Alibaba for alleged monopolistic practices. Since then, the company has encountered heightened competition amid slower economic growth in China. PDD Holdings, owner of Pinduoduo and Temu, momentarily surpassed Alibaba in market capitalization.
When questioned about the success of Chinese-affiliated e-commerce firms like Temu, Shein, and TikTok in the U.S., Tsai commended their “great consumer proposition,” citing “high quality” products and “reasonable prices.”
“They’re very aggressive doing it and we’re going to observe and figure out what we want to do,” he remarked, noting Alibaba’s existing overseas presence through AliExpress and Trendyol, which targets the Turkish market. Regarding U.S.-China tensions, Tsai acknowledged the necessity for both governments to collaborate in certain domains despite fierce competition, a challenge Alibaba must navigate.
While Alibaba has abandoned plans to spin off its cloud division, the company remains committed to enhancing its artificial intelligence capabilities and monetizing cloud computing.
According to Tsai, e-commerce offers “one of the richest use-case scenarios, or brings the most variety, in terms of use cases for using AI applications.” These applications include swiftly generating product catalogs for consumers and virtual dressing rooms for clothing, he added.
