With net revenues of $23 billion last year, Alibaba Group is a force to be reckoned with on the worldwide retail stage. As president of the world’s largest e-commerce company, Michael Evans, a former Goldman Sachs vice chairman — and Olympic Gold Medalist on the Canadian rowing team in 1984 — works with founder Jack Ma to continue the company’s expansion around the world. Here, he opens the book on how the Chinese powerhouse operates and where the opportunities are for the future.
WWD: You’re the president of Alibaba and focus on international markets — pretty much everything outside of China. Where do you see the biggest opportunities?
Michael Evans: My job is to basically assist in the globalization of the company. The opportunity falls in two places: one, the consumer opportunity, and two, the merchant opportunity. The biggest consumer opportunity is where five to seven billion people live in the world, which is Asia. It doesn’t mean the U.S. or European consumer isn’t important, but those in Asia, Africa and Latin America are very important. The merchant opportunity is in the developed regions of the world: the U.S., Canada, Europe, South Korea, Japan, Australia and New Zealand, which produce the highest quality and most interesting products today. So connecting those consumers and markets is the most important part.
WWD: Can you explain that a little more?
M.E.: It’s not like Amazon where it’s local to local. It’s a cross-border business because the consumers are in one place and the merchants are in another. We will have local-to-local businesses in China, but the real opportunity is to connect great products and consumers in new markets all over the world.
WWD: You were just in Russia, can you share your insights gained there?
M.E.: The Russian market is interesting because what you have is a country with very few brands and manufacturing, so most of the products that are being consumed by Russian consumers are being bought from places like China. That’s exactly what we’re talking about when we say we’re connecting the world of consumers and merchants. It’s different in every market. Jack’s vision of the future is all about small businesses, brands and retailers from all over the world buying and selling their products to consumers from all over the world. That’s a very different business model than say, an Amazon or an eBay.
WWD: How do things like Singles Day or Brand Days fit into that strategy?
M.E.: They’re very different things. Singles Day is something we developed in 2009. It was an opportunity to take one day for single people in China and offer them the ability to buy products on our platform. That’s what 11-11 is all about, it’s mostly men who are single, and we offer them the opportunity to participate in great promotions on a single day. The first day in 2009, we had 27 brands and we sold over $8 billion worth of product. Last year, we had tens of thousands of brands and we sold $17.8 billion. This has grown like many things in China to have a life of its own, and we’ve learned that it’s not just buying and selling things, it’s fun, it’s engaging, it’s entertainment, it’s 24 hours of shopping that everybody looks forward to every year. In the future we’ll move beyond China to other markets around the world.
WWD: Are you finding increasingly overseas brands are interested in getting involved?
M.E.: The statistic from last year is that 40 percent of everything sold on the platform originated from an international brand. And they do all sorts of interesting things. Mondelez decided they wanted to create special packaging for Oreo cookies that would be designed by the consumer. So Brand Day is about brand building, not about sales. So much about Brand Day and 11-11 and our luxury platform and Tmall, and all these other things that we’re doing is not about selling product, it’s about consumer engagement, brand building, customer acquisition and having fun.
WWD: You recently did a see-now-buy-now show as part of Singles’ Day, how successful was that?
M.E.: We started it last year, it’s a virtual online fashion show. It was eight hours and 50 brands. As interesting products come down the runway, the consumer on his mobile phone or laptop can pinpoint a new dress, an attractive jacket, a pair of pants and preorder it. We learned a couple of things, eight hours is a bit too long so we shortened it up to 2.5 hours this year and 27 brands including some great U.S. brands such as Jason Wu and Opening Ceremony. And we introduced some more interesting features: not only can you virtually select a product, but you can also virtually try it on. This is a way to engage consumers, it’s a way to allow them to have fun and see interesting things and a way for merchants and brands to try new products and ideas.
WWD: You recently announced a step-up in R&D. Does this fund that?
M.E.: We just announced $15 billion over the next three years that we plan to spend on things like machine learning, IoT, quantum computing, Thin Tech. We’re going to set up several sites around the world trying to attract the very best people to do this research. It’s not for moon shots or selling things on other planets, it’s basically for dealing with real problems that we see in our existing ecosystems today in terms of expanding what we do to the rest of the world.
WWD: You’ve spoken about this concept of new retailer: merging online and off-line. You have physical retail holdings as well. How far down that path are you and what have you learned?
M.E.: New retail is something we do today and we’ll be doing a lot more of in the future. It’s a very exciting part of our business. Some of our competitors appear ready to kill the off-line retailer. We don’t want to, we want to support the off-line retailer and integrate it with online activities. Look at a market like China where 15 percent of total retail is online, that means 85 percent is off-line. We’re interested in the 85 percent of the growth opportunity in addition to the 15 percent. The merchants love it because they’re working with all the data that is incredibly valuable in deciding how they’re spending their marketing and advertising dollars. The other side is the consumer side: they want to shop online and off-line. Young people still want to go to the mall. People are not going to do all things online. It’s true in the U.S. and it’s also true in China. So they need to be integrated.
WWD: You mentioned the luxury pavilion, how does that differ from the web site and why did you segment it?
M.E.: Luxury is something we started to think about a year ago in terms of establishing a platform or pavilion. We talked to as many luxury brands as we could and said, if we want to set up a separate pavilion just for you, what will it look like and what will it have in it? We gathered all the feedback and built the pavilion with those features. For example, we have something called Brand Hub and it’s the opportunity for luxury clients to as closely as possible replicate what they have off-line online: the customer experience and the narrative. We’re not trying to sell anything. We have something called Tspace, it’s where a brand introduces a new product. We just did this for Loewe that had a special on handbags with hearts on them for Chinese Valentine’s Day. Sold out in five minutes. We think of this as an innovation or experimental lab. Then we have the flagship store and the online to off-line integration. It’s not about selling product here, we are building brands and that appeals to a lot of people who are thinking about that vast Chinese market and how to acquire customers and make sure they really understand the brand.
WWD: But do you understand the consumer? The age difference between the Western luxury consumer and the Chinese luxury consumer is significantly different.
M.E. Many luxury brands understand the consumer from the traveling Chinese consumer who is showing up in their stores around the world: 5 percent of traffic, 30 percent of sales. But they haven’t been able to capture data on those consumers. What we are offering — and it’s very different from Amazon because Amazon doesn’t share data — is we’re going to show you the data so you can target and market to them and understand who they are. In the future, we’re also going to tell you how to target consumers who should be buying your products.
WWD: You worked at Goldman Sachs and also won an Olympic Gold Medal in rowing. What did that teach you about the business?
M.E.: Not a lot. The connection between the two is the discipline and adaptability. Moving out of the banking world to the retail/e-tail world is a good change. I’m still learning, but this is a fascinating business to be in at a very important inflection point. For brands and retailers, the future looks a lot more positive than what you read in the newspapers. This is a big part of what we’re focused on, to support you and all the off-line networks around the world that are going to be very important to the future of consumers.
WWD: On the issue of counterfeits, people believe Alibaba is not doing as much as it says it’s doing. How do you change that?
M.E.: If I look over the past 2.5 years at where we were and where we’ve gotten, the brand protection initiatives we have in place take a long time for brands, retailers and small businesses to appreciate and understand. We have visual imaging technologies and algorithms on our platform today that survey all 1.8 billion products on the platform continuously and they take down tens of thousands of products everyday. And you say, how do people put so many on the platform in the first place? And the answer is that we have very specific rules, but we have 100,000 brands. We have lots of work to do but a lot is in the communication of what we’ve done and what we’re committed to do in the future. It’s a very, very important issue for us and if we can’t get it right and convince you that our platform is a safe place to be, then no one will want to be on that platform.
WWD: What do you see as the future of authentic Chinese brands going global?
M.E.: Chinese brands are producing come fantastic products. They’re relatively well-known in China and almost completely unknown outside of China. One of the things we’re going to do as part of New York Fashion Week is to have a China brand day in September where we’re going to focus on China brands that are going to sell their product.
WWD: Is there room for Alibaba to sell in the U.S.?
M.E.: Through AliExpress, we already sell products that are manufactured by Chinese small businesses but it’s a relatively small market. Our approach to the U.S. is not to come here and compete with Amazon. Taking the pie and slicing it into smaller pieces doesn’t actually help the consumer or the merchants. Our approach is to take retailers and brands and small businesses and put them on our platform so they can access the Chinese consumer. The Chinese consumer buying market today is about $300 million in the middle class and will double to $600 million over the next five years — and they love American products. So to come here to sell Americans American products is not interesting to us. Taking great American products and selling them to Asian consumers is really interesting to us and that’s our strategy in the American market.