uploads/2019/09/china-2704112_1280.jpg

Jack Ma Steps Down—What’s Next for Alibaba?

By

Updated

After two decades of spearheading Alibaba (BABA), Chairman Jack Ma finally stepped down today. Ma had made his retirement plans clear on September 10, 2018, exactly one year ago. He plans to retain his position as a member of the board for another year.

Daniel Zhang, the current CEO of Alibaba, will serve as the new chairman. As the company’s CEO, Zhang has a fair idea about where he wants to lead Alibaba Group.

What Daniel Zhang has in mind for Alibaba Group

Zhang hopes to diversify the Alibaba Group based on Ma’s concept of “New Retail.” With this New Retail strategy, the Chinese e-commerce giant plans to venture into new market territories such as consumables, grocery items, food, and the restaurant industry.

To achieve this feat, Zhang hopes that adding go-between couriers could handle the delivery logistics. Machine learning and AI technologies such as face recognition would be promoted on the technology front. The company also showcased its New Retail concept at the 2019 National Retail Federation Conference in New York City.

Overall, Zhang’s business plan seems like a plot from the movie Inception—a layer of new business within the existing ventures of Alibaba. Its New Retail business will operate under the brand name Freshippo.

The Alibaba that Jack Ma built benefited greatly from the exponential growth of the Internet and the political climate in China at that time. But now, according to Zhang, the business needs a new catalyst. Without the right stimuli, Alibaba could be lost because of too much market competition in the e-commerce sector.

The concept of New Retail would bring together small-scale enterprises that have the potential for global outreach. Alibaba designed this to be a one-point solution for all customers.

Even the business will benefit, as data can be managed in the central data repository, combining both the online and offline customers into one database. This shift should ease the E-Commerce Group’s operations.

Along with New Retail, Ma had also suggested other strategies like New Finance, New Technology, New Manufacturing, and New Energy.

Jack Ma tweets his trip down memory lane

In classic folklore, Alibaba gained fame after he found a den stashed with money. His reputation and popularity grew after saying the magic words, “Open Sesame,” in front of a cave filled with riches.

Ma is the modern-day personification of this story. His cave of riches was an apartment in Hangzhou, China. Now that he has built a global brand that has lasted over two decades, Ma believes that he has achieved his goal.

Ma tweeted a video from the humble apartment where his e-commerce empire began. In his sentimental video, he reminisces about how he was determined to be one among the top ten businesses. What he started in 1999 is now a beacon of hope for new and budding entrepreneurs.

Alibaba’s upcoming Investors’ Day event

On September 2, Alibaba announced plans to host an Investor Day on September 23–24 in Hangzhou. Zhang will play an essential role as a speaker in this event. Other senior members, including CFO Maggie Wu, will share the stage with Zhang.

Alibaba stock trends for investors

In 2019, Alibaba’s stock price has witnessed an overall positive market response. This trend contrasts with other Chinese players that received mixed responses due to market volatility and the trade war. Some Chinese companies such as Tencent Holdings (TCEHY) and Baidu (BIDU) faced a drastic fall in their stock prices in May. However, Alibaba Group’s stock price movements have been consistent.

In 2017, when the idea of New Retail was publicly announced, BABA’s stock price increased sharply. Now, with Zhang reiterating the New Retail strategy, we expect its stock price to gain upward momentum going forward. Over the long term, we’re still unsure how Zhang plans to streamline this strategy.

In 2019 so far, Alibaba stock has outperformed the broader market. As of September 6, its stock has risen 28.9% against the 18.8% gains seen in the S&P 500 Index. Among its peers in China, Tencent Holdings has risen 10.9%. In contrast, Baidu has tanked 35.3% on a year-to-date basis.

More From Market Realist