Alibaba eyes brick-and-mortar department store space

The e-commerce giant is increasingly looking at traditional brick-and-mortar businesses

After conquering grocery deliveries, Alibaba Group is setting its sights on a new part of China’s $4-trillion retail sector: Department stores.

The e-commerce giant, which is also venturing into cloud computing and entertainment, is increasingly looking at traditional brick-and-mortar businesses, Chairman Jack Ma, Vice- Chairman Joseph Tsai and Chief Executive Officer Daniel Zhang said in interviews with Bloomberg News on the company’s 18th anniversary. Alibaba, started in Ma’s apartment in 1999, is worth $458 billion today.

The executives, speaking less than a month after Amazon.com closed its $13.7 billion acquisition of Whole Foods Market, discussed Alibaba’s strategy for dealing with competition, its vision on data and challenges the company will face. Ma said Alibaba will need to embrace a different mindset given its current size, and move away from its asset-light approach to grab a bigger share of global trade. 

“I think when you are young, tiny, a light model is good. When you are strong, big —think about it —you need heavy things. There is no heavy is good, or light is good -a mix is good. To be efficient, you need to connect light and heavy models together. But with Alibaba’s size today, you should not leave the heavy model to others, it’s something you have to do because the infrastructure you are building up, you have to invest,” Ma said.

Alibaba is also increasingly finding itself in competition with Tencent Holdings over payments, cloud computing and financial services. Tencent Chairman Pony Ma (not a relation) and Jack Ma both aspire to expand beyond China. 

Alibaba is also battling Amazon as it seeks growth in Southeast Asia, with e-commerce in Indonesia alone projected to reach $65 billion by 2020 from $8 billion now, according to a report by Macquarie Research.

“I think even Pony does not have the same experience of globalisation as us. So for everybody, it’s new. For Amazon, I think e-commerce only started like 20 to 25 years ago, so nobody is an expert, especially when doing businesses in other nations. We are new. The competition that you should worry about is going to be in local areas,” Ma said. 

“I’ve been saying this again and again internally. Alibaba going outside China is not about globalising Alibaba. We are globalising e-commerce infrastructure. We are trying to build the infrastructure of online payments. We are trying to build an infrastructure of logistics, and we are trying to build an infrastructure of cloud computing,” Ma said. 

“We are going there so that, say they need the payment system, logistic system, they need the platform system. Now they can sell things globally. We are interested in the cross-border trading and e-commerce. I don’t think Tencent can do that. Because we’ve been doing this for 15 years. They will probably be good on the payments, especially if you are using WeChat, which the Chinese people are using. But when you go to India, Indian people don’t use WeChat, they probably cannot do a lot,” he said.

With China’s tighter cyber security laws, technology companies face more challenges in the country. Alibaba is already China’s biggest cloud-computing provider, with the unit projected to make up 15 per cent of Alibaba’s revenue by 2021, according to JPMorgan Chase. 

“Nine years ago, when Alibaba shifted its position from an e-commerce company to a data company, we had a huge fight internally and finally decided that we were shifting. So we haven’t called ourselves an e-commerce company internally for nine years,” Ma said. “I don’t know how we can make money out of data. Data is so important for human development in society. It’s gonna be as precious as oil in the last century. 

So we have to work that out,” he said.