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Alibaba Group Holding Ltd (BABA) Expecting Birth of a Re-imagined Retail Industry

Alibaba (NASDAQ:BABA)

In a letter to shareholders, Alibaba Group Holding Ltd Chairman Jack Ma said that pure e-commerce players will soon face tremendous challenges, with e-commerce itself rapidly becoming a “traditional business.” To transform China $4.5 trillion traditional retail industry, the e-commerce giant is creating the fundamental digital and physical infrastructure for the future of commerce, which includes marketplaces, payments, logistics, cloud computing, big data and a host of other fields, according to Mr. Ma.

Alibaba sees birth of re-imagined retail industry in coming years

Mr. Ma said in the letter that Alibaba isn’t just trying to shift buy/sell transactions from offline to online. “Our goal is to empower merchants with the ability to transform and upgrade their businesses for the future,” he said.

Alibaba (BABA)

He said that his company’s traditional e-commerce business is undergoing rapid change. “In the coming years, we anticipate the birth of a re-imagined retail industry driven by the integration of online, offline, logistics and data across a single value chain,” Mr. Ma wrote.

“The most important opportunity on the horizon is not growing online sales in isolation but rather helping traditional retailers upgrade into a brand new retail model,” Alibaba CEO Daniel Zhang said in a separate letter to shareholders. “The consumer retail industry as a whole is experiencing a radical disruption driven by digital transformation.”

In addition to helping businesses in China, Alibaba wants to reach to companies and small businesses in other countries. For example, the e-commerce giant plans to expand its presence in India through a series of acquisitions.

In next 20 years, Alibaba hopes to serve 2 billion consumers around the world, empower 10 million profitable businesses and create 100 million jobs, according to Mr. Ma.

Zhang said that Alibaba has grown its local presence around the world to help global businesses expand into China and tap into the hundreds of millions of Chinese consumers through Tmall Global. The company also opened new offices in Italy, France, Germany, the Netherlands and Australia.

In August, Alibaba Group Holding Ltd announced a new program designed to allow global technology companies to more easily break into China. The program, Global Marketplace and AliLaunch, will help international technology partners to enter China market via the company’s Cloud’s initiatives.

“We also expanded our footprint into Southeast Asia through investment in a controlling interest in Lazada and gained direct access to the markets of Indonesia; Malaysia; Singapore; Thailand; Vietnam and the Philippines,” Zhang wrote.

Alibaba Cloud hosting 35% of total websites in China

According to Zhang, cloud computing, digital marketing and cross-platform entertainment are key areas of long-term growth.

The company started its cloud computing business eight years ago, and now Alibaba Cloud hosts 35% of total websites in China, which is very impressive.

Alibaba Cloud, which provides cloud computing and big data services, now ranks among the world’s top three cloud computing companies, Mr. Ma said. The company’s computing business offers a wide range of products and is working to enable all businesses – large, medium and small – to benefit from the greater operational efficiency and lowered costs.

Mr. Ma predicted three decades of rapid technological change across industries in the letter.

“Throughout history, technological disruptions have followed similar trajectories: 20 years of technological disruption followed by 30 years of further rapid change as new technologies are applied throughout society,” Mr. Ma said.

Further, he said that the Internet revolution is a historical inflection point, much like when electricity was introduced, and it may have an even greater impact.

“Over the next 30 years, with computing power as the new ‘technology breakthrough’ and data as the new ‘natural resource,’ the landscape of retail, financial services, manufacturing and entertainment will be transformed,” Mr. Ma wrote.

Alibaba CEO Zhang said in his letter to shareholders that Alibaba Cloud has developed a unique competitive advantage through its services and is now one of the world’s leading cloud service providers.

“Cloud computing and big data will become ubiquitous,” Zhang said in the letter. “Data has already become the new ‘natural resource’ that is as vital as oil and electricity. Cloud computing is the new ‘engine’ powering commercial operations.”

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