BEIJING — Jack Ma, the high-profile executive chairman of Alibaba, says the Chinese e-commerce giant isn’t “too big to fail.”
Ma spoke about the future of Alibaba, which had a record-breaking public offering in New York last fall, in a two-hour speech to China’s securities regulatory commission here.
As Alibaba’s business expands to other sectors, ranging from finance to online video, cloud computing, mobile and health care, Ma’s speech seemed an exercise in humility and an attempt to allay fears that he will not squeeze new entrants into such sectors, as well as existing players out of business. Over the past year or so, Alibaba has invested millions of dollars in a diverse menagerie of businesses. Most recently, the company revealed Monday that it had bought a minority stake in a Chinese smartphone company.
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“We are big, but not strong,” Ma contended in his speech late Tuesday. “Other people have very high expectations for us, and we lack a clear understanding of ourselves, as well.
“Alibaba is only 15 years old. We are not as powerful as people think,” Ma said at the meeting, where he also discussed the company’s plans to expand its online payment and banking services. “We have been under tremendous pressure for the past six months and that pressure is growing.”
He added: “Business is war. But veterans can survive on the battlefield. The probability of failure for all businesses is the same.”
Ma’s remarks come amid ongoing turmoil the company is facing, including scrutiny from Chinese regulators over the alleged selling of fake products on Taobao.com, a consumer-to-consumer site operated by Alibaba, as well as a lawsuit filed in New York alleging the e-commerce company made misleading statements, hiding the fact that it met with Chinese regulators months before the company’s initial public offering in September. During that July meeting, government regulators allegedly raised concerns about possible illegal business practices.
At the end of January, China’s main corporate regulator, the State Administration for Industry and Commerce, which had met with Ma in July, released a white paper outlining illegal business practices it claimed Alibaba engaged in, including bribery and the selling of counterfeit goods. That white paper was later taken down from the Internet after negotiations in which Ma agreed to work closely with regulators to ameliorate problems. Also at the end of January, Chinese regulators issued a separate report, which showed Taobao to have the worst record among China’s e-tailers for selling counterfeit products.
Ma said during the meeting Tuesday that Taobao was created to serve small vendors who had the drive to succeed but lacked a platform to do so. Businesses have become successful from the platform, which was appropriate to launch during a certain stage of China’s development, he said. “It is better to try to help those who want to succeed. China had poor infrastructure for businesses,” he said
Ma also spoke about the need to expand greater access to the mobile Internet and e-commerce to China’s rural areas, as well as how Alibaba will shift its focus to using data analysis, or “big data,” to predict consumer trends and, in turn, help both brands and small businesses.
Meanwhile, on Tuesday, China’s General Administration of Quality Supervision, Inspection and Quarantine or AQSIQ, said in a statement posted on its Web site that a senior official with the government agency told Ma during a meeting Monday that Alibaba’s business practices are potentially damaging China’s reputation overseas as well as consumer confidence in e-commerce at home.
In response to AQSIQ, Alibaba said the company is “dedicated to the fight against counterfeits.”
“We work closely with our government partners, brands and industry associations to tackle this issue at the source,” the company said. “We also utilize technology, like data mining and big data, to scrub our platforms of counterfeits. The AQSIQ meeting is a positive one, and we are glad AQSIQ recognized the efforts Alibaba Group has made in the fight against counterfeits.”
China’s e-commerce darling has long publicized its efforts to eradicate counterfeit goods from its online platforms, although brands and e-commerce industry insiders have complained that Alibaba has not done enough. Last August, for example, Kering, which owns brands such as Yves Saint Laurent and Bottega Veneta, filed a suit against Alibaba for the alleged proliferation of fake brands on the company’s sites. That suit was later withdrawn after the two sides agreed to work together to solve the issue.
In November, some vendors participating in Alibaba’s Singles’ Day shopping event, a holiday on Nov. 11 which, with discounts, is an online shopping bonanza in China, said the group used unfair business practices, forcing them to offer extreme promotions in exchange for high-profile marketing on shopping platforms while threatening to lower the vendors’ visibility if they offered items at lower prices on competitors’ sites.
“I do not feel I was born to be a businessman,” Ma said Tuesday in Beijing. “Those of us who are honest, that is the ideal. But of course there are many loopholes, but Chinese society has entered a new era, and whatever problems there are, we will communicate those. This is what I want to share.”
Analysts say the ongoing, and highly visible, government scrutiny of Alibaba is tied to a number of factors, including a fear that the company is getting too big and is creeping into territory of existing players with ties to officials, and, thus, are encouraging the criticism.
“Jack Ma is acting too big for his britches, and my guess is that there are certain people who want to take him down,” Shaun Rein, managing director of the Shanghai-based China Market Research Group, a strategy intelligence firm, said. “He is clearly upsetting certain people. Anybody who is too high-profile in China — that becomes a problem.
“I think the company will be under more scrutiny,” Rein added. “Ma is known for being ruthless in business, so nothing that the government is saying is anything that is necessarily wrong.”