Our thoughts on Alibaba’s CEO & chairman change

Alibaba today announced that Joe Tsai and Eddie Wu, two co-founders, will succeed Daniel Zhang as Chairman & CEO for the Group respectively. 

Our thoughts: 

1. Alibaba’s recent changes have been swift, but clearly not over. Outgoing CEO Daniel Zhang clearly articulated the purposes of the restructuring. Jack Ma’s message in a ‘casual’ meeting with key executives back in May was quite clear: Alibaba needs to “return to Taobao, return to users and return to the internet”.

2. Jack Ma has a strong sense of purpose – we could see that from his first TV interview before he became famous. From the mission of “to make it easy to do business anywhere” to the creation/naming of key subsidiaries including “Taobao” and “Ant”, we could see the strong desire to support millions of small businesses to grow. 

3. Since Daniel Zhang took over from Jack Ma (CEO in 2015 and Chairman in 2019), Alibaba has shifted focus from Taobao, which supports mainly SMEs and individual sellers, to Tmall, which focuses on brands. We mentioned before that Alibaba was more like an advertising company – while Taobao contributes most of the consumer traffic, brands on Tmall contribute the majority of the advertising revenue.

4. The focus on Tmall was probably based on the predictions of continuous upscaling of Chinese consumers’ consumption power & habits. This thought impacted Lazada as well, which for a long time focused on brands, giving Shopee a chance to overtake. Shopee accounted for almost half of Southeast Asia’s ecommerce GMV in 2022, according to our calculations. 

5. But more worryingly for Alibaba, Pinduoduo was able to take off in China for almost exactly the same reason. Now Pinduoduo’s Temu is racing aggressively ahead of Alibaba’s own international ambitions (Lazada, AliExpress etc.).

6. Jack Ma’s return not only reset the organisation on a different trajectory, but also inspired the workforce. The return of the co-founders (including Joe Tsai, Eddie Wu but also Lucy Peng), who know the business inside out and who care about the business, are crucial in navigating this huge ship of close to a quarter million people. 

7. We will probably see Alibaba focus a lot more on initiatives to support small businesses and emerging brands – for example channelling more consumer traffic to them instead of large brands during 11.11. Some of these initiatives will probably lower the return on investment in the short term, but will make Alibaba more future proof. 

8. Will brands on Tmall revolt if that happens? Unlikely, because Tmall is still the place to go for brands – JD is limited in size and consumer traffic, Pinduoduo is hardly a comfortable place for any brand image, and Douyin’s video formats are high maintenance for brands. Brands will lose some traffic, but they will still be very comfortable working with Tmall. 

9. In its international business, as we mentioned in the Ecommerce in Southeast Asia report, we are already seeing positive developments at Lazada. With Temu raging, TikTok making commitments, and Shopee/SHEIN refocusing on growth, the war is far from over. It would be nice for Alibaba companies to really start flexing their muscles.