In advance of its upcoming IPO, Alibaba has released a series of videos explaining the company’s mission to potential investors.
The videos, which have been online for several days at Retail Roadshow, describe the company’s numerous shopping platforms and how each of them has impacted the lives of ordinary Chinese consumers. Despite the heartstring-plucking soundtrack and rosy tone, the clips nevertheless provide an excellent overview the company’s products and how it influences China’s retail infrastructure. If you’re hazy on the nuances behind Alibaba’s business model or numerous services, it’s well worth viewing.
The 40-minute opener is the one you’ll really want to watch, as vice executive chairman Joe Tsai and CFO Maggie Wu break down the company’s business model and growth. Unfortunately, it’s not embeddable, so we’ve taken some screenshots to capture the highlights.
From a birds-eye view: China is big, its internet penetration is big and getting bigger, its ecommerce market is big and getting bigger, and Alibaba is big and getting bigger. This sets the stage for big growth. Analysts placed China’s internet penetration at 46 percent for the year 2013 – more internet users, more potential Alibaba customers.
What better way to start off than by jabbing the big boys? Alibaba’s gross merchandise volume dwarfs that of Amazon and other like-minded companies, hitting US$248 billion in 2013, and US$296 billion for the year ending in June 2014. Of course, transaction volume is one thing, revenue and profits are another, but this is a roadshow video, so we’re here for some spectacle along with our statistics.
A handy graphic of Alibaba’s ecosystem – the outer blue ring consists of Alibaba-affiliated products and services that help draw users deeper into its marketplaces, listed in the middle white ring, where people buy and sell stuff.
Tsai repeatedly stressed how Alibaba’s markeplaces and peripheral services contain network effects – as more wholesalers get on Alibaba.com, more buyers flock to the site. Subsequently, as more small merchants buy stock on Alibaba.com and put it up for sale on Taobao.com, Taobao gets more customers.
Wall Street believes in mobile. What a coincidence! So does Alibaba. For the period ending in June 2014, 33 percent of its total gross merchandise came from mobile, which subsequently made up 86 percent of total mobile retail transactions in China. Remember a few slides back Tsai pointed out how China currently had around 36 percent mobile internet penetration? As that figure grows, Alibaba’s revenues from mobile likely will as well.
Since Alibaba doesn’t actually sell physical goods, it earns its revenues by charging a combination of commissions, listing fees, and marketing services across its six major marketplaces. This keeps overhead costs lower than ecommerce firms that keep stock in warehouses, and is more scaleable too.
Alibaba’s gross merchandise volume is growing at 45 percent year-on-year. That’s slightly down from the 60 percent growth the company was seeing in 2012, but as it continues to expand into new verticals like on-demand delivery and media, it hopes to keep that figure high.
Here we are, talking about mobile again. Alibaba’s gross merchandise volume from mobile increased from RMB 118 billion (over US$19 billion) to RMB 164 billion (US$26 billion), marking year-on-year growth of more than 300 percent.
After the slides, we then go into storytelling mode. In the video titled “How Alibaba Has Impacted China,” viewers go on a tour to various localities to meet ordinary people who have expanded their small business thanks to Alibaba’s marketplaces. “When I first saw Taobao, I knew very little about the internet,” says a painter from the Deyang, Sichuan Province. “After a month of posting my paintings online, I sold my first one. Taobao gave me hope. Without it, how could I sell my work in this little town?” (Note: The videos we’ve embedded below have not been uploaded to Youtube by Alibaba, or Tech in Asia).
In the Taobao explanatory video, Alibaba explains how its flagship consumer-facing marketplace features so many different products you could decorate your entire home just using the site. It also outlines its main marketing service, which lets lets vendors target potential customers with keyword selections and a pay-for-click bidding system.
Tmall is where domestic and international vendors go to sell their goods to Chinese consumers under branded storefronts. Alibaba singles out the distributor of Elle handbags in China as an example of a well-known brand that uses Tmall as the core of its online business.
As for global-facing marketplaces, AliExpress is Alibaba’s relatively-unknown but fast-growing business-to-consumer marketplace. “It’s a straight way between the producer and me,” says an AliExpress customer from Russia. “All other stores buy from China. So why should I buy from other stores?” Later, Alibaba turns the spotlight towards two entrepreneurs who sourced a Chinese manufacturing partner for their inflatable pool toys using Alibaba.com.
Finally, there’s Alipay, Alibaba’s escrow payment service. Alipay technically isn’t a part of Alibaba, its numerous appearances in Alibaba’s roadshow media only further highlights the awkward relationship between the two entities when it comes to finances. “It’s important to note that since 2011, Alibaba Group no longer controls Alipay, but has contractual arrangements with it,” the narrator cheerfully states, before describing how it works seamlessly with Alibaba’s marketplaces.
Alibaba’s pre-IPO roadshow videos are a must-watch
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