Jack Ma – E commerce in China and Around the World

a good afternoon ladies and gentlemen my name is vicky malhotra to Heaven Investment Banking for Credit Suisse in asia-pacific it is my honor to introduce our keynote speaker this afternoon Jack Ma founder chairman and chief executive officer of Alibaba Group a global e-commerce leader and the largest e-commerce company in China as the chairman chief executive of Alibaba Group he’s responsible for the overall strategy and a focus of the company started in 1999 as an online global marketplace providing export marketing services to Chinese SMEs Alibaba has over the years innovated and developed successful businesses in consumer e-commerce online payment cloud computing and micro lending areas the full spectrum of the modern world of e-commerce in the 14 years since it started Alibaba has become an online joint employing more than 24,000 people in approximately 70 cities globally last year’s alibaba’s team all and table are marketplaces China’s two largest online shopping websites achieved a combined annual transaction volume of over 1 trillion RMB approximately 157 billion u.s. dollars with a RIC record 3.1 billion in a single day of sales in November and this is just the beginning China’s internet population today is over half a billion while that may seem substantial the penetration rate is only around 40 percent there is significant room for growth Credit Suisse Research expects China’s ecommerce business to more than double in the next two years from about two hundred and seven billion dollars in 2012 to more than 500 billion in 2015 clearly the e-commerce business in China has developed to a force that no one can afford to ignore Jack Ma will now discuss how the secta has been generating grassroots economic opportunities and changing lives in China and beyond he will also discuss the future of e-commerce as many of you know earlier this year Jack decided to step down from the road of Alibaba Group CEO and from may 2013 will dedicate himself the role of executive chairman of Alibaba Group this move will give him an even stronger strategic vantage point from which to guide alibaba’s growth ladies and gentlemen it’s my pleasure to welcome Jack Ma thank you very much for the introduction I think internet really changes people years ago five years ago I never scared of speaking the public now I get a bit worried and scared when I was a primary school student I was so better at writing I never write because I talk a lot but now I start to write because everything I talk I talk you know years ago I talked whatever I want to say but today whatever I say it causes a lot of problems in China and I feel always feel nervous in speaking in front of the investors when I talk to the intrapreneurs I feel more comfortable because we are the same animals and we are different people keep on asking me what’s the difference between China ecommerce in the USA e-commerce and what’s the difference between Alibaba and Amazon and eBay for years I don’t know how to answer it and now I know how to answer it the difference between China ecommerce and the u.s. ecommerce is that the e-commerce in the USA is which I’d call is a deserting them is a desert it’s just a supreme entery to their main business because the USA infrastructure of doing business is so good so it is very difficult for e-commerce in the USA to grow to develop to surpass the traditional business but in China because of the infrastructure of Commerce is too bad and e-commerce become the main cause just like China Mobile not because China Mobile did such a great job because China Telecom was so bad years ago so that made China Mobile grow very fast and e-commerce in China is the same and a second in the USA ecommerce is online shopping it just to go shopping China ecommerce is a lifestyle if you go to Amazon you want to go buy things you buy what exactly you want you see this is

the thing I want this you get get it you feel happy China on top ah is different the things you order may not you get you may not the thing you want and people will love it oh geez it’s different people don’t like have the surprise but on top but they give you a surprise on almost every day every morning many of my colleagues they receive probably over to a package every day and they I ask why to new package they say the fun of getting things not the things you want the feeling of opening the package because every time you have a different feeling so it’s a lifestyle it’s true I mean you go to China if you use in Amazon eBay model quality model to to ask for China users you will be shocked and this is China a lot of things happen in USA may not happen in China and the second the the US ecommerce is mainly put to the tradition of business online and China you come has solved the problem of China that is a job creation and domestic demand we never know that China grows so fast on the e-commerce we are one of the small tiny island in the southern China ocean see they think a lot of otters they have like in the past or six months they have a four hundred and sixty percent of growth and that’s small tiny island and we find a lot of soldiers probably stay there there they do not have place to buy things that they always order from top up so tau ball go to the second and third tiers every cities that because they don’t have the supermarket they become the main trend of shopping on the local area and people keep on asking me what’s the difference between Amazon eBay and Alibaba how is the Amazon eBay they are ecommerce company and Alibaba is not an e-commerce company Alibaba helped others to do ecommerce we do not sell things and we are not a company that normally China Connor we call ourself a company drowning platform a company that is running an ecosystem we are almost everywhere people say Jack you know you are in the b2b and b2c and you’re calling C to be on a finance and online payment logistic cloud computing you are everywhere not because we’re greedy not because we want to do it because we have to do it if we cannot if we do not to do it China ecommerce in the years will collapse I remember nine years ago when I started that a leap a people say yet don’t touch the financing sector because it’s illegal you may be in prison and I we taught ourselves if we don’t do it the China ecommerce were always like I got chat room everybody said it’s a good thing and I don’t pay you don’t get the things so I say well put me in the prison let’s make a shirt that Ali pay the payment solution works and people say the payment solution is such a stupid idea it’s an escrow service I pay you hold the money and you get the things you pay the money if you don’t get the things you want return the money they say it’s a stupid product and I say as long as I solve the problem I like stupid things you know let’s make stupid things smart keep on improving every day today we have over 800 million people register using Ali pay as the count and a leaping up today solve the ecommerce problems we are paying the electricity water bill and even taxi and last week I went to a vegetable market somebody say we accept Ali pay because they say Ali paid with you know you get the force money and the Ali picker solve that problem so we are actually building up a infrastructure of China and we are building up the platform and we believe ecosystem I don’t we don’t believe the empire in the last century business where you’re big you call yourself Empire and I don’t like the idea of empire I’m payin pilings join me or I kill you ecosystems let’s work together improve the business environment and we discovered other thing that the tradition of business because some ecommerce traditional business is is having a tough time now traditional business including the department store the supermarket and they are all facing childhood challenge a lot of companies say well funny thing in the world everybody complete the others whether they fail you know when I feel it’s all the other people’s afford people say because of tapa we lose our business who

are getting bad and bad unfortunately they cannot stop this trend their business is going to be tougher and tougher the second industry that’s going to face in challenge challenge is traditional b2c e-commerce model which I caught em is a model it’s going to facing huge challenge and we believe that putting its it won’t work to put to the traditional business just a purely online that’s not called ecommerce in the future business will not make money by the because of the skill it’s because of the the valley the different value created people’s telling us well because our skill is not a big enough when my skill is getting bigger I’m going to make money I’ve checked the Amazon they have fifty two billion dollars are they still do not make money so skill does not make any sense and in the future people will not make money by how many things you sell at one time people make money by how many different of things you sell at one time the traditional thing you want the same standard a quality skill but these things will be changed because of e-commerce and the second or the third is that in the future people you will not make them any but make money by the service you offer good service you do it’s going to be how efficient you are and Alibaba we we our company right now have twenty does not including the Financial Group we have a 25 units 25 different business units maybe in the future we might have 50 I don’t know right we have done many units and we are almost in everywhere we control our head counts by efficiency we have we only have to 24 to the 4000 people I tell your story last the thing I feel proud of the two years ago we we start to have a budgeting meeting and I asked my team well year 2012 if we want to double all the numbers we have how many people we need and people say seven thousand eight hundred new people and it’s a no no no check it again and then they say six half thousand eight hundred people as you know and they might my people asking you how many you want I said 200 there’s no impossible 200 my answer is are four years we discuss we should hire more people for future I’ve heard this for 10 years now let’s let’s let’s just do the efficient thing and I told all the management if we have net income net you know hat count over 200 even one people we should have no bonus for a whole year for year 2012 and then we started stat the plan year 2012 we never lose 1,000 people or the number doubled and I say if we want to create more jobs for the others let’s keep our head accounts make sure because right now we have over 500 register users on top up no matter how many people we hire ourself we cannot be it’s always not enough people so we can focus on technology focusing on making sure the platform is efficiency focusing everybody makes the difference in the platform that will make the difference so and the other things I would say is that the amateur model I’ve been looking into with great respect in years they were facing challenge because people asking how you can make money right the traditional b2c is that they buy products they they you they they have a good service and they do they deliver the products themselves and they’re using even their own payment and things changed because of the infrastructure in China we build up which we believe that the many companies are using the infrastructure like a public electricity public water easy to use and more efficiency so in the past 10 years we’ve been focusing on two things changing improving the sales channels of e-commerce in China and second making sure the consumer feel comfortable about e-commerce we’ve been working on that very hard and I say Taba has over 500 minute registered users every day we have over a hundred and million people visiting shopping our

site and over 70% of the package delivered in China all created by our company and we created direct indirect jobs for China over 11 million people that means over 11 million people work on our platform so nothing changed the way that ecommerce did it’s impossible that you want you want to buy big lot of things and sell online using your own IT infrastructure you even using all investor your own logistic company China today we have a deliverer people all together probably less than 1 million people and we need we believe China will have at least 8 million people on deliver products and I don’t think nobody can if you want to cover such a huge land it’s impossible for somebody in China to manage a company that have over 1 million people so we have to using the public utility public service on logistics or payment on credit system now today what we are doing is that we are changing the behavior of manufacturing in the past of three months I think most of the big manufacturers came to us years ago we never talked to a big manufacturer because they think huh rubbish you know you have to tiny small we are good quality we have a good channels but today they will change because we create we sold one trillion RMB last year that fundamentally changed their thinking last year most of the manufacturers think if we produce a hundred TVs I only put a five on the online today they think they should have put at least 250 online so many of the manufacturers try to change their way of manufacturing they and after this thing changed I believe the e-commerce were changed and the third which I believe the next tenure because of the mobile internet and because of the of the cloud computing the e-commerce will grow even much faster and we invested highly on cloud computing not because it is a fancy thing because this clock computing because of the data’s we collected can help many many small medium-sized companies I told many people yes we did destroyed a lot of traditional business we do not destroy the business with this church tradition of thinking they think that most of the business when they study when they have the competition the first step they lose is that then they say oh I don’t have any competitor second step is a oh that you know that’s not a competitor and the third oh my god this thing grows so fast the force this say let’s catch up too late these are four steps that most of company in trouble so we check hum which is step are you in and I’ve seen a lot of a traditional business always try to challenge us four years we are considered to be crazy guy people who telling lies to people want to raise more money people on an IPO it’s ok people look down upon you you know as long as the people who support us bro Alibaba believe one thing if my customers do not make money we will never make money and we believe one thing that helped in this mom always try to help do not do not try to help help successful people help those people who want to be successful the day when we grow up 10 years ago when out when Taobao was founded it’s so difficult to find supplies to sell in tapa I remember the day when we launched the May the 10th we have a seven employees for Taba and everybody said well let’s get a four products let’s get a full pretzel 24 plus should be listed on Taobao and I’m one of the seven people I came home looking for things that I can sell on Taobao I only care got a two so that day I said and realized the c2c model want to work at that time so gather 17 products list in etapa for the first of three days nobody came to buy so we had to by ourself he buy me and I heard and the first a week later somebody came to sell everything they sold we bought it we have a whole room bout a room of garbage and we told people we really buy it yourself today we have over 1 billion product

listings on our site and then number we today we are not getting more numbers we want to controlling the numbers why China ecommerce grow so fast when we never try to convince successful people online because when I go to people asking those 46 40 50 successful people ask how many people are here here top or buyers nobody raised hands I said that’s right if they raise hands something wrong we saw a marketing strategy we should convincing those people who are 20 years old China because one China policy many years ago you convince parents you can miss children today you can miss your children you can his parents so get the kids get the young people because they are the trend of the future so today you go to school you go young people that you see all the young people using Talpa and they receive tens of packages every day and one of the ministers came to my other jack I never Xiang ping online I’m never using tau bar as a cert it’s not a fashion that’s nothing you should be proud of because people will leave you I’ll say this guy never shopping online he’s not a fashionable right he’s the guy is live in last century so if you want to be the person live in this century and last century shopping on top of the world is changing and I always tell many of my friends who are in the business successful business area it’s so difficult to be back to yesterday if you do not a change yourself you got not going to have a future and what we are doing we want to change China we’re not doing e-commerce we believe this is the opportunity that this century give us using the technology using the transparent open share a responsibility philosophy that internet brings we improve China and we’re focusing on helping improving those young people because they are going to change the world in China so we do not consider ourselves as a ecommerce company we consider ourself a company that improves China created jobs demand and intellectual properties and everything that we believe we can do by the by the young people that we gather together so that’s what I want to talk talk about and any questions you have any questions I’m I’m ready and happy to out sir thank you very much okay thank you jack very compelling speech we probably have about five or ten minutes for some questions so you know if you could raise your hand and I’ll point to you and then please direct the question to Jack thanks Jack for your very fascinating presentation I have two questions one is you had a bet with a traditional shopping or guru in China mr. wanjin in the end of last year so if you can have a gas in five years of time that how much of the online sales percentage is a total percentage of retail sales in China will be the second question is you mentioned about you more prefer rely on the public facility for money liquidity or for even for the logistics as well but we read from the news line recently you set up a lodge is a company with a traditional company in time as well so what are you thinking behind that especially you’re working with the traditional retail company okay yeah I had a bet with the one gentling and that actually he bet on me he won a bet with me I don’t guess to me I I never bet if I don’t know the result because five years the battery is a ten years later whether ecommerce will be having 50% of China retails today I’ll leave up a group alone have we like that 5% of the China total retailer it market in China and I think in our mind especially on the mobile internet there’s no online offline everything’s online one’s yelling and those successful businesspeople they’re too far away from internet time they still think it’s a business a

channel this do you think it is a business model no it is a lifestyle young people are changing and we think five years very conceptive li maybe 30% yeah it’s going will go much faster I told the Prime Minister that next to five years is the golden period of e-commerce of Internet in China next of five years because 10 years later I bet the bet I bet is nobody would talk about e-commerce internet because it’s such it is such a common thing like electricity and nobody would say electricity is such a high technology and this is what we want to do we wanted ten years later nobody mention about e-commerce nothing for you proud of it’s just of your life right and I work with the tradition of business I never hate them I love them you know they they have money and they want to do it why not right I work do not want to build up our own logistics system China today they’re probably five years ago I mean yeah five years ago I went to the China post office post op Bureau and I say let’s work on together for deliver system they have 80,000 sort of no share house or all of China and we work it’s not if because they were beautiful last a century and then the past five years we helped us they the the private sectors there are five private companies deliver products today the five company they probably have 60 or 70% of deliver business look just a business angel they grow so fast the miracle de mid is on November the 11th Alibaba made over three billion dollars sales for one day that’s a miracle the miracle is that that day over 78 minute package need to be delivered in November winter time and these five companies they achieved it I asked these guys how could you do it because normally their memory is only 220 million packages that day 78 million packages they say we caught anybody good anybody can walk help us to deliver and that’s the hope of China e-commerce that’s the hope of China private sectors not the SOE I think it’s very difficult to convince SOE guys to work that hard right and that’s the future of China and what we want to do we do not want high more people to deliver deliver products we should help those five companies making sure they should not spend our money on buying land negotiate with the government they should focusing on improving their services high and training good people and develop China should have maybe another three companies bigger than ups and a Federal Express so we work with the traditional business we invest heavily on that we want to build up by infrastructure that 24 hours any place you order online within 24 hours you will get the products and we are not we do not want high one-minute people we want high nobody facility these people to do it that’s our dream and we just decided it’s a I hope to retire but that thing probably will make me now retire for another ten years yeah it’s a over there please yeah please go ahead I a lot of Internet companies in China have gone public in the US and in Hong Kong to a lesser extent they all have to have this VI e structure was wondering if you might be able to take us through your thought process of when you took I like took control of a leap a and second question is if you have any advice for investors in terms of looking at other Internet companies in China and how they might be able to avoid the risk of having controlling insider taking control of certain assets yeah first I uh I like the question and as to now I still don’t know I don’t understand the V ie things because later myself or joke told me that what is VI e and I really love VI e and I think they’re such a great system that really helped China help ecommerce help Internet but we shouldn’t make it a transparent it’s not like nobody talked

about it but everybody’s doing it it’s so many things happy in China right nobody talked it but everybody’s doing that we want to making sure the VI is is I want this thing is be transparent it’s legal it’s check there everybody take it for the alley pay issues if we don’t do it as a CEO I’m the guy have to make the tough decisions very clear if you don’t if you don’t just CRO sure if you don’t do the governor’s say you will never get there Rice’s if you don’t get the license topic lapsed and we are at the area that a financial you know financial financial market is such a strictly regulated it’s nothing that my one of my investors are Jack you know you know everything saying this way you can do it that way I say yet but not in the financial market are not in the company that that big size when you have more than one trillion RMB transactions happening every day one tiny one tiny thing will make you in trouble so we’ve been discussing with the government very clearly we have if you want to get license to what exactly they say and where we get the license we try to convince that the government what’s the way we believe right and I still feel proud for what we did for a leap a and I think the investors were at the end there were no why I do this and how we solve the problem later guess it’s never you should never do if the CEO like me if a business that sighs like me let us if you do it because for your own interest you’re gonna know where we are not a public company but we are just like a public company millions of people look at us I don’t want my people walking on the street people say this guy’s still the company so I would say people will see the results of a leap a pretty soon how we solve it why we do it and it’s the it’s not the policy it’s not only the policy should believe it it’s the people you believe him I would have saved my investors like I’ve been working with them Masayoshi Son Yahoo these guys we’ve been working together more for more than 10 years if we are the people cannot be relied on we will not be like today if we do not if we want to do things for ourselves Alibaba Group will never grow that fast and I would write I would like to find a person that stood the products if I investor 550 million dollars so he can bring me over 30 billion dollars I wouldn’t trust that guy but in China everywhere in the world it’s about the people you believe in and then trust to him at the tough time he has to make the tough decision there’s at the tough time there’s no perfect if there’s no perfect decision but you have to make decision as the CEO I would have fired the CEO if he did not take the decision at that time it’s always sitting down the chat thing everything’s good and the business gone I want the business that’s all the investor want and he has to make decision find the right people I’m making sure the right people can prove his ability only at the tough time and I have to and good thing is I’m gonna retire I don’t have to make that tough time I can talk like investors ah go do it right as I see you you have to do it but as investors Wow you should do this you should do that and I will be back to you guys sorry that’s question right here what just one sec he’s gonna mean the mic thank you jack for the brilliant speech it’s very inspiring I just want you know because currently ecommerce companies in China still experience experience the problem how to monetize their transactions although they are indeed in large amount and I understand you try it and also not that smoothly and you mentioned you want your customers to earn money but what if your customers don’t want you to earn money if what if my company yeah you mentioned

you want your customers to and money yeah but what if your customers don’t want you to and make money all right thank you well guys I tell you one thing first Alibaba is a company then make a lot of money every I think in a Futaba for 10 years we never internally have 15 minutes discussing how we make money I give you my word and which we promised again again for I get happier we should have a meet and discuss how we make money always cancel that may trigger that meeting is not important we are making a lot of money what we do if you come to our internal meeting you will find that all the young people say no no no that money is enough we charge too much we charge too much today ecommerce company in China if you do not make money today it would be very hard for you for us to imagine you will make money in the future it’s such a wonderful time making money now and people a lot of SMEs small power sellers they want us to make money I receive a lot of emails jack please make money if you don’t make money we are bankrupt because we rely on you as it don’t worry about us don’t worry about us we are making money I think when we appeal you will know the numbers it’s our competitors do not want us make money it’s the big powerful traditional business donors that want us making money I feel guilty if I make too much money because it’s against our mission our measuring is helping small business doing business easier and this is our mission we keep up for 13 years were people for another 92 years if this is our belief we charge a tiny little bit money can make because it’s the efficiency we are making so I think making money for Alibaba is not a big problem but making money for some traditional e-commerce company which in your mind like Amazon model is blood product problem it’s impossible for you guys to buy things must sell online and using your own IT using your own logistics system and say when to certain size I’m not going to make money no that’s that’s a fish story we told this start a you years ago ten years ago when we studied ecommerce people say Jack Ma this is crazy guy he want to commit to suicide that’s cross finger and see how he died right and because the cross finger we groped today if you want appeal if you want to be a strong internet company commerce company by free by large size and you want to committed suicide we help you die quickly we have you know so many bad do Cena Tencent and so all the above we are all there you if you want to die we help you die so it’s things changed so many big traditional business in the wake up the situation changed it’s not like a skill how big skill you will and say when my skill is big I can take money no we would never give you a chance to have the skill if we give you the skill you will not make money so things changed situation changed the story we told about 10 years ago work today you’ll tell the same started 10 years it goes no want to work the only thing you should believe is help others to successful help your surprises be successful help your consumer to benefit and you squeeze yourself yeah that’s what I could do one last question perhaps back there thank you so much yak just quick question regarding mobile Internet’s you mentioned this is one of the most important trends watch out for going forward and I just wanted to hear your thoughts on how you’re gonna grow the mobile internet on Alibaba and maybe on the hardware and software side do you envision yourself partnering with some some other companies thank you yeah I think that mobile internet is going to be very challenge to China internet and to us three years ago we started prepare for that and we using all kinds of ways but we believe one thing the cloud computing the data is is one of the that the basic things you find a wing for the mobile and you should hide the great people and partner with the others and we also invested highly but we’re not that lucky and not the creative so

creative like like a $0.10 for the wishing such a powerful thing right and I believe in the internet world is like aircraft period ok aircraft carrier if you call just to take an example the Internet company is like an aircraft carrier mobile Internet are the fighters in the place on aircraft arcavir they have to work very well if a pure mobile internet company is just like a pure air airplane fighter will never fight very long for this it’s not a strategic only they work together smoothly that company will good good so today in China we see two aircraft carriers one is tension and the other is Alibaba Group because we all potatoes we also the other one is like a battleship right which is good I mean you know we never know that the aircraft care is better than battleship or at different fighting ways but for us because we’re already that size so we have to know one thing that how we can develop our own fighters maybe it’s not a it’s such a bloody example I mean but I just people never sell aircraft carriers but you can buy planes so merge and acquisition having more people new people joining because of different the traditional business people fill in the internet time because they see internet from traditional business angle we internet company we will fill because we see move by from internet angle we should look from the other angle we wing on the business we wing the traditional business because we go we see the ink twist from the internet angle so we should have see from the Mumbai ink angles and I believe nectar three five years will be the wonderful interesting time for mobile internet and one of the one of the messages I give to the our pal Bob mobile unit is that destroy tower bomb the the ink the PC Thapa do anything you can to win them if we if only you know how to revolutionize yourself you can revolutionize the others so traditional business always think well I have an e-commerce how can you support me how can you support my traditional business today what we should do is how we traditional business can support the e-commerce how Internet company can support the all the facilities all do YouTube all the things we have how can we support our mobile unit to win so we are working pretty hard on that and we are confident but we need some luck and luck takes time a lot means what my lucky means very good things into your customers heart somebody someday the luck will come if you think about the customers if you think about it employees if you care your investors luck will come and that’s what I believe cuz in custom number one in probably number two shareholder number three at the critical time I’m a critical time the CEO always remember who’s a customer who are the people you work together and who other people support to you where you need them the investors usually the supportive way time is a good you