Daniel Zhang: The CEO Changing the Way China Shops

Jack Ma is full of business maxims. One of them used to be that a good chief financial officer could never make a good chief executive officer. But in 2014, he broke his own rule when he named Daniel Zhang as Alibaba’s new CEO.

In the three years since Zhang took the helm, he has led the company to a listing on the New York Stock Exchange, overseen multibillion-dollar takeovers and investments, spearheaded the transition to a mobile-first business strategy and introduced the world to New Retail, which has prompted a seismic shift in the commerce sector as Alibaba’s technology continues to blur the lines between online and offline shopping. All of this culminated in a fiscal first-quarter earnings announcement in August that was the company’s best to date and saw BABA shares reach new highs.

Not bad for a finance guy.

“I never dreamed that I would be a CEO of this company, because I have a finance background,” Zhang says, offering a take similar to that of Ma. “I just want to be a part of this, not the guy who runs this.”

 

WATCH: This is how 11.11 grew into the world’s largest one-day online shopping festival under Daniel Zhang’s leadership.

 

He very much is the-guy-who-runs-this, however. While his approach may be understated—indeed, most people couldn’t pick him out in a line-up—Zhang’s business instincts have driven Alibaba’s change from a pure e-commerce company to a technology giant, putting its $432.6 billion market capitalization among the most important tech companies in the world. He has his hands in virtually all aspects of the company, making sure his teams are executing on Ma’s vision. The focus on even the smallest of details highlights a key difference between Alibaba’s founder and Zhang.

That may be one reason why Alibaba recruited the Shanghai native in the first place. Zhang started his career in 1995 at Arthur Anderson, though not as an auditor. At the time, China’s securities markets were just taking off, and Zhang helped clients to trade on the new platforms. He was eventually charged with launching a new office in the western city of Chongqing.

“That was the first time I experienced entrepreneurship,” he says. “You have to build a new business from scratch.”

Daniel Zhang

Daniel Zhang rallies the troops during the 11.11 Global Shopping Festival in 2015.

In 2002, Arthur Anderson’s China offices merged into PricewaterhouseCoopers, which is where Zhang stayed for another two years. He was then hired as CFO at Shanda Interactive, a Chinese online gaming company that was trading on the Nasdaq (it’s since been taken private). It was a fateful breakfast in 2007, however, with Alibaba Group Executive Vice Chairman Joe Tsai, that put him on his current course.

“He said, ‘Why don’t you go to Hangzhou to meet with Jack and know more about Alibaba,’ Zhang recalls. ” I said [to myself], ‘That’s not bad.’ At that time, Jack was already very famous.”

The sit-down with Ma was “quite relaxed,” he says. “We didn’t talk about business. We just have a chat for one hour, in his small office. Much smaller than today.” An offer was made, and after two weeks of weighing the decision, Zhang accepted.

“The reason is because I think e-commerce has a bright future and it’s just at the beginning,” Zhang says. Unlike the gaming business, e-commerce is “more relevant to the people’s daily life.”

Daniel Zhang

Zhang announces in 2016 that Taobao is now a mobile-first platform.

He started as CFO of Taobao Marketplace, the company’s most trafficked platform with 10 million daily visitors at the time (Mobile Taobao alone has 189 million daily active users now). But Zhang’s purview extended far beyond his job title, including operations as well as finance. That led him to B2C shopping site Tmall.com, known then as Taobao Mall. In 2008, the site had just launched—and was struggling after losing its general manager.

“I thought, this is such an important business, if nobody will take care of this, I will take care of it temporarily,” Zhang says.

His first priority was finding a way to put the newly renamed Tmall on the e-commerce map in China, something that was not easy given the popularity of Taobao. He looked to the biggest shopping day of the year in the world’s largest consumer market for inspiration.

“One day I talked with my team, I said, ‘Let’s do a campaign, like our [version of] Black Friday,’” Zhang says. “’But we need a good day. So [let’s] try to find a day which is a Chinese festival,’ which is helpful for a big event.”

Daniel Zhang

Zhang speaks at the World Economic Forum in Davos last January.

There were no Chinese festivals in November, though, so Zhang latched onto something different: Single’s Day, a little-known holiday for the unattached, China’s bachelors and bachelorettes.

The first Single’s Day in 2009 was a big success for Tmall. The event brought in RMB 52 million ($7.8 million), a significant jump from its typically daily gross merchandise volume of less than RMB 10 million. A year later, thanks to a growing awareness among Chinese consumers, the figure soared 1,700 percent to RMB 936 million. In 2011, it jumped again, hitting RMB 3.4 billion. For 2012, Alibaba set a goal to reach RMB 10 billion. The festival’s GMV ticked passed that number by 1:30 in the afternoon, eventually closing at RMB 19 billion.

In 2014, after serving as Alibaba Group’s chief operating officer for less than a year, Zhang was tapped as CEO. 11.11’s surging growth has continued apace, reaching a record RMB 121 billion last year, or $17.8 billion. That’s half of the total value of an entire day’s consumption in China playing out on one platform, and more than eight times that of Hong Kong, a major shopping destination in Asia. Even Zhang himself gets in on the action, though not right away.

Daniel Zhang

Zhang talks with Alibaba Group Executive Vice Chairman Joe Tsai at the company’s Investors Day conference in June.

“I always miss the first two hours because I don’t have time to buy,” he says. “I have to monitor the whole process.” What did he end up buying last year? “A jacket, some shoes.”

While Zhang’s push to grow GMV has put Alibaba among the world’s top e-commerce companies, he has focused just as much on changing the nature of online shopping as transaction turnover. For 11.11, that meant introducing entertainment and media to the annual shopping festival in the form of a live televised gala in 2015. The event, which reached an even larger audience last year, catalyzed new levels of user engagement as viewers at home could interact with the show via their mobile phones during the broadcast.

It was Zhang also who thought to use 11.11 as a testing ground for new innovations in commerce. Last year, Alibaba introduced an augmented-reality game and virtual-reality shopping experience to the festival, while furthering the online-offline integration of stores. For example, consumers were able to touch and try products at Intime shopping mall locations that were for sale only online on Tmall.

 

WATCH: Zhang explains “New Retail” at the Viva Tech conference in Paris in June.

 

Zhang oversaw Alibaba’s pivot to mobile as well, as smartphones have become the primary way for Chinese consumers to access the internet. This mandate started while he was still COO. He replaced the entire mobile team—including the head of the division—with young people and started to refocus Mobile Taobao as a social-commerce platform. Zhang attributes this move to the app’s “stickiness,” he says.

“We are far more than just a shopping destination,” he says. “We are consumer media. We are a content-driven platform.”

He has also pushed the company to use the latest advances in data science, cloud computing and artificial intelligence to create a New Retail experience. This approach has shown significant advances in the past year, including a “See Now Buy Now” fashion show, a first-of-its-kind supermarket, called Hema and a major tie-up with global hotelier Marriott International.

Zhang’s work has helped to grow Alibaba to such an extent that if GMV were GDP, the company would rank 22nd on a list of the world’s largest economies. And if the company reaches its goal of serving two billion customers, creating 100 million jobs and supporting 10 million profitable businesses over the next 20 years, Alibaba will rank fifth behind the U.S., China, the European Union and Japan. As far as Zhang is concerned, Alibaba is already operating as one.

Ma Zhang Hema

Jack Ma and Daniel Zhang at a Hema supermarket in Shanghai in July.

“Together with all the partners, all the participants in the ecosystems—buyers, sellers, service providers, content providers—today, altogether, we constitute a real economy,” he said at Alibaba’s Investors Day conference in June.

With such significant growth in just 10 years in the head office, maybe Ma knew what he was doing when he ignored his own advice and tapped Zhang for the role.

“That’s why when he announced my appointment as CEO in his letter to staff, he made this the exceptional case,” Zhang says.