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Alibaba Group

Alibaba Group

Alibaba Group Holding Limited is a Chinese multinational conglomerate holding company specializing in e-commerce, retail, Internet, and technology. Founded on 4 April 1999 in Hangzhou, Zhejiang, the company provides consumer-to-consumer (C2C), business-to-consumer (B2C), and business-to-business (B2B) sales services via web portals, as well as electronic payment services, shopping search engines and cloud computing services. It owns and operates a diverse array of businesses around the world in numerous sectors, and is named as one of the world's most admired companies by Fortune.[3][4]

At closing time on the date of its initial public offering (IPO) – US$25 billion – the world's highest in history, 19 September 2014, Alibaba's market value was US$231 billion.[5] As of 19 December 2018, Alibaba's market cap stood at US$352.28 billion.[6] It is one of the top 10 most valuable and is #59 biggest public companies in the world by Global 2000 list.[7] In January 2018, Alibaba became the second Asian company to break the US$500 billion valuation mark, after its competitor Tencent.[8] As of 2018, Alibaba has the 9th highest global brand value.[9]

Alibaba is the world's largest retailer and e-commerce company, one of the largest Internet and AI companies, one of the biggest venture capital firms, and one of the biggest investment corporations in the world.[10][11][12][13][14] The company hosts the largest B2B (Alibaba.com), C2C (Taobao), and B2C (Tmall) marketplaces in the world.[15][16] Its online sales and profits surpassed all US retailers (including Walmart, Amazon, and eBay) combined since 2015.[17] It has been expanding into the media industry, with revenues rising by triple percentage points year on year.[18][19] It also sets the record on the 2018 edition of China's Singles' Day, the world's biggest online and offline shopping day.[20][21]

Alibaba Group Holding Limited
Public
Traded asNYSE: BABA[166]
ISIN
IndustryConglomerate
Founded4 April 1999Hangzhou,Zhejiang
FounderJack MaPeng Lei
HeadquartersNo. 969 West Wen Yi Road[1],
Worldwide
Products
Services
Revenue
101,958 (March 31, 2019)[2]
SubsidiariesSeecompanies and affiliated entities
Website
Alibaba Group
Simplified Chinese
Traditional Chinese

Naming

The company's name came from the character Ali Baba from the Middle Eastern folk tale collection One Thousand and One Nights because of its universal appeal.[22] As Jack Ma, one of the founders, explained:

One day I was in San Francisco in a coffee shop, and I was thinking Alibaba is a good name.

And then a waitress came, and I said, "Do you know about Alibaba?" And she said yes. I said, "What do you know about?", and she said, "Open Sesame*]]". And I said, ", this is the name!" Then I went on to the street and found 30 people and asked them, "Do you know Alibaba?" People from India, people from Germany, people from Tokyo and China... they all knew about Alibaba. Alibaba – open sesame. Alibaba is a kind, smart business person, and he helped the village. So... easy to spell, and globally known. Alibaba opens sesame for small- to medium-sized companies. We also registered the name "Alimama", in case someone wants to marry us!"[23][24]

History

On 4 April 1999, Jack Ma and his team of 17 friends and students founded Alibaba.com, a China-based B2B marketplace site, in his Hangzhou apartment. In October 1999, Alibaba received a US$25 million investment from Goldman Sachs and SoftBank. Alibaba.com was expected to improve the domestic e-commerce market and perfect an e-commerce platform for Chinese enterprises, especially small and medium-sized enterprises (SMEs), to help export Chinese products to the global market as well as address World Trade Organization (WTO) challenges. In 2002, Alibaba.com became profitable three years after launch. Ma wanted to improve the global e-commerce system, so from 2003 onward, Alibaba launched Taobao Marketplace, Alipay, Alimama.com, and Lynx.[25][26]

When eBay announced its expansion into China in 2003, Ma viewed the American company as a foreign competitor and rejected eBay's buyout of Alibaba's subsidiary Taobao. Through applying existing technologies and gaining trust in the Chinese e-commerce market, as well as expanding through dominating the market at a loss before making a return on additional services, Alibaba's subsidiaries outperformed eBay in the Chinese e-commerce market, claiming a growing percentage of consumers from eBay. Alibaba subsidiary Taobao would later force eBay out of the Chinese market, with eBay closing its unprofitable China Web unit, though the two companies would break even six years later.[25][27][28]

In 2005, Yahoo! invested in Alibaba through a variable interest entity (VIE) structure, buying a 40% stake in the company for US$1 billion.[25][28] This would as a result net in US$10 billion in Alibaba's IPO alone to Yahoo!.[27]

According to Li Chuan, a senior executive at Alibaba, the company was planning in 2013 to open traditional brick and mortar retail outlets in partnership with Chinese real estate company Wanda Group.[29] Additionally, Alibaba purchased a 25% stake in Hong Kong-listed Chinese department store chain Intime Retail in early 2014.[30] In early 2017, Alibaba and Intime's founder Shen Guojun agreed to pay as much as HK$19.8 billion (US$2.6 billion) to take the store chain private. Alibaba's stake—28% from 2014's US$692 million investment—would rise to about 74% after the deal.[31]

In April 2014, Alibaba, Coatue Management, and Andreessen Horowitz led a US$250 million Series D financing round that was completed by on-demand transportation company Lyft, bringing its total amount raised to $332.5 million.[28][32] On 5 June 2014, Alibaba bought a 50% stake of Guangzhou Evergrande F.C. from Evergrande Real Estate Group Ltd. in a deal that was worth 1.2 billion yuan (US$192 million).[28][33] On 5 September 2014, the group—in a regulatory filing with the US Securities and Exchange Commission—set a US$ 60- to $66- per-share price range for its scheduled initial public offering (IPO), the final price of which would be determined after an international roadshow to gauge the investor interest in Alibaba shares to shareholders. On 18 September 2014, Alibaba's IPO priced at US$68, raising US$21.8 billion for the company and investors. Alibaba was the biggest US IPO in history, bigger than Google, Facebook, and Twitter combined.[34][35][36] On 19 September 2014, Alibaba's shares (BABA) began trading on the NYSE at an opening price of $92.70 at 11:55 am EST. On 22 September 2014, Alibaba's underwriters announced their confirmation that they had exercised a greenshoe option to sell 15% more shares than originally planned, boosting the total amount of the IPO to $25 billion.[37][38]

In January 2017, Alibaba and the International Olympic Committee jointly announced a $800 million deal that would last till 2028 in where the company would sponsor the Olympic Games.[28][39]

In September 2018, Jack Ma, the main founder of Alibaba, announced that he would step down as chairman in a year's time so he could focus on philanthropy.[40] In response to the announcement, The Economist stated that Ma had a significant impact in China and worldwide via contributions and dedication to various businesses.[40]

In May 2019, Bloomberg cited sources familiar with the matter as saying that Alibaba was considering raising $20 billion through a second listing in Hong Kong.[42]

On Tuesday, 10 September 2019, Jack Ma officially step down as the chairman of Alibaba, Daniel Zhang succeeded him at the head of the company.

In September 2019, the municipal government of Hangzhou announced that it was boosting its monitoring of the private sector by embedding government officials in Alibaba and other companies.[43][44]

Companies and affiliated entities

E-commerce and retail service platforms

Alibaba Binjiang Campus in Hangzhou, headquarters for Alibaba's B2B service.

Alibaba Binjiang Campus in Hangzhou, headquarters for Alibaba's B2B service.[45]

Lazada warehouse in Cabuyao, Laguna, Philippines during the company's 11.11 sale promotion in 2018. Lazada Group is a subsidiary of Alibaba Group and Alibaba co-founder Lucy Peng Lei is CEO of the company.

Lazada warehouse in Cabuyao, Laguna, Philippines during the company's 11.11 sale promotion in 2018. Lazada Group is a subsidiary of Alibaba Group and Alibaba co-founder Lucy Peng Lei is CEO of the company.

In 1999, Jack Ma launched the primary business of Alibaba, Alibaba.com, while working as an English teacher in Hangzhou.

Alibaba.com later became the world's largest online B2B trading platform for small businesses as of 2014.[46] Alibaba.com has three main services: the English language portal Alibaba.com, which handles sales between importers and exporters from more than 240 countries and regions,[47] the Chinese portal 1688.com, which manages domestic B2B trade in China, and transaction-based retail website AliExpress.com(全球速卖通), which allows smaller buyers to buy small quantities of goods at wholesale prices.[48] Alibaba.com went public at the Hong Kong Stock Exchange in 2007, and was delisted again in 2012.[49] In 2013, 1688.com launched a direct channel that was responsible for $30 million in daily transaction value.[50]

In 2003, Alibaba launched Taobao Marketplace (淘宝网), offering a variety of products for retail sale. Taobao grew to become China's largest C2C online shopping platform and later became the second most visited web site in China, according to Alexa Internet.[51][52] Taobao's growth was attributed to offering free registration and commission-free transactions using a free third-party payment platform.[53] Advertising made up 85 percent of the company's total revenue, allowing it to break even in 2009. In 2010, Taobao's profit was estimated to be ¥1.5 billion (US$235.7 million), which was only about 0.4 percent of their total sales figure of ¥400 billion (US$62.9 billion) that year, way below the industry average of 2 percent, according to iResearch estimates.[53] According to Zhang Yu, the director of Taobao, between 2011 and 2013, the number of stores on Taobao with annual sales under ¥100 thousand increased by 60%; the number of stores with sales between ¥10 thousand and ¥1 million increased by 30%, and the number of stores with sales over ¥1 million increased by 33%.[54]

In April 2008, Taobao introduced a spin-off, Taobao Mall (淘宝商城, later Tmall.com), an online retail platform to complement the Taobao C2C portal, offering global brands to an increasingly affluent Chinese consumer base. It became the eighth most visited web site in China as of 2013.[55] In 2012, Tmall.com later changed its Chinese name to Tianmao (天猫, "sky cat"), reflecting off of Tmall's Chinese pronunciation.[56] In March 2010, Taobao launched the group shopping website Juhuasuan (聚划算), offering "flash sales", which are products that are available at a discount for only a fixed time period. In October 2010, Taobao beta-launched eTao, a comparison shopping website that offers search results from mostly Chinese online shopping platforms,[57] including product searches, sales and coupon searches. According to the Alibaba Group web site, eTao offers products from Amazon China, Dangdang, Gome, Yihaodian, Nike China, and Vancl, as well as Taobao and Tmall.[47] As part of a restructuring of Taobao by Alibaba, these spin-offs became separate companies in 2011, with Tmall and eTao becoming separate businesses in June and Juhuasuan becoming a separate business later in October.[58]

In 2010, Alibaba launched AliExpress.com, an online retail service made up of mostly small Chinese businesses offering products to international online buyers. It is the most visited e-commerce website in Russia.[59] It allows small businesses in China to sell to customers all over the world, resulting in a wide variety of products. It might be more accurate to compare AliExpress to eBay, though, as sellers are independent; it simply serves as a host for other businesses to sell to consumers.[60] Similar to eBay, sellers on Aliexpress can be either companies or individuals. It connects directly Chinese businesses with buyers. The main difference from Taobao is that it's aimed primarily at international buyers, mainly in USA, Russia, Brazil or Spain.[61]

In 2013, Alibaba and six large Chinese logistics companies (including SF Express) established a company called Cainiao for delivery of packages in China. This network gradually grew to 14 local logistics companies in 2014.[62] In 2016, Alibaba's Taobao and Tmall, two of the world's largest and most popular online retail marketplaces, achieved a total transaction volume of 3 trillion yuan (US$478.6 billion). The company aims to double the transaction volume to 6 trillion yuan by 2020. As of February 2018, Taobao reached 580 million monthly active users, while Tmall achieved 500 million monthly active users.[63][64][65] It is also rapidly expanding its e-commerce network abroad.[66] Alibaba has also announced that it will invest 100 billion yuan over five years to build a global logistics network, underpinning an aggressive overseas expansion, and demonstrating Alibaba's commitment to building the most efficient logistics network in China and around the world. It is investing a further 5.3 billion yuan in Cainiao Logistics to boost its stake to 51 percent from 47 percent.[67] The investment would value Cainiao, a joint venture of top Chinese logistics firms, at around US$20 billion.[68]

On 11 June 2014, Alibaba launched US shopping site 11 Main.

The 11 Main marketplace hosts more than 1,000 merchants in categories such as clothing, fashion accessories and jewelry as well as interior goods and arts and crafts and it plans to keep adding more, said the company.[69][70] On 23 June 2015, Alibaba announced that it is selling 11 Main to OpenSky, an online-marketplace operator based in New York.[71]

In April 2016, Alibaba announced that it intended to acquire a controlling interest in Lazada by paying $500 million for new shares and buying $500M worth of shares from existing investors.[72] Lazada Group is a Singaporean e-commerce company founded by Rocket Internet in 2011. Lazada operates sites in Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam. Its sites launched in March 2012, with a business model of selling inventory to customers from its own warehouses. In 2013 it added a marketplace model that allowed third-party retailers to sell their products through Lazada's site. Lazada features a wide product offering in categories ranging from consumer electronics to household goods, toys, fashion and sports equipment. In March 2018, Alibaba announced its plan to invest an additional $2 billion in the company, totaling a $4 billion investment. Alibaba also plans to appoint Alibaba co-founder Lucy Peng as Lazada's new CEO.[73]

In October 2016, Alibaba launched Alitrip, later named Fliggy, an online travel platform that is designed as an online mall for brands such as airline companies and agencies.[74][75] Fliggy set the target audience as younger generation and it strives to become a one-stop service when they plan their trips, particularly in overseas travel.[76] On 7 August 2017, Alibaba Group and Marriott International hotel group announced a comprehensive strategic co-operation. Two companies will set up a joint venture company. Through the docking technology system and the superiority resources, Fliggy has Marriott hotel flagship store. It has the same function with Marriott Chinese website and Marriott mobile app to create the best global travel experience for consumers.[77]

In 2017, Alibaba started opening a chain of supermarkets, named Hema (盒马, lit.

box horse), as part of the company's "new retail strategy," where customers can either order in the store or online for delivery in under 30 minutes.

It offers a mobile app that recommends customers products based on data analytics.[78] In addition, customers can have their groceries cooked to eat in the food court of the supermarket.[79]

Alibaba ships parcels across all countries except for Argentina, Azerbaijan, Brazil, Central African Republic, Cuba, Ecuador, Iran, Korea, Liberia, Libya, Macedonia, Micronesia, Peru, Saudi Arabia, Sudan, Syria, Tajikistan, Uruguay, Venezuela and Yemen.[80]

Cloud computing and AI technology

In conjunction with the company's 10th anniversary, Alibaba launched Alibaba Cloud in September 2009, aiming to build a cloud computing service platform, including e-commerce data mining, e-commerce data processing, and data customization.[47] It has R&D centres and operators in Hangzhou, Beijing, Hong Kong, Singapore, Silicon Valley[81] and Dubai.[82] In July 2014, Alibaba Cloud entered into a partnership deal with Inspur. Alibaba Cloud is the largest high-end cloud computing company in China.[83] In 2009, Alibaba acquired HiChina, the largest domain registration service and web hosting service company in China, and built it into Alibaba Cloud.[84] On 28 July 2011, Alibaba Cloud released AliOS (formerly Yun OS and Aliyun OS), a Linux distribution designed for mobile devices.[85] In the 2017 Computing Conference in Hangzhou, Alibaba launched AliGenie, a China-based open-platform intelligent personal assistant. It is currently used in the Tmall Genie smart speaker.[86] On 25 September, 2019, Alibaba's subsidiary Pingtouge announced an AI accelerator called the Hanguang 800. The Hanguang 800 contains 17 billion transistors built with a 12 nm process. Pingtouge claim it is capable of 78,563 images per second (IPS) inference and 500 IPS/W in ResNet-50. The Hanguang 800 can be rented on the Aliyun AI cloud service.[87]

FinTech and online payment platforms

Food ordered with Alipay

Food ordered with Alipay

In 2004, the Alibaba Group launched Alipay, a third-party online payment platform with no transaction fees. It also provides an escrow service, in which buyers can verify whether they are happy with goods they have bought before releasing money to the seller.[53] Alibaba Group spun off Alipay in 2010 in a controversial move.[88] According to analyst research report, Alipay has the biggest market share in China with 300 million users and control of just under half of China's online payment market in February 2014.[89] In 2013, Alipay launched a financial product platform called Yu'ebao (余额宝).[90] In 2015, Alibaba announced that they will introduce a system that can be paid by recognizing the owner's face.[91][92] On 16 October 2014, the Alipay company was re-branded as Ant Financial Services.[93]

One of the factors for Alibaba's success in this platform is the company's quick and reliable payment system, where it offers several types of payment systems such as credit card, debit card, Alipay, Quick-pay, and online banking. These payment systems help to cope with simultaneous cash flow transactions with ease and convenience. Ant Financial was ranked sixth in Fortune's Change the World list, recognized for the positive green environmental impact of its Ant Forest, the world's largest platform for tracking individuals' carbon footprints. Ant Financial and its partners have achieved considerable success in the reduction of CO2 emissions.[94][95] Ant Financial is the highest valued fintech company in the world, and the world's most valuable unicorn (start-up) company, with a valuation of US$150 billion.[96][97][98]

Entertainment services

Alibaba created a new live entertainment business unit under its Digital Media and Entertainment Group which focuses on ticketing, content creation and live experiences, bringing its entertainment ticketing platform Damai and its content creation and technology units MaiLive and Maizuo under one roof. It aims to provide a platform for live events (e.g. concerts, plays, eSports and sports events), as well as supporting content partners and leveraging Alibaba's data capability for offline shows.[99][100] It also provides the online digital distribution service 9Apps, which hosts downloadable content and applications.[101]

In March 2014, Alibaba agreed to acquire a controlling stake in ChinaVision Media Group for $804 million. The two firms announced they would establish a strategic committee for potential future opportunities in online entertainment and other media areas.[102] The company was renamed Alibaba Pictures Group.[103] In March 2015, Alibaba Group launched AliMusic as its music division. Xiami Music and Tiantian Music are two of music steaming APP owned by AliMusic. AliMusic named Gao Xiaosong as the chairman and Song Ke as Chief Executive Officer in July 2015.[104] In 2017, Tencent Music has expected $10bn IPO by signing a rights deal with Alibaba, strengthening its position within the important Chinese market. Under the terms of the deal Alibaba will gain the right to stream music from international labels such as Sony Music, Universal Music Group and YG Entertainment, which already have exclusive deals with Tencent, in return for offering to its catalogue from Rock Records, HIM International Music and so on.[105] In April 2014, Alibaba and Yunfeng Capital, a private equity company controlled by Alibaba's founder, Jack Ma, agreed to acquire a combined 18.5 percent stake in Youku Tudou, which broadcasts a series of popular television programs and other videos over the Internet.[106]

Internet services

In 2004, the Alibaba Group released Aliwangwang, an instant messaging software service for interactions between customer and online sellers.

By 2014, there are 50 million Aliwangwang users, making it the second largest instant messaging tool in China.[107] In October 2013, the Alibaba's chairman Jack Ma announced that the Alibaba Group would no longer use Tencent's messaging application WeChat, and would henceforth promote its own messaging application and service, Laiwang.[108] In April 2014, Alibaba Group and UCWeb, a Chinese provider of mobile internet software technology and services, launched Shenma (神马), a mobile-only search engine, as part of a joint venture.[109][110] Later in June, the Alibaba Group acquired UCWeb, with an international product portfolio that includes a mobile browsing service (UC Browser), app and game distribution platforms (9Apps and 9Game), a mobile traffic platform (UC Union) and UC News that primarily caters to all types of news in the India market (as an aggregator) among others.[111][112][113][114][115][116] Alibaba's Y Projects Business Unit developed the Xuexi Qiangguo app, which is used to teach Xi Jinping Thought.[117]

In October 2005, Alibaba Group formed a strategic partnership with Yahoo! and acquired Yahoo! China, a Chinese portal previously launched on 24 September 1999 that focuses on Internet services like news, email, and search.[118] In April 2013, Alibaba Group announced that, as part of the agreement to buy back the Yahoo! Mail stake, that they would suspend technological support for China Yahoo! Mail service and begin migration of Yahoo! China Mail accounts. Several options were offered to users to make the transition as smooth as possible, and Yahoo! China users had four months to migrate their accounts to the Aliyun mail service, the Yahoo! Mail service in the United States, or to another third-party e-mail provider of the user's choice.[119] Yahoo! China closed its mail service on 19 August 2013. E-mails sent to Yahoo! China accounts could be forwarded to an Alimail box until 31 December 2014. Users were also allowed to transfer e-mail accounts to yahoo.com or any other e-mail service. It is estimated there are no more than a million users with Yahoo! Mail for China and chances are they also own other e-mail accounts.[120]

Others

In 2014, Alibaba and Yunfeng Capital, a private equity firm, launched AliHealth when the two companies bought a 54% stake in CITIC 21CN for HK$1.33 billion (US$171 million).[121][122] It is listed on the Hong Kong Stock Exchange as SEHK: 241 [169]. It positions itself as a pharmaceutical e-commerce business and medical services. In the same year, Alibaba acquired Chinese map supplier AutoNavi.[123] In April 2015, the group also reached an agreement to transfer its online B2C pharmacy, Tmall Medical (yao.Tmall.com), to AliHealth. The integration provides consumers a wide range of pharmaceutical and health products available in China.[124] In 2015, Alibaba later launched its Shanghai-based sports division, AliSports, after a consolidation of some of the parent company's existing business units.[125] The new company's operations encompass television and digital sports rights, event operation, venue commercialization, copyright, media, business development, gaming, and ticketing.[125] AliSports secured exclusive title sponsorship of the FIFA Club World Cup from 2015 to 2022.[126] The company announced a Champion of Champions rugby sevens tournament in 2017, to be played in Shanghai for the highest prize money ever offered in the sport.[127]

In December 2015, Alibaba agreed to a deal to acquire the South China Morning Post and other media assets belonging to the group for a consideration of $266 million. Although Alibaba promised editorial independence, vice-chairman Joseph Tsai said that Alibaba believes that "the world needs a plurality of views when it comes to China coverage. China's rise as an economic power and its importance to world stability is too important for there to be a singular thesis."[128] The acquisition attracted media concerns over what this would mean for the newspaper's coverage.[129]

Other subsidiaries of Alibaba include Hangzhou Ali Venture Capital and Alibaba Entrepreneurs Fund.

Hangzhou Ali Venture Capital (杭州阿里创业投资) is a company 80% owned by Jack Ma and another manager of Alibaba. For regulatory purpose, Alibaba Group did not own the company directly, but by pleading. It was considered as a subsidiary and/or consolidated entity of Alibaba Group.[130] Ali Venture Capital is a shareholder of Beijing Enlight Media[131] and a domestic shareholder of China Unicom.[132] The Alibaba Entrepreneurs Fund is a non-profit making initiative launched by Alibaba Group in 2015.[133]

Alibaba also has invested in more than 10 startups in Hong Kong including DayDayCook,[134] GoGoVan,[135] WeLend[136] and Qupital.[137][138]

Corporate governance

Jack Ma, founder and Executive Chairman of the Alibaba Group

Jack Ma, founder and Executive Chairman of the Alibaba Group

Alibaba's main founder Jack Ma is the executive chairman of the Alibaba Group since its creation. Joseph Tsai is Alibaba's executive vice-chairman since 2013. Daniel Zhang is Alibaba's CEO since 2015.[139] J. Michael Evans is Alibaba's president since 2015.[140] The board of directors of Alibaba includes top management Jack Ma, Joseph Tsai, Daniel Zhang, and J. Michael Evans, directors Eric Jing and Masayoshi Son (founder and CEO of SoftBank), and independent directors such as Chee Hwa Tung, Walter Kwauk, Börje E. Ekholm, and Wan Ling Martello, as well as Yahoo! co-founder and former CEO Jerry Yang.[141] Besides Ma, Tsai, Zhang, and Evans, senior management also includes Maggie Wu (CFO) Judy Tong (CPO), Jeff Zhang (CTO and President of Alibaba Cloud Intelligence), Sophie Wu (CCO), Tim Steinert (General Counsel and Secretary), Jessie Zheng (CRO and CRGO/Chief Platform Governance Officer), Angel Zhao (Head of Alibaba Globalization Leadership Group), Chris Tung (CMO), Trudy Dai (President of Wholesale Marketplaces), Fan Jiang (President of Taobao.com), and Jet Jing (President of Tmall.com).

Previously, Jack Ma served as the CEO of the Alibaba Group since its creation, but later stepped down on 2013, choosing Jonathan Lu as his successor.[142][143] The Alibaba Group under Lu was performing well, though there were rumors that Ma was growing distrustful in Lu's ability to lead the company.[144][145] Daniel Zhang, who served as COO of Alibaba under Lu, succeeded Lu as CEO in 2015.[146] On 10 September 2018, Ma chose Zhang to succeed him as executive chairman of the Alibaba Group after his stepping down announcement, and this would go into effect in 1 year on 10 September 2019.[147]

Controversies

Gold Supplier membership

Alibaba.com offers a paid Gold Supplier membership to try to ensure that each seller is genuine; sellers' Gold Supplier status and the number of years it has been held are displayed.[148] The supplier verification types and checks are listed on Alibaba.com's website, with more stringent checks for sellers outside China.[149] While the majority of suppliers are reported to be genuine, there have been many cases of sellers, some with Gold Supplier status, seeking to defraud unsuspecting buyers.[150] In February 2011, controversy ensued when Alibaba's corporate office admitted that it had granted the mark of integrity of its "China Gold Supplier" program to more than 2,000 dealers that had subsequently defrauded buyers; the firm's share price dropped "abruptly" after the announcement.[151] A statement from the firm reported that Yan Limin, the general manager of Alibaba.com at the time, had been dismissed in March for "misconduct"; Phil Muncaster of UK's The Register additionally reported that "a further 28 employees had been involved in dodgy dealings".[152]

As the Economist noted, the company's response has conflicting components: Alibaba's promulgated view that its corrective actions indicate its commitment to quality and integrity (where it contrasts itself with other scandal-associated Chinese business sectors), versus a damage control view suggesting that the subscription-driven, third-party verified "China Gold Supplier" program was endangered by diminished trust in its endorsement system, removing the incentive for global buyers to choose Alibaba as their business-to-business service, thus more broadly endangering Alibaba through impact on its brand and capabilities (the latter via the "defenestration of senior people").[151] The scandal was said to have placed the head of Alibaba Group, Jack Ma—who was described as having been furious over the scandal—in a position to personally fight to win back trust.[153]

Uranium sales

In May 2012, a US law enforcement agent posing as an American broker representing persons in Iran posted an advertisement on Alibaba.com seeking to purchase uranium. In August 2013, Patrick Campbell of Sierra Leone was arrested at New York's John F. Kennedy International Airport. Samples of raw uranium ore were allegedly found concealed in the soles of his shoes. Campbell was accused of seeking to arrange the export of 1,000 tonnes of yellowcake from Sierra Leone to the Iranian port of Bandar Abbas, packed in drums and disguised as the mineral chromite.[154] It was later determined that the samples contained an insignificant amount of uranium, and Campbell was acquitted at trial.[155]

Counterfeit items and scams

Alibaba is frequently associated with fraudulent import of counterfeit items: in 2016, the Office of the United States Trade Representative added Taobao back onto a list of notorious counterfeit platforms that includes the likes of torrent site The Pirate Bay.[156]

Alibaba denied wrongdoing and started timid action against counterfeiters with only two lawsuits filed as of January 4, 2017,[157] but brands suffering from the counterfeit products continue to blame Alibaba for not doing what it takes to fight the issue.[158]

Class action on IPO

Alibaba and the underwriters of its IPO were sued in California in a consolidated class action lawsuit.[159] The lawsuit was brought in San Mateo Superior Court in October 2015 on behalf of investors who purchased Alibaba's American Depositary Shares, and it alleged violations of the Securities Act.[160] Alibaba reached a settlement agreement in December 2018, subject to court approval, in which it agreed to pay $75 million to settle the lawsuit.[159][161][162]

See also

  • Variable interest entity

References

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