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Alibaba CEO Jack Ma:

Retail Can't Even Fight Back


Retail Can't Even Fight Back


In this interview with TV anchor Sally Wu, China's biggest e-commerce mogul shares his vision of the future where the world belongs to the little guy.



Retail Can't Even Fight Back

By Elaine Huang
From CommonWealth Magazine (vol. 548 )

Questions for Mr. CEO, a forthcoming publication from CommonWealth Magazine, features in-depth conversations between Phoenix Television anchor Sally Wu and six of China's top business executives. Among them, the interview with Alibaba founder Jack Ma stands out the most.

At Wu's prompting, Jack Ma speaks his mind, holding back nothing. At one point, Ma offers that "large businesses are no good; smaller businesses are beautiful."

When Hon Hai CEO Terry Gou declared, "The Internet economy is a great boost to big business, like putting wings on a tiger," Jack Ma responded in his customarily strident fashion by predicting that a number of big corporations would get "knocked off" before they could fit themselves with a pair of wings. Following are excerpts from the interview with Jack Ma:

Wu: In the future, what sort of small business will have the most creative power? What kind of small businesses will be able to adapt to the future world? Will they necessarily be as small as the individual?

Ma: A new economic era is close upon us. The concept we have termed "Made in China" will undergo massive change, so that in the future it will be all about "Made in the World."

From here on out small enterprises must set themselves apart, and many of the parts they will use in their products will come from all over the world. In other words, we'll see the emergence of what could be termed "Made in the Internet."

Everything is accelerating in the Internet age, moving and changing faster than ever. In the future, businesses will compete first of all on value, or unique creative consciousness; second on personality; and third on specifications. The world of the future is a world for the small.

Alibaba and Taobao's way of thinking is to use the technology and thinking of the Internet to enable countless small businesses to take part in competition. Precisely due to my faith in this way of thinking, and being firm in the belief that small is beautiful, I believe the future will only get better.

Wu: If you look ahead to the next five years and the web-like cooperative network among small businesses, how will they simultaneously identify ways to make a profit in the market?

Ma: Small businesses can achieve profit, but it is tough for them to achieve scale. Conversely, it's possible to achieve scale but find profit elusive, so that is something each business must gauge for itself.

Everyone in China wants to have a big company and do big business. The way we suddenly grew so big, almost haphazardly and unintentionally, we are not a good model for people to learn from.

We got lucky. Our generation is especially fortunate – we have the Internet, we discovered e-commerce 13 years ago, we came into contact with other likeminded people, and somehow we made it to where we are today.

Corporate enterprises should work within their capabilities. A lot of people say they want to be Jack Ma. But if I could choose all over again, I wouldn't want to be Jack Ma. It's too hard. I mean it.

I remember one year I was in Japan and saw a little establishment with a sign on it saying it was celebrating its 147th year. I went inside and found one old man, an old woman, and one worker. The place looked to be around 20 square meters, and they sold all sorts of cakes and confections.

The old man and woman smiled with great satisfaction and said, "Our shop has been run for generations and generations, for 147 years. Today we are celebrating our anniversary, so have some cake on us." The old lady then added, "The Japanese emperor, people from families of the highest stature, they've all bought our cakes."

This gives people a feeling of contentment. What a wonderful feeling it must be, to run a little shop like theirs for so many years! Look at us. Now that we've gotten big, we have to fret about capital at one moment, then labor issues the next, and all sorts of things in society after that. There's no feeling of contentment in that at all.

Wu: You don't feel contentment at the moment?

Ma: My contentment right now is different from theirs. It's like having ascended to 7000 meters, where all I can do is enjoy the satisfaction of being at that elevation. This kind of contentment…

Wu: Make you feel woozy from lack of oxygen?

Ma: Yes, I'm quite short of breath. Actually, you're reluctant to go up there, but you do, and coming down isn't easy, so you just wait there.

Wu: But you still have to keep climbing. Right?

Ma: To tell you the truth, if I could, I wouldn't climb.

Wu: The Jack Ma I know wouldn't shrink from climbing.

Ma: Sometimes a person shouldn't be too selfish. If I put things aside and didn't climb, I would feel like I'm being selfish. After all, we owe our success today to the current age, and all the colleagues that have supported us. Everything I have, I was given by others.

I never thought things would turn out the way they are today. If you have had extraordinarily good luck, and you do not do a good job, that good luck goes bad. So sharing your good luck with others is the best way to ensure you keep doing well. That is the truth.

Wu: Some young people have recently told me, they don't have to head to the big cities, or go to work at big corporations. Does this corroborate the "small is beautiful" ethos of which you speak?

Ma: In the future, fewer and fewer young people will choose to join big corporations, and more and more of them will opt to join unique, happy, and beautiful companies where they can fully express their individuality and self-worth.

China's Future Must Be "Small and Beautiful"

I firmly believe that microorganisms, not lions or elephants, have the greatest impact on the ecosystem.

Therefore, it is not how big or how many big corporations there are that will impact China's future economy, but how good, how beautiful, and how unique its small enterprises are. That is the foundation of the country's economy.

With a population of 1.3 billion, China can't count on state enterprises and large corporations to take care of employment. It's up to small enterprises to employ people, because if state enterprises doubled the number of employees, it would paralyze the entire state enterprise system. But if every small business were to add one or two employees, they could take care of a lot of jobs.

Wu: Last year, the day before "Double Eleven" (November 11, or "Single's Day," China's most important shopping day), you said that the new sales model is now waging a great war on the conventional sales model.

Ma: That's right. A lot of people say the battle among those of us in e-commerce is so intense. I would say that e-commerce enterprises aren't waging a "great war" against one another. If we're fighting a war, it's against the conventional model. If there is an impact to be felt, it should send massive shockwaves through the state enterprises.

This is not about what I want, but what this era demands and the prevailing trend across society.

This is why I am particularly angry at the retail industry. What gives them the right to make a fifteen-percent margin, and set prices so high? How can they get away with squeezing television manufacturers' margins so low that they only make 10 Renminbi per TV set, or even seven Rmb?

If only seven Rmb can be made from the sale of a television set, how can TV manufacturers be expected to innovate? Manufacturers must be allowed to make money so that both parties can see their interests met.

Does Putting Wings on a Tiger Help It Fly?

Wu: During discourse with Hon Hai CEO Terry Gou at the 2009 West Lake Forum, the two of you expressed divergent opinions on size.

Chairman Gou said that the Internet was a great boost to large corporations, like putting wings on a tiger. The Internet is their wings, extending their reach everywhere. Consequently, company size is not about scale, but capabilities and flexibility.

Ants work as a team. But how does their team divide up a piece of candy it moves? This gets into issues of profit sharing and giving back.

Ma: The first statement is problematic. What does "giving a tiger wings" mean? Has he seen a tiger with wings? That's imaginary. I for one have never seen a tiger with wings that could fly. If you put wings on a tiger, it would still be unable to take off, because it's too heavy. So this idea of the Internet giving them a big boost is a figment of big business's imagination.

People in the retail industry hate me. Right now they're on their last legs, and all they can do is hate. They don't even have the energy to fight back, because I won't give them the opportunity to fight back.

Real business competition involves conquering your foes without a war. When I discover an opponent, I do something to debilitate him. That's what is so frightening about the Internet, because while you're waiting for your wings, someone is coming after you to take you out. So to me yesterday's "big" is tomorrow's burden.

Wu: You have said before that you aim for your company to be a great information company of the 21st century. What kind of service will you provide? Is targeted marketing part of that scope of services?

Ma: Targeted marketing will be a small part of what we do.

What we really want to do is to share the information we collect. For instance, to share the information Taobao collects on consumers with manufacturers, and share information on manufacturers with consumers and suppliers; and share information on Alipay, Taobao, and small- and medium-size enterprises with others.

We are not sure how to make money from information, but we know that a decade from now information will be a more expensive commodity than petroleum. Since it is certain to make a gigantic contribution to society, investment must be made in information. Anything that makes a contribution to society is bound to be profitable.

Collecting, processing, and sharing information is the direction our company will take over the next decade.

Translated from the Chinese by David Toman