Jack Ma's strategy to take Alibaba global

As his success at Alibaba has shown, Jack Ma is no ordinary entrepreneur

When Jack Ma met Donald Trump, he promised his Alibaba e-commerce platform would help create one million jobs over five years in the US.

 By Adam Lashinsky

It’s part of Ma’s continuing campaign to knock down trade barriers and boost small business; that he’s built a global retail empire on the way is a happy side-effect.

Jack Ma is one of China’s richest men with a fortune valued at nearly US$30 billion. As executive chairman of Alibaba Group, he leads the dominant force in Chinese e-commerce, a company with a market value of US$264 billion and some 450 million customers. A global ambassador for Chinese business, he spent 800 hours aloft last year – visiting princes, presidents and prime ministers, and lots of mere businesspeople, too. 

“A professional pilot cannot travel that much, or so I’m told,” he boasts.

Even so, the rich and powerful people who meet with Ma tend to come away from the experience with a fresh nugget of information, either about him or about the still poorly understood digital conglomerate he started with a bunch of friends 18 years ago in the provincial coastal city of Hangzhou. 

Jim Yong Kim, a physician who is the president of the World Bank, met Ma four years ago over a dinner lasting more than three hours and was startled to find the billionaire wearing sandals, holding Buddhist prayer beads, and sitting cross-legged on his chair. Kim was so taken with Ma’s passion for facilitating global trade by focusing on small-business people that he’s rethinking his international development organisation’s approach.

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Others are moved by Ma’s humanity. Jean Liu, president of Chinese ride-hailing start-up Didi Chuxing, has known Ma for years and considers him a mentor. (Alibaba is a Didi shareholder.) She recently learned, through family connecĀ­tions rather than from Ma, about how he repeatedly visited a seamstress he had met after learning she was ill. Says Liu: “He genuinely cares about the people around him.”

In January 2017, the then US president-elect Donald Trump met with Ma who pledged to create one million jobs in the USThen there’s the President of the United States, who met Ma for the first time a few weeks before his inauguration. 

“Trump didn’t know that much about Alibaba,” reports company president Michael Evans, a former Goldman Sachs banker and Asia hand who helped set up the pow-wow. 

“He was fascinated to hear that Chinese consumers are interested in buying from US small businesses. I don’t think that had occurred to him.” 

Ma used the sit-down to make a bold promise – that Alibaba would help create one million jobs in the US over five years. The pronouncement was music to the then president-elect’s ears. 

“It was a great meeting,” he declared before the cameras in the lobby of Trump Tower, a beaming Ma beside him. “Jack and I are going to do some great things.”

President Trump isn’t the only one who could stand to learn more about Alibaba. Despite its heft in China and the blockbuster 2014 public offering that raised US$25 billion on the New York Stock Exchange and introduced Alibaba to Western investors, Ma’s company remains a mystery to most non-Chinese. There’s a simple reason for that: Few outside the world’s second-largest economy are Alibaba customers.

Ma is aware of this knowledge gap. It’s part of what drives him to keep logging frequent-flyer miles to educate people about his company and his plans.

To realise his vision – which relies on technology to buy, sell, finance and deliver goods on Alibaba’s digital platforms around the world – Ma has been busily recasting himself of late as a global leader. Already he is the first Chinese business executive who can claim to have transcended his homeland for the world stage. 

In his travels, Ma promotes the lowering of trade barriers, touts his own brand of philanthropy, and supports causes such as primary-school education. His version of globalisation is carefully calibrated and expansive enough to be consistent with the goals of China’s President Xi Jinping, as well as with Trump’s America-first positioning.

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As with so many effective leaders, Ma’s motives are complex. China is already a huge consumer market and one that’s still growing fast, but Ma knows that eventually he will need to conquer new territories for Alibaba to continue on its current trajectory. Like other Chinese champions, Alibaba has thrived at home while foreign competitors have so far been stymied from entering his turf. 

If that changes, foreign markets will be even more crucial. Ma also needs for Alibaba – plagued by criticism over the profusion of counterfeit wares for sale on its sites – to develop a reputation as trusted around the world as Ma is cherished by his fellow bold-faced names.

Ma’s opportunity is unique. After centuries of stagnation, his country has recently reassumed its position as a world leader just as Alibaba, one of its marquee corporate names, has joined the ranks of world-beating companies. 

With characteristic intuition, Ma, 53, seems to realise that this is his moment to go beyond merely being famous and take his place among the globe’s revered business leaders.

Squaring off against Amazon

If you’re reaching for comparisons, Ma lines up favourably against a certain dogged American e-commerce entrepreneur: Amazon CEO Jeff Bezos, No. 1 last year on Fortune’s annual list of the world’s greatest leaders. Both are famous for their tenacity, their management philosophies, and their growing list of significant side ventures. (Like Bezos, Ma now owns a venerable newspaper – the South China Morning Post.) 

One surprise, as the two companies enter the early phases of squaring off against each other outside their respective home markets, is that Alibaba’s business is actually better than Amazon’s, at least in terms of its profitability. Plus, Ma arguably has more felicitous government relationships than Bezos both in Beijing and in Washington, D.C., given that the Bezos-owned Washington Post has repeatedly drawn Trump’s ire.

Ma’s current standing with the White House, however, rests heavily on his job-creating pledge to President Trump. And that bold promise is built on a bit of nuance. Specifically, Ma predicted that Alibaba will sign up one million US small businesses to its various e-commerce platforms, primarily Taobao, its mass-selling site for individuals, and Tmall, its higher-end site for established consumer companies. 

In China, Alibaba hosts 10 million merchants, and it has estimated that those businesses account for 30 million jobs. The one-million-job pledge updated a general goal of helping US small businesses sell in China that Ma had posited a year earlier in a Wall Street Journal op-ed. The company now estimates that each US business that sells on Alibaba’s platforms will typically hire one employee as a result, hence the one million new jobs.

Ma gave Canadian prime minister Justin Trudeau a tour of Alibaba's Xixi Campus in Hangzhou in September 2016.Unpacked, the big promise is classic Ma, a born promoter and natural communicator with a finely tuned ear to the needs of government officials. Duncan Clark, a China-based investment adviser and the author of the comprehensive 2016 book Alibaba: the House That Jack Ma Built, labels the move equal parts “theatrics” and effective. 

“To me, it broke the tension,” says Clark, at a time of deteriorating US-China relations. “Jack is very good at seducing and working the room.” 

A few weeks later, he notes, Ant Financial, an Alibaba affiliate controlled by Ma, announced plans to acquire the Texas payments firm Moneygram for US$880 million, an offer subsequently topped by the US firm Euronet. Alibaba would have needed the US government’s blessing to prevail in the deal.

Many assumed Ma’s bonding with Trump presaged an Alibaba move into selling to US consumers. For now, Alibaba professes to be more interested in helping US businesses sell to Chinese consumers rather than the other way around. 

“People are always asking ‘What’s your US strategy? What’s your US strategy?’ ” says Evans, Alibaba’s president. What it isn’t, he says, is competing against Amazon in the US. 

Instead, Alibaba’s designs on the US are threefold: work with established brands to sell on Tmall; help small businesses – the ones that would create new jobs – sell in China on Taobao; and match US manufacturers with Chinese component makers on Alibaba.com, the company’s original business. 

Evans says Tmall hosts 7000 US brands. Alibaba doesn’t disclose US figures for the other two categories, presumably because they are too small.

One company Alibaba does brag about is a hip sneaker consignment store in Manhattan’s SoHo neighbourhood called Stadium Goods. Evans relishes recounting how Alibaba invited the tiny company to a conference in New York a little over a year ago to learn how to sell on Alibaba, and how Stadium Goods subsequently shot up from a handful of workers to 60 employees. 

That’s true, says John McPheters, Stadium Goods co-founder and CEO, though only three of those employees, Chinese-language writers, are attributable to the Alibaba business. China is in fact a huge opportunity for his company, which is on track to move US$100 million of merchandise this year, nearly 90 per cent of it online. Alibaba will account for about 10 per cent of online sales, he says, and all of it will be on Tmall, the company’s high-end site, which has much tighter controls to fend off fake goods. 

“Authenticity is a  huge pillar of our business,” he says. “We have a crazy checklist” to ensure what the company sells is legitimate. “Chinese consumers are very focused on trust.”

"Our ideas, our policies, our decisions are going to affect the lives of half a billion people." Jack Ma, Alibaba

McPheters is being polite. By stressing his company’s focus on Alibaba’s Tmall, he’s highlighting his unwillingness to sell on Taobao, which has been plagued with counterfeits. The problem is so bad that in December the US Trade Representative reinstated Taobao on its notorious-markets list, a name-and-shame tool intended to pressure non-US marketplaces to clean up their acts. (Taobao.com appeared between the Russian site Rutracker.org and the Pirate Bay, an illegal-download site.) 

Alibaba has been struggling with this for years. The company typically says it is doing its best to police Taobao. Yet Ma himself has advocated more extreme measures. 

In a blog post on a Chinese social media site, he advocated treating counterfeiting like drunk driving, an endemic problem in China until the government imposed stiff prison sentences on offenders. 

“There is a lot of bark around stopping counterfeits, but no bite,” he wrote.

The public call to action, which came during the government’s annual National People’s Congress, was a bold but canny move for Ma, says Clark, his biographer. “They can never do enough to win over the trust of the brands and some investors,” he says. “It’s this cloud that is hanging over them.”

Taking the world stage

An academic-like curiosity has been a hallmark of Ma’s success in business. He began his career as an English teacher, after learning the language by watching movies and chatting up Western tourists in his native Hangzhou. 

Ma was one of the first of a group of Chinese entrepreneurs to discover the internet, and he had a Zelig-like ability to show up in the right place at the right time. In 1997, for example, while working for China’s Ministry of Commerce between start-up efforts, Ma was assigned to work as a translator for Yahoo! co-founder Jerry Yang on a visit to Beijing. 

“He was inquisitive, confident, and clearly eager to learn about the new world of digital and the internet,” says Yang, whose company went on to invest US$1 billion in Alibaba in 2005 and who is on its board today. (Yahoo!’s stake in Alibaba is now worth US$40 billion.)

Ma relishes the role of teacher. “For more than 12 years I called myself chief education officer,” he says during a video interview from his office in Hangzhou. 

In 2013 he stepped down as CEO of Alibaba. (The current CEO, Daniel Zhang, joined the company in 2007.) Yet no one doubts that Ma’s is the singular voice that matters on all important decisions regarding Alibaba and its many affiliates, a group Ma himself acknowledges is complex. In fact, he likens Alibaba to the environment, in which he has taken a keen interest as a board member of the Nature Conservancy. 

Actress Scarlett Johansson and Ma at a Singles Day online shopping festival in 2016 in Shengzhen.For Ma, the environment and his company are two sides of the same complicated coin. Just as the different components of nature need to work together in an ecosystem, says Ma, “Alibaba needs to work with society, government, and all kinds of organisations.” He would simplify his business if he could, he says. “But I cannot.”

Ma has gotten involved with numerous international organisations, in the process raising his stature and Alibaba’s. In 2016, Ma was named a special adviser on youth entrepreneurship and small business to the United Nations Conference on Trade and Development, and he’s a fixture at the World Economic Forum in Davos, Switzerland – the rare Chinese executive who mixes as easily with Western peers as with those in China.

In 2015, Alibaba bought Hong Kong’s English-language South China Morning Post newspaper, about two years after Bezos bought the Washington Post. Like Bezos, he has taken a hands-off approach, meeting infrequently with its staff, having installed his long-time deal-making confidant, Alibaba vice chairman Joe Tsai, as head of the organisation. 

Whereas Bezos framed his purchase as aiding an institution integral to democracy, Ma explained his investment as ensuring that non-Chinese speakers have access to high-quality information about China. 

The Alibaba chairman sees his high profile as an obligation. “Running such a big economy” – his word for the US$485 billion worth of economic activity that took place on Alibaba last year – “you have the responsibility to share with people what you think. Our ideas, our policies, our decisions are going to affect the lives of half a billion people.” 

The scope of Alibaba’s business activity is instructive, again, in comparison with Amazon’s. While Alibaba’s revenues of nearly US$22 billion are tiny compared with Amazon’s US$136 billion in sales, Alibaba is far more profitable. Ma’s company had operating profits of US$6.7 billion in the 12 months ending 31 December 2016, versus Amazon’s US$4.2 billion. 

Whereas Amazon owns warehouses and takes ownership of much of the inventory it sells, which explains its higher sales figure, Alibaba is an asset-light technology platform, making money mostly by charging for advertising and other sales-related fees.

"Jack is very good at seducing and working the room." Duncan Clark, Jack Ma biographer

There is a business imperative behind Ma’s global leadership, given that nothing happens in China without the government’s explicit or implicit permission. 

“I think Jack understands that as powerful as Alibaba is in China, his best protection is to diversify into a multinational,” says Orville Schell, a China scholar and journalist who is director of the Asia Society’s Center on US-China Relations in New York City and who has known Ma for more than a decade. 

Schell, who lives in Berkeley, says that a few years ago Ma came to visit his son, who was attending UC-Berkeley, and aspired to stay for a while. 

“He got a house and furnished it, and hoped to live half-time and audit courses, participating in the life of the mind,” says Schell. 

“But then the siren song of his business and making it bigger, greater, and more global took over.”

What’s next, Jack?

Ma has a startling confession: he wants to retire. He says he first began preparing for that day when he was 45. And he doesn’t want to be one of those old men who attend board meetings long after they’ve lost their mojo. “They should give the young people a chance,” he says. 

He demurs on revealing exactly when he plans to bow out, though he has ideas about what activities will occupy his time. One is teaching. The other is relaxing. “I have my own timetable,” he says. “I don’t want to die in my office. I want to die on the beach.”

Few take this talk seriously, however. Multiple observers close to Alibaba point out that no major decisions happen without him and that he continues to shape strategy for Alibaba. He owns just under 8 per cent of the company, not a controlling stake, yet everyone understands that people work for Ma much the way Steve Jobs ruled Apple with an even smaller share of the company. 

And Ma’s globetrotting serves Alibaba’s global ambitions. A year ago it paid US$1 billion for a controlling stake in Lazada, a South-East Asian online retailer. Alibaba and Ant Financial, which runs the dominant Chinese payments platform Alipay, have invested in Paytm, an Indian e-commerce player. 

And while Alibaba’s operational forays into the US market have been furtive, it has invested aggressively in US start-ups, including Magic Leap, Lyft and Snap. 

"I have my own timetable, I don't want to die in my office. I want to die on the beach." Jack Ma, Alibaba

Says Evans, the company’s president: “It is important for us to keep abreast of things that could have an impact on any aspect of our business.”

In the meantime, Ma is pursuing his twin goals of knocking down trade barriers and boosting the fortunes of small businesses. Alibaba has one of the simplest mission statements of any big company: to make it easy to do business anywhere. 

In China, this meant investing in a network of logistics companies called Cainiao – Alibaba owns 47 per cent – that vastly improved on the meagre capabilities of the government’s postal delivery system. 

Alipay is now boldly branching out from payment processing to loans, at times angering China’s massive state-owned banks. Ma has crafted a new label for such initiatives: the World e-Trade Platform, or eWTP. It’s a catch-all phrase to explain the global integration of Alibaba’s e-commerce systems.

Ma hosted Australian prime minister Malcolm Turnbull at Xixi Campus in September 2016.A decade ago it would have been unfathomable that the leader of China’s biggest e-commerce company would be perhaps the most prominent corporate voice on world trade – though no more unlikely than that the president of China would give a pro-globalisation address to the World Economic Forum in Davos, as Xi Jinping did in January. Ma was in the audience when Xi spoke, and he met with Xi there. 

“He made a wonderful speech and a commitment to globalisation,” says Ma. “I think globalisation is a great start, but it’s just the beginning.” 

Globalisation is “a baby”, he says, “and the baby is having growing pains,” obliquely referring to Trump’s full-throated trade challenges to China. “We should not kill the baby because he cries a lot.”

Then Ma pivots from government to capitalism, extolling his belief in the power of business to accomplish what politicians cannot. 

“Maybe the business community has to drive this instead of government,” he says. “I feel sorry for government. When you put 200 country leaders in the same room trying to realise something, it’s impossible. But when you put 200 businesspeople in one room, we might work something out.” And maybe Ma will be leading that conversation. 

Adding up Alibaba

Founded: 1999
Employees: 46,819
Headquarters: Hangzhou, China
Annual active buyers in China: 443 million
Countries with buyers using Alibaba: 200+
Annual revenue*: US$21.7 billion
Operating profit*: US$6.7 billion
Market value: US$264 billion
*12 months ended Dec. 31, 2016

The tao of Jack

As his success at Alibaba has shown, Ma is no ordinary entrepreneur. These three precepts are key to his approach.

Pursue an asset-light strategy

Alibaba is a platform, not a retailer. It holds no inventory and a 47 per cent stake in a logistics network rather than owning trucks and warehouses directly.

Play on the world stage

Like President Xi Jinping of China, Ma promotes the virtues of global trade – all the better if small businesses sell their wares on Alibaba’s platforms.

Plan your retirement well in advance

Ma says he’s been thinking about his departure from the company he built since he was 45, eight years ago. But it’s probably still not imminent.

© 2017 Time Inc. All rights reserved. Reprinted/translated from FORTUNE and published with permission of Time Inc. Reproduction in any manner in any language in whole or in part without written permission is prohibited. FORTUNE and the FORTUNE logo are registered trademarks of Time Inc. used under license. A version of this article appears in the April 1, 2017 issue of FORTUNE with the headline "You don't know Jack".

This article originally appeared on FORTUNE.com

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