In China today, Perrin Beatty moderated a panel discussion between Prime Minister Stephen Harper and Alibaba CEO, Jack Ma.
Every Canadian has heard of Amazon, but not all have heard of Alibaba. Yet.It’s an amazing story: Alibaba's transactions last year totaled nearly $250 billion, compared with $116 billion for Amazon. Every second, Alibaba handles an average of 500 orders, worth more than $9,000. Amazon’s equivalent transaction value in 2013 would be less than $3,700 per second. There are more than 300 million active users for Alipay; this makes it the third-largest payment system in the world, after Visa and MasterCard.
Alibaba is having a transformational impact on global commerce.
The Canadian Chamber was pleased to participate in the discussion. China is an important market for Canadian businesses. On Oct. 1, the Canada-China Foreign Investment Promotion and Protection Agreement (FIPA) came into force, a huge boost for an already impressive relationship. China’s direct investment in Canada stood at almost $16.7 billion in 2013, an increase of 36.6% since 2009, while Canada’s direct investment in China totaled $4.9 billion in 2013, a 38% increase over 2009. On the trade side, China is by far Canada’s fastest growing trading partner, with imports from Canada quadrupling from $5 billion to $20 billion and exports nearly tripling from $18.6 billion to $52 billion.
Perrin Beatty is in China with a delegation of Canadian companies and will participate in the APEC Summit in Beijing later this week
Background on Alibaba
- Ecommerce is expected to reach 10% of all retail in China by the end of 2014. (Compared to 5% in the U.S.)
- The domestic Chinese market is dominated by Alibaba through Taobao (consumer to consumer, like eBay) & Tmall (business to consumer, like Amazon) with payments facilitated by Alipay (like PayPal).
- During the beginning of the China domestic ecommerce boom in 2005, Alibaba received a $1 billion investment from Yahoo in exchange for 40% of the company. This gave it a huge financial advantage over everyone else. Included in this relationship was consumer marketing know-how and intellectual property
- Alipay’s escrow based payment platform solved the problem of consumer trust and adoption for Chinese consumers, many of which did not have credit cards and other modern forms of payment. This was a critical move.
- Alibaba has had aggressive and smart marketing, such as flash sales promotions.
- They transformed an obscure student-created holiday into an online holiday that became the largest ecommerce sales day in the world. November/11 or 11/11, now known as Singles Day in China, generated $5.75B in single day sales in 2013. Many offline retailers also hold sales in their shops during this period.
- Ecommerce is growing fastest overall outside of major tier 1 cities in China. The highest mobile payment penetration rates in China are often found in “far off” locations as the demand for goods is even higher than the ability of the limited offline retailers to deliver.
- One more thing that’s important to remember: unlike Amazon and other U.S./Canadian companies, China’s ecommerce firms have relatively weak competition from traditional retail stores. There are no 100-year-old legacy retailers (like Sears, Macy’s, The Bay) with strong nationwide networks and powerful local brands that command loyalty. This has benefited ecommerce tremendously.