In this series, we explore one of China's most iconic internet companies that captures the country's rapid economic boom during the 2000s - Alibaba Group. Since its founding in 1999, Alibaba has grown to become the largest retail commerce business in the world in terms of gross merchandise value (GMV), with a GMV of RMB7.5 trillion generated from its China retail commerce marketplaces and a total GMV of RMB8.12 trillion generated from the Alibaba ecosystem as a whole during fiscal 2021.
While Alibaba is widely known for its success in Chinese retail commerce, the Group's ecosystem also consists of a wholesale business segment (which is what Alibaba started with initially), international e-commerce platforms outside China (i.e. southeast Asia's Lazada, south Asia's Daraz, and Turkey's Trendyol), an industry dominant cloud computing business, as well as acquired digital media, entertainment, and other initiatives. In this article, we introduce the components of the Alibaba ecosystem, and examine the constituents of the Group's colossal commerce empire. Other business segments are explored in detail in Part 2.
Alibaba Series Roadmap
Note: Alibaba Group's fiscal year ends in March, so "fiscal year" in our Alibaba series refers to the year ended March 31st.
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Undoubtedly, Alibaba's history is lengthy and detail-heavy due to the evolution of its many business units. In this section, we focus on summarising the events surrounding the Group's key businesses.
The company Alibaba was founded as a wholesale commerce platform in 1999 for Chinese wholesalers to sell to customers domestically and abroad, while Taobao was launched four years later as an online retail marketplace in 2003. To support the company's e-commerce business and facilitate transactions by bridging the trust gap between buyers and sellers, Alipay was created as an online payment platform with escrow functionalities in 2004.
As China's economy boomed in the early 2000s, the country experienced a surge in demand for higher-quality, premium products. To meet this demand, Alibaba launched T-Mall in 2008, while the famous 11.11 sale was pioneered and first hosted by T-Mall in 2009. The same year also saw the inception of Alibaba's cloud computing business, although Alibaba Cloud did not gain much traction until later on as the cloud computing industry grew in importance.
In 2011, Alipay was divested and eventually developed to become a diversified digital finance platform that was renamed Ant Financial in 2014. T-Mall was also expanded around the same time to include an international component, T-Mall Global, where brands from around the world could now reach out and enter the Chinese market. Alibaba went public on the New York Stock Exchange (NYSE: BABA) the same year.
2016 marks the start of Alibaba's foreign ventures, with the acquisition of southeast Asian
e-commerce company Lazada, followed by the acquisitions of south Asia's Daraz and Turkey's Trendyol platforms in 2018. In 2019, Alibaba had a secondary listing on the Hong Kong Stock Exchange (HKEX: 9988).
Ant Financial, now known as Ant Group, was scheduled to go public on the Hong Kong Stock Exchange and the Shanghai Stock Exchange's STAR Market in November 2020. However, the IPO was called off as a number of new online micro-lending regulations were launched in China (see our summary and analysis here).
The Alibaba Ecosystem
We now turn to a cross-section of the Alibaba ecosystem. Although Alibaba is commonly viewed as just an e-commerce company, and e-commerce does form the core of the Group's business, we think that an understanding of Alibaba as an ecosystem of companies (as the Group also describes itself) is more robust and accurate.
The Alibaba ecosystem consists of a domestic and global core commerce business, two supplementary business arms (i.e. cloud computing, and digital media and entertainment), an experimental business segment (i.e. innovation initiatives), and spun-off financial services associate Ant Group, which Alibaba has a 33% stake in.
We further discuss Ant Group in our Ant Group series.
*note: as of April 2021, DingTalk was reclassified from the Innovation Initiatives segment to the Cloud Computing segment
We construct a flowchart explaining the structure of the Alibaba ecosystem as follows:
In the section below, we focus on the core commerce segment and explore its constituents in detail.
Core Commerce Segment
Commerce lies at the core of Alibaba Group and accounts for 87% of the Group's revenue in the year ended 2021. The core commerce segment comprises of both retail and wholesale commerce in the domestic Chinese market, at the cross-border level between China and other countries, as well as in the global (i.e. ex-China) markets.
China Retail Commerce
Domestic retail commerce accounts for the bulk of Alibaba's commerce portfolio, with China retail contributing to 66% of the Group's total revenue in fiscal 2021 (see specific financial details in Part 3). We walk through the history and development of Alibaba's retail commerce portfolio below.
2003 - 2010: The Launch of Retail E-Commerce
The Taobao and T-Mall marketplaces are the two earliest launched platforms that form the crux of Alibaba's retail e-commerce business.
Taobao (Chinese: 淘宝) is a marketplace launched in 2003 that hosts products from individual merchants and small businesses. Taobao also serves as a "top-level traffic funnel" that directs users to Alibaba's various e-commerce marketplaces and other features within the Alibaba ecosystem. For example, users can access T-Mall products and access livestream features through the Taobao application.
T-Mall (Chinese: 天猫) is a marketplace launched in 2008 with a diverse range of premium product offerings from nationally and globally (as part of T-Mall Global, discussed further below) renowned brands and established online merchant stores with a strong track record. T-Mall also pioneered China's famous 11.11 Singles' Day sale in 2009, which was later extended in 2020 to become an 11-day sales campaign spanning November 1st to November 11th with a total GMV generated of RMB498.2 billion.
As of March 2021, there were more than 250,000 brands and merchants listed on T-Mall, with everyday items, fast-moving consumer goods, apparel, and consumer electronics being the most popular product categories for buyers. T-Mall was also the largest third-party e-commerce platform in the world in terms of gross merchandise value during the past fiscal year.
2011 - 2015: Expanding the Scope
At the start of the following decade, Alibaba expanded the T-Mall platform to include an online supermarket (T-Mall Mart) and a pharmaceutical sales platform (via Alibaba Health). The Group also launched a separate platform for buyers and sellers of niche products, named Idle Fish.
T-Mall Mart (Chinese: 天猫超市) is T-Mall's online supermarket established in 2011 where consumers can order daily necessities, fast-moving consumer goods, and selected general merchandise from the Taobao application with same-day or next-day delivery.