Alibaba’s Taobao and cloud units will directly answer to the conglomerate’s CEO, Eddie Wu, as the tech giant seeks to take on budget-focused PDD. While grappling with low consumer spending, Alibaba has undergone drastic changes in 2023 amid a corporate restructuring and multiple leadership changes. — SCMP
Alibaba Group Holding’s decision to put its ecommerce and cloud units under a single chief executive is set to make China’s largest online market more technology-driven and consumer-oriented as it seeks to fend off rising competition, according to analysts.
Alibaba, owner of the South China Morning Post, on Wednesday named Eddie Wu Yongming, the co-founder who is already CEO of the conglomerate and its cloud unit, as head of the Taobao and Tmall Group (TTG), the tech giant’s key revenue driver. He replaced Trudy Dai Shan, another Alibaba co-founder.
The change pushes Wu, a long-time aide of company co-founder Jack Ma, to the front line of defending the company’s dominant ecommerce position at a time when its smaller rival PDD Holdings has shown strong growth momentum. In his first letter to employees after taking over as Alibaba Group CEO in September, Wu wrote that the company will sharpen its focus on being more “artificial intelligence-driven” and putting “users first”.
Wu’s more expansive role, along with the expected promotions of a young generation of executives, will make it easier for Alibaba to embrace consumer-oriented operations and AI applications in its competition with PDD, which runs Pinduoduo in China and Temu overseas, analysts said.
Li Chengdong, founder and chief analyst at e-commerce consultancy Dolphin, said Alibaba has “blurred” its focus on e-commerce in recent years as it evolved into a sprawling business empire across a variety of sectors, opening the door to its more budget-focused rival Pinduoduo, which is known for cut-to-the-bone deals.
“Alibaba is facing fierce competition from Pinduoduo, and the stakes are very high, especially from the loss of users to its rival”, Li said.
But Wu’s background could help make Alibaba’s e-commerce operations more technology-driven, according to Wang Xiaoyan, an analyst at market consultancy 86Research.
“Taobao is expected to distribute traffic through algorithms, similar to Pinduoduo, in our estimation,” Wang said. This will make the platform less labour-intensive, she added, and reduce operating costs for merchants, benefiting Alibaba with higher margins in the long run.
Chelsey Tam, a senior equity analyst at Morningstar Asia, noted that the frequent changing of the guard within Alibaba this year may also be contributing to general “confusion” about the company.
The drastic changes that Alibaba has seen in 2023 include the announcement of a complete restructuring into six independent groups in March, followed by multiple changes in top management, including the departure of Daniel Zhang Yong as CEO in September.
Zhang was meant to stay on and oversee the public listing of Alibaba Cloud, but he wound up leaving in September. Then last month Alibaba aborted the plan to spin off its cloud business, citing the impact of US chip sanctions and a re-evaluation of market conditions.
Alibaba also recently suspended a planned public listing for its grocery business Hema Fresh. Both moves dealt a blow to Alibaba’s ambitious restructuring plan.
Alibaba’s previous bet that Chinese consumers would “upgrade” their spending did not come to pass amid a slow economic recovery in China after the country ended its strict pandemic control measures last December. Three years of Covid-19 controls and lockdowns had made consumers more price-sensitive.
Chen Hudong, an analyst at Hangzhou-based ecommerce consultancy 100ec.cn, said Pinduoduo has benefited from consumers holding back on discretionary spending, as it is a more likely destination for shoppers looking for greater value for money. – South China Morning Post
