Alibaba's Tumultuous Leadership Transitions in 2023
In 2023, Alibaba has been actively implementing numerous changes, yet the company's frequent flip-flopping between these initiatives makes it challenging to discern the actual direction and underlying strategy of the organization.
Former CEO Daniel Zhang initiated a restructuring plan to divide Alibaba into six divisions, each with its own CEO. The intention was to eventually spin each division off into separate, publicly listed companies.
However, this plan was abruptly reversed a few months later. Not only was the spin-off of the Cloud unit halted, but Daniel Zhang was also replaced as the CEO of both Alibaba and its cloud unit.
Joseph Tsai and Eddie Wu, co-founders of Alibaba, assumed the roles of Chairman and CEO, respectively.
In a surprising turn of events, Alibaba recently announced Eddie Wu's new position as the CEO of the China e-commerce division, succeeding another co-founder, Trudy Dai. This division, encompassing platforms like Taobao and Tmall, came under scrutiny following Jack Ma's internal forum statement about PDD Holdings' superior performance.
We suspect that Jack Ma's influence contributed to both Dai's replacement and Daniel Zhang’s abrupt departure, signaling his persistent, albeit behind-the-scenes, impact on Alibaba's strategic decisions.
The China e-commerce segment, Alibaba's primary revenue source, contributed 40% of the total revenue in the third quarter of this year. However, it only showed a modest 4% year-over-year growth, in stark contrast to PDD Holdings' 94% increase in the same period.
While PDD Holdings' revenue growth may be partly attributed to its international e-commerce brand Temu, the bulk of its revenue likely originates from China. Combining Alibaba's domestic and international e-commerce revenues reveals an 11% year-over-year growth, still significantly lower than PDD Holdings' 94% rate.
In absolute terms, PDD Holding's revenue of 68,840 million yuan is approximately 56% of Alibaba's total e-commerce revenue of 122,165 million yuan. Just a year prior, PDD's revenue was about 32% of Alibaba's. This stark comparison is a clear wake-up call for Alibaba.
Refocusing on its core business, Alibaba has reduced investments in non-core areas like Xpeng and increased investments in overseas e-commerce units, including $845 million in Lazada and a planned $2 billion in Trendyol, based in Turkey. Alibaba's international e-commerce segment saw a 53% growth from the previous year, but faces stiff competition from emerging players like Temu and TikTok Shop. These ongoing investments are crucial for Alibaba's units to remain competitive.
However, the most critical challenge lies in revitalizing the China e-commerce segment, Alibaba's main revenue driver. It's uncertain if Eddie Wu, simultaneously serving as CEO of Alibaba Group, Alibaba Cloud, and China E-commerce, can outperform Trudy Dai in regaining market share and growth.