Dive Brief:
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Alibaba Group Executive Chairman and co-founder Jack Ma on Monday announced that a year from Monday (Sept. 10, 2019), on the company's 20th anniversary, CEO Daniel Zhang will replace him as chairman of the board.
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Ma will stay on as executive chairman for 12 months to ensure a smooth transition and will complete his term as a member at its annual shareholders meeting in 2020, according to an Alibaba press release.
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In a letter to employees accompanying the company's release, Ma said he will continue his role as founding partner in the Alibaba Partnership, which includes 36 other executives of Alibaba Group and its affiliates. The partnership helps steer the company through its ability to influence the makeup of its board. Ma also said that he plans to return to teaching, his first career.
Dive Insight:
In his letter on Monday, Ma said that Alibaba has been working on leadership succession for a decade and noted that he handed over the chief executive reins three years ago.
"The one thing I can promise everyone is this: Alibaba was never about Jack Ma, but Jack Ma will forever belong to Alibaba," he wrote.
Alibaba posts robust sales numbers quarter after quarter (not least during its self-invented Singles Day holiday, when it breaks its own astounding records each year), the fruits of its efforts to connect to Chinese consumers, socially and culturally. In its most recent quarter, Alibaba reported that total revenue rose 61% to RMB 80.9 billion ($12.2 billion, per the release), as EBITDA (earnings before interest, taxes, depreciation and amortization) reached RMB 26.5 billion.
The company has built an e-commerce and, increasingly, a brick-and-mortar juggernaut based on the proposition that its consumer transactions, of any kind, are friction-free. Like Amazon, Alibaba is also supported by a diversified business structure, with a formidable cloud business, for example, that helps bolster the more turbulent retail business it undertakes. Its cloud revenue grew 93% year over year to RMB 4.7 billion, and its digital media and entertainment revenue grew 46% to RMB 6 billion, the company said.
But unlike Amazon, and despite ongoing wariness about counterfeit sales rampant on its Taobao and Tmall marketplaces, Alibaba has successfully courted several upscale brands eager to reach the massive Chinese market. Tiffany last month began selling its millennial-focused "Tiffany Paper Flowers" collection in China exclusively on Tmall's Luxury Pavilion, two weeks before the collection's Sept. 1 arrival in Tiffany's China stores, for example, according to an email to Retail Dive from Alibaba. Since Luxury Pavilion was launched a year ago, some 70 brands have joined, including Burberry, Versace, Moschino, Marni, Tod's, Maserati, Guerlain and Givenchy, according to that release.
Much of Alibaba's success in China comes from its wider cultural ambitions. While executives have previously said that they expect the company's results to be broken down by analysts into segments and data points, they've noted that's not how the company approaches its operations and goals, and Ma's letter Monday reflected that attitude.
"Alibaba is amazing not because of our business or scale or accomplishments," he wrote. "The best thing about Alibaba is that we come together under a common mission and vision. Our partnership system, unique culture and talented team have laid a strong foundation for the legacy of our company. In fact, since I handed over the CEO's responsibilities in 2013, the company has run smoothly for five years on the back of these institutional ingredients."
The company is not without its challenges. Its runaway growth is meeting some limits, including rising competition from rival JD.com and barriers to entry in markets the company hasn't yet reached, which could pressure margins at least in the near term, according to a note from investment research firm Trefis emailed to Retail Dive.