Alibaba has its tentacles in a lot of areas.
But the Chinese giant is doing so much, so quickly and at such scale that — like the digital revolution itself — it can be hard to grab a hold of just what the company is up to.
Helping to explain it all — as well as the Chinese consumer, the war against counterfeits and more — is group president Michael Evans, who sat down with WWD on the sidelines of the National Retail Federation’s Big Show Monday following a main stage presentation.
Taking center stage at the company right now is its New Retail initiative, which seeks to digitize the entire retail value chain. New Retail can most clearly be seen in Hema, the company’s food concept that has about 100 stores in China now, two of which use small robots to deliver food to patrons. Consumers can also go to the store to pick up groceries or order them for home delivery. It’s a business powered very much by an app that can be used to order in stores or remotely.
New Retail is an idea that hasn’t fully come to fashion yet, but is on the bleeding edge of retail at Alibaba, which is only growing bigger as it spreads out beyond its home turf in China.
Alibaba interacts with 600 million people on its platforms, facilitates $780 billion in sales, connects 200,000 brands with consumers, ships 70 million packages a day and so on. By being the most-important player on the Chinese e-commerce scene, the company has made itself vital to the hopes of brands looking to expand in the still-quickly growing market.
While at one point it felt natural to describe Alibaba as the Amazon of China, when Evans took the stage at the Big Show, he quietly discarded the comparison.
“We are a marketplace, we’re not a retailer,” Evans said. “We are connecting [small- and medium-sized enterprises] and brands directly with the consumer. We don’t compete with brands or SMEs or retailers. We give all of those constituencies data.”
While Recode’s cofounder Kara Swisher had earlier described Amazon as a businesses protected by “moats” — or sizable advantages in areas from data to pricing to delivery — Evans said, “We’re not building moats, we’re building bridges.”
In his interview with WWD, Evans emphasized just how important those bridges are while also underscoring the growth of the company’s New Retail initiative to fully connect the entire retail process, how quickly the landscape is changing and what Alibaba is doing to keep up.
WWD: We last sat down just over a year ago, that’s at least a dozen digital years. What have you learned since then?
Michael Evans: As it relates to New Retail, we have another digital year behind us. What started off as something with [food concept] Hema, has now expanded to multiple other categories. And what we realized is that New Retail is not category specific. We realize that it actually can cover the entire retail chain. The application of the technologies needs to be category specific…but having realized that, it’s clear to us now that the opportunity in China is not just our online piece with one or two categories with online retail, but it’s the $5 trillion retail market.
New retail was an ambition initially and I think it is now showing that it can be a reality. Now there’s a huge amount of work to do to make that happen, but we’re as committed to it as we were initially and particularly now that we see the applications can be so successful.
WWD: What’s New Retail look like for apparel, beauty and luxury?
M.E.: When we did the Richemont/Net-a-porter-Alibaba China Joint venture, one of the things that Richemont and NAP were very interested in is New Retail, because they would love to take the off-line luxury maisons and connect them with the online flagship stores. But that’s a step-by-step process and we have not done it in luxury or fashion yet.
WWD: Why not?
M.E.: Just because we started in other categories. We stated it with Hema, we had existing relationships in consumer electronics and home goods.…When you think about fashion and apparel broadly, you have thousands and thousands of different brands and they’re not aggregating as a single brand, so New Retail means you’re setting New Retail for each one of the brands. A brand may have a hundred off-line stores or it may only have three. It’s a more fragmented business as opposed to things like home furniture. There’s more to do than we have time and its going to take time.
WWD: What’s the latest on Alibaba’s anticounterfeiting efforts?
M.E.: We’ve made huge progress. Our platform governance team in China has been both expanded and is really serious.…We [also] have a group of international people who work in platform governance, who spend a lot of time with the associations…to first of all understand their concerns and secondly to work with the platform governance people in China to address those concerns.
WWD: Fashion will probably never be rid of counterfeits, but it sound like you feel have the right pieces in place and you’re just executing now?
M.E.: I think we’ve done a better job than anyone on this, we should because you cannot be the market leader in luxury, you can not be the market leader in fashion and apparel if you aren’t the leader in anticounterfeit.
WWD: The Apple warning sparked a lot of concerns about the Chinese consumer, what should luxury fashion brands and the apparel market be thinking about when it comes to the Chinese consumer?
M.E.: Apple’s all about volume and the impact that a slow down in volume in product sales, how that impacts your topline and your bottom line. Luxury is much less concerned about volume. There are some luxury brands that are very focused on volume, but by far and away, the largest would rather curate the supply, have the ultimate brand experience for the customer and then slowly develop their relationship with their customer.
I can’t tell you what’s going to happen in the next six months or the next 12 months, but I can tell you what’s going to happen in the next 10 years. This will be the largest consumer market in the world, it will be the largest economy in the world and its going to be the largest luxury market in the world.
WWD: What impact has the U.S.-China trade war had?
M.E.: The trade war is unfortunate because when the two largest economies in the world decided that they want to get into a battle over trade, not only is it not good for the U.S. and for China, but the effect to all these other economies in the world is also significant, and the longer it goes, the more significant the impact is.
WWD: Alibaba has expanded strongly in adjacent markets in Asia and you’ve said Europe and America will come after that, any sense of timing?
M.E.: The long-term process of globalizing Alibaba, if you say three and half years ago we stated, this is a 15-, 20-year project to globalize Alibaba. We started with Southeast Asia and South Asia…because those are countries in our backyard and they’re also large populations, which tend to be underserved…so we can have a very meaningful impact in a relatively short period of time.”
WWD: Right now this is such a burning issue, everything you’re doing, you have Amazon as the leader and companies like Target trying to build share, if it’s 15 years before Alibaba tries to sell to these consumers, is it too late?
M.E.: We’re not going to wait 15 years to make that determination, but at the same token, the idea that we’d come to the U.S. and compete against Amazon directly that doesn’t make any sense, that would be like Amazon coming to China trying to compete against Alibaba.
WWD: They did.
M.E.: My point. This is not about showing up, this is about thinking, how can you participate and partner and be a good partner in markets around the world that are already well-developed.
WWD: Are you still explaining Alibaba to the world? It sounds like it.
M.E.: I just explained it this morning [at the Big Show]. I was listening to Kara Swisher and the point she made, which is Amazon is all about building moats. And the moats are basically designed to kill off other retailers, to hurt them. We’re all about building bridges and I really believe this is the fundamental difference in the business philosophies of the two companies.
And then it manifests itself in every other way. Everywhere we go, we partner. We don’t do anything by ourselves. Amazon doesn’t partner with anyone, it’s all about Amazon.