Alibaba Group, the world’s largest e-commerce company, will soon strike the word “e-commerce” from its lexicon, says Alibaba Executive Chairman Jack Ma.
The problem, as Ma sees it, is that e-commerce, as distinct from traditional retailing, is rapidly becoming an outmoded concept as online and offline retailing become fully integrated. But what can you call Alibaba if not an e-commerce company? With its rapidly growing cloud-computing business and its initiatives in fintech, logistics, Big Data, the Internet of Things, artificial intelligence and virtual reality—many of which were outlined at an Alibaba-sponsored computing conference held in Hangzhou, China, last week—even “technology company” doesn’t seem to cut it.
Alibaba officials are making the switch to “data company.” This is because, in a nutshell, “Data is the blood of the new economy,” explained Alibaba Group CEO Daniel Zhang recently. Alibaba collects massive amounts of data on its e-commerce marketplaces, through mobile wallet Alipay, and from from digital entertainment sites and social media properties operating within in its ecosystem. “We use data to refuel (our) business and refuel the participants in the ecosystems to help our partners to do business easier anywhere in this fast-changing digital world,” Zhang said.
Effectively mined and analyzed, data enables businesses large and small to better understand markets and consumer behavior, improve products and user experiences, and even anticipate the wants and needs of individual customers. As a Morgan Stanley analyst recently noted, Alibaba has laid the foundation to transform itself into “a leading data commerce company that leverages big data/cloud computing to upgrade all of its businesses, ecosystem partners, and customers.”
Here are five ways Alibaba is using data today:
Alibaba uses the vast store of data it collects from its 423 million active buyers to generate personalized storefronts and product pages when consumers shop on Taobao Marketplace or Tmall.com. The feature is called “A Thousand People, A Thousand Faces,” and merchants are using it to deliver not just product recommendations based on a visitor’s shopping history but also individualized virtual-storefront homepages geared for particular types of shoppers. According to figures from Alibaba, GMV from personalized shopping recommendations tripled in the company’s 2016 fiscal year.
Alibaba’s data can also be used to facilitate product development. Through the use of consumer purchasing and preference data, the company helps brands test new products and hone their marketing strategies. For example, P&G used Alibaba to successfully test market a new sanitary napkin through an exclusive online launch on Tmall. Results prompted P&G to expand the availability of the product to offline retail outlets in China.
Historically, marketing has never been an exact science. But today Alibaba is using data to connect merchants with their most likely customers in a very targeted way. The company says it helped an unnamed snack brand nearly double its potential customer base in China by matching information on the brand’s existing customers with information on consumers in Alibaba’s database who had similar brand affiliations and similar purchase histories. The result: A higher click-through rate for a special promotion produced more purchases.
Logistics isn’t just trains, planes and trucks. It’s data, too. The company’s delivery services, operated through Cainiao Network, provides express courier companies with routing information through its e-shipping label program, which is replacing a manual system with a more efficient, all-digital solution. The program increased the accuracy with which packages were sorted at warehouses and routed to their destinations, taking the successful delivery rate to 98 percent from 95 percent. Based on the 33 million packages each day that Cainiao delivered last year, the 3 percentage point improvement means that an extra 1 million packages reach their intended destination without issue—and Cainiao avoided the costs associated with the added fuel and labor necessary to collect and reship errant packages.
Alibaba affiliate company Ant Financial uses data to develop financial products such as consumer loans and insurance products, but it also parses that information to manage fraud risk and minimize its loss ratio. Ant Financial’s Alipay unit has a “payment graph”—much like Facebook’s social graph—that identifies patterns in relationships among users who make payments to each other. With this payment graph, along with algorithms Alipay uses to measure the credit risk of applicants, the online payments provider is able to maintain its bad-loan loss ratio at less than 1 out of 100,000, or less than 0.001 percent.