Watch this Fox Business News report on the world's largest e-shopping day, Alibaba's 11.11 Shopping Festival
Alibaba Group Chief Strategy Officer Zeng Ming is a soft-spoken but confident man.
In a Sept. 8 AliFest media briefing on the future of e-commerce, Zeng, a former university professor, explained to reporters how the spectacular growth of Alibaba's Taobao online shopping platform had transformed retailing in China, helping consumers in the country's remotest regions buy "the same things as people in Beijing or Shanghai or Hangzhou."
Taobao's reach continues to expand as millions of Chinese begin shopping online every year, pushing the website's annual Gross Merchandise Value (GMV, the total monetary value of transactions generated on the platform) higher by leaps and bounds. "We are very confident within a year the Taobao GMV will be more than (RMB) 1 trillion," Zeng said. In U.S. dollars that's about $157 billion, up from just $33 billion Taobao generated in all of 2009.
One trillion is a big, confidence-inspiring number. In terms of sales-producing power, Taobao's 6.5 million online store owners collectively have already passed Wal-Mart, the world's largest retailer with 2011 revenues of $444 billion. "We have definitely bypassed eBay and Amazon," he added. "We have probably passed them both combined in terms of GMV."
Zeng wasn't bragging. He cited those large numbers as manifestations of the powerful changes that the Internet is driving. The way Zeng sees it, most conventional ideas about manufacturing, about business management, about supply chains, all will become obsolete or drastically reshaped in coming years by e-commerce. "We've been talking about the information age for many decades now, but I think we are finally at a tipping point," he said.
Because of the ever-faster flow and non-linear spread of information via the Internet, mass manufacturing (where giant multinational producers dictate what consumers buy) will give way to faster and faster product development cycles. Consumer feedback, gathered quickly and widely shared among symbiotic groups of businesses, will make production more responsive to customer demand, leading to mass customization. Ultimately, consumers themselves will be able to order products according to their individual tastes and have them made and delivered in just a few days by highly flexible, on-demand manufacturing chains—a business model Zeng calls "C2B," or Consumer to Business, in contrast to the current B2C (business to consumer) model.
"E-commerce is much more than online sales," Zeng said. "We are fundamentally moving into a new business paradigm."
Yet e-commerce still has some evolving to do. Zeng commented on a recent price war between several of China's largest online retailers that devolved into an embarrassing social-media spat and sparked a government investigation into alleged deceptive marketing practices. "I understand why it happened," Zeng said of the price war, "but I don't think that is the future of e-commerce. I hope they would create value for customers and the whole value chain rather than just fighting for more customers."
Responding to a question from a reporter about online retailer 360buy, which instigated the price war, Zeng said: "I don't know how to put this politely … frankly, to me at least, the competition between 360buy and us is over … they are much smaller than Tmall (Taobao's B2C website) and frankly I no longer think about them very much." Taobao and Tmall have about an 80% share of China's B2C market, according to independent market analysts.
Confident? "We are moving past competition," Zeng said. "We are going full speed into C2B." The next target? Taobao platforms will generate RMB three trillion in GMV in five to seven years, Zeng said.