Alibaba CEO Outlines 2016 Growth Strategy
With all the turmoil in the Chinese Market – both financial and consumer. Alibaba CEO Daniel Zhang has stepped up and announced a shift in direction from developing China’s underserved rural markets and penetration of global markets, to focus on growing its already large base in China’s Tier 1 cities.
“We are going to consolidate and expand our current market, particularly by enhancing reputation, optimizing user experience and increasing our market share in first-tier cities,” according to Zhang at Alibaba’s campus in Hangzhou. Although he provided few details at the time, this refocusing was foreshadowed in September when Alibaba announced it would add China’s capital, Beijing, as a second headquarters.
Alibaba has been expanding its Beijing operations with online sale of groceries and consumer electronics, and plans to use the city as a hub to better serve northern China (400mm population), where penetration and support infrastructure is less developed than in China’s southeastern provinces.
Zhang outlined a three-prong strategy
- targeting first-tier Chinese cities,
- continue to promote e-commerce among rural Chinese residents
- global growth through international e-commerce websites, “to build up channels that allow international brands and merchants to sell online to Chinese consumers.”
Alibaba’s Tmall Global, a cross-border marketplace, provides Western retailers and brands with a simplified channel for selling online in China, and g.taobao.com, a niche channel within the company’s giant Taobao Marketplace that helps consumers discover quality products sourced from around the world.
In 2015, Zhang had indicated the globalization of Alibaba from a mostly Chinese operation was a top priority. They had “hired former top Goldman Sachs executive Michael Evans to oversee international expansion,boosted its presence in Europe and made cross-border online shopping a highlight of its annual 11.11 Shopping Festival.”
In addition to enabling retailers to tap the growing purchasing power of rural Chinese consumers, Alibaba’s rural development strategy includes B2B / Wholesaler middleman disintermediation that help farmers in the hinterlands sell and deliver agricultural products to online shoppers in the country’s big cities. Zhang said”In 2016, we are going to ramp up our efforts to bring quality goods to rural buyers, and deliver local produce to urban customers, so the rural market can be connected to the whole country and even the whole world.”
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