23 November, 2015

Alibaba goes beyond ecommerce to powerful data sets

Since the huge IPO of Alibaba and their amassing of an enormous expansion war chest, the intensity of the conversation around ecommerce has only intensified, and analysts provided greater granularity of insights into the category. Not many platforms are profitable, and the need to continually invest in technology in this emergent phase is self evident.
Having taken almost two decades to reach US$1 trillion in sales, educated predictions are that it will double again in two years, hitting US$2 trillion in 2015. Exponential growth like this is very exciting. But what does a China dominated category growth mean for everyone else? Is ecommerce just a launching pad for Alibaba’s final goal?
Shopping in China is an acceptable pastime in itself; 78 per cent of Chinese believe that if you can shop, you are successful in life (McCann Truth about Shopping 2014). With only an emerging “offline” commerce sector, consumers in China have moved online to find the choice of products they yearn for, eagerly building their profiles.
In the US, by contrast, the study revealed ecommerce is merely making shopping more convenient, with a by-gone age of leisurely in-store retail experiences fondly remembered. No such cultural folklore exists in China, the younger and inevitably time-starved e-customers cannot refer to their older generations for a shopping education. Curiosity thus drives engagement and participation helps to define them. So it is clear we have very different customer psychologies in our ecommerce titan’s home-markets.
Alibaba is not only growing organically on its primary platforms. Alibaba has been acquiring companies on quite an incredible scale. Many of these companies, such as taxi hailing apps and an app analytics company, may not seem central to Alibaba in western eyes. But it is clear that Jack Ma’s team wants to have a keen understanding of their customers’ purchase habits across multiple touchpoints. The Chinese consumer’s expectation now is that shopping enjoyment should be seamlessly synced with the invisible conveniences technology provides – online reservation, delivery, and recorded personal information.
Worries about the data that online stores hold in markets outside of China would suggest that this kind of integrated platform creation could raise privacy concerns. The Japanese ecommerce giant Rakuten, however, appears to be following a similar strategy to Alibaba in building a platform that can connect, entertain and provide retail opportunities. Chat app giant LINE is building entertainment as well as O2O commerce into its communication platform.
The mobile payment war is now officially engaged in by Apple, and will create another area for newly found cross category competitors to face off in the search for customers. In this area, Alibaba challenges traditional banks and payment facilitators, like MasterCard and Visa, eBay’s Paypal, and some Telecom companies, with Alipay. The battleground here isn’t just in internet services. It is in offline retail as well, where knowledge of the customer can deliver amazing competitive advantage.
The Truth about Shopping study told us that the majority of shoppers are happy for stores to use their data if they get value in return. While accepting technology driven shopping, it does worry western shoppers that they will miss out on discovering unexpected delights. They want the human, personal touch amidst a wave of algorithm-based personalisation.
By acquiring the massive data treasure trove that is the Youku platform, they have now got a significant data set on Chinese consumers across digital entertainment, online shopping, transportation and payment outgoings. Such a primary dataset on so large a group of people, across such a significant part of their lives has never been in existence before.
Alibaba has also reportedly invested over US$1 billion dollars in artificial intelligence and cloud computing company Aliyun. So they have the smarts and the data sets to build some astonishingly predictive algorithms.
As Alibaba’s platform of services expands globally it will continue to build a quality data set around communities, their lifestyles and shopping habits. Therefore, I strongly suggest that we think of Alibaba as a data company and not an ecommerce provider.
So, is Google really Alibaba’s target and real competition?

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