How Alibaba’s six business units performed before restructuring

Alibaba Group, the Chinese e-commerce giant, announced its biggest restructuring in its 24-year history, to create six business group with their own CEOs.
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The company will divide into six business units, each with its own CEO and board of directors, and adopt a holding company management model. The business units will have the freedom to seek independent funding and IPOs, which could result in a possible carve-out in the future, Reuters news report said.

Alibaba’s core business has been e-commerce, with smaller divisions in sectors such as cloud computing and entertainment. The restructuring will see the Taobao Tmall Commerce Group cover Alibaba’s domestic-facing e-commerce marketplaces, which make up over two-thirds of its total revenue.

Taobao and Tmall are China’s dominant e-commerce marketplaces in China.

Despite the scale of Alibaba’s e-commerce operations, growth in the business has slowed.

Last quarter, revenue in Alibaba’s China Commerce category fell 1 percent, reflecting maturation in China’s overall e-commerce sector but also the impact of the country’s COVID curbs, stiff competition from rivals, and slowing economic growth.

Taobao Tmall Commerce Group will remain wholly owned by Alibaba Group after the restructuring.

It will be led by Trudy Dai, a member of Alibaba’s founding team. Dai was appointed to lead the domestic e-commerce businesses in December 2021 when the company reorganized its international and local e-commerce businesses.

Alibaba’s Global Digital Commerce Group includes overseas e-commerce marketplaces such as Lazada, which serves Southeast Asia, and AliExpress, which has become popular in Russia, Latin America, and parts of Europe.

These platforms face fierce local competition in the markets they operate in outside of China and make up just 8 percent of Alibaba’s total sales.

Together with Alibaba’s other overseas e-commerce platforms, they are some of the company’s fastest-growing divisions.

After the restructuring, the group’s CEO will be Jiang Fan who had been leading Alibaba’s international e-commerce businesses since December 2021. Jiang previously oversaw the Taobao and Tmall businesses.

Alibaba’s Cloud Intelligence Group includes Aliyun, the company’s cloud computing unit. The company is the dominant player in China’s domestic cloud computing sector, with a 36 percent market share, according to research firm Canalys.

The division is also home to DAMO Academy, Alibaba’s research arm for chips and artificial intelligence, as well as Dingtalk, the company’s workplace messaging app.

Alibaba recently confirmed that DAMO has begun testing a ChatGPT-esque app that it plans to integrate with Dingtalk.

Daniel Zhang, current chairman and CEO of Alibaba Group, will serve as CEO of the Cloud Intelligence Group.

The Local Services Group will encompass food and grocery delivery services. This division includes food and grocery delivery services such as Alibaba’s Ele.me app as well as Amap, its mapping app.

Alibaba competes with Hong Kong-listed Meituan in the country’s food delivery sector.

According to research firms CBNData and Trustdata, in 2021 Ele.me occupied 27 percent of China’s food delivery market compared to 67 percent from Meituan.

Local services currently make up just 5 percent of Alibaba’s total revenue. Its CEO will be Yu Yongfu.

Cainiao Smart Logistics unit will continue to serve both Alibaba and third-party customers. Alibaba formed Cainiao in 2013 by making investments in a number of Chinese logistics companies. The unit is now a major logistics provider in its own right in China, serving both Alibaba and third-party customers. Cainiao makes up 7 percent of Alibaba’s total revenue. Wan Lin will continue as Cainiao’s CEO.

Alibaba’s Digital Media and Entertainment Group will house the company’s YouTube-esque streaming video site and film production unit called Alibaba Pictures. Its CEO will be Fan Luyuan.

Despite the scale of Alibaba’s e-commerce operations, growth has slowed in this business. Last quarter, revenue in Alibaba’s China Commerce category fell 1 percent year-on-year, reflecting maturation in China’s overall e-commerce sector, the impact of COVID curbs, stiff competition from rivals, and slowing economic growth.

After the restructuring, the Taobao Tmall Commerce Group will remain wholly owned by Alibaba Group, while the other units will be free to seek fundraisings and listings. The restructuring is led by Trudy Dai, a member of Alibaba’s founding team, who was appointed to lead the domestic e-commerce businesses in December 2021.

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