Billionaire Jack Ma, Alibaba Group founder and executive chairman, talks about his unusual entrepreneurial beginnings at Stanford University on May 4, 2013. See what else he has to say about e-commerce and the China opportunity.
Driven by rapid e-commerce growth in China's smaller cities and the success of last month's 11.11 Shopping Festival, annual sales volumes on Tmall and Taobao Marketplace, the country's two largest online shopping websites, have surpassed a combined RMB $1 trillion ($157 billion) for the first time.
The milestone, reached on Nov. 30, was hailed by officials for Alibaba Group, the parent company of the shopping websites, as a potent sign of the increasing importance of e-commerce in the everyday lives of Chinese consumers.
Speaking on Dec. 1 at a panel discussion in Hangzhou, China, Alibaba Group Chairman and CEO Jack Ma noted that only two companies—Alibaba and U.S. retailing giant Wal-Mart—have ever recorded annual transaction volumes greater than RMB 1 trillion (or the equivalent in U.S. dollars).
Wal-Mart's revenues totalled $444 billion last year, so the Alibaba websites—which unlike Wal-Mart do not sell goods directly but act as online marketplaces for millions of large and small merchants—still have some catching up to do.
But Ma said achieving the RMB 1-trillion mark means Alibaba will this year surpass Amazon and eBay to become the largest e-commerce company in the world by annual GMV (Gross Merchandise Volume, a measure roughly equal to gross sales). "It's very likely that next year, our transaction volume will be bigger than all the American e-commerce companies combined," Ma said.
Alibaba officials said they reckoned the websites would hit RMB 1 trillion by the end of 2012, but greater-than-expected sales volume during the 11.11 Shopping Festival hosted by Tmall and Taobao Marketplace, put the websites over the top several weeks earlier than anticipated.
Transaction volume is being heavily fuelled by online spending in China's third and fourth-tier cities, where e-commerce sales have been growing 60 percent year-over-year in 2012, compared with 40 percent growth in the country's largest cities, officials said. As online spending soars, "A growing number of industries have realized that e-commerce has morphed from an emerging business model to a mainstream business model," Ma said.
The e-commerce boom has forced China's logistics industry to adapt rapidly to the soaring volume of package deliveries. In the first six months of the year, sales on Alibaba shopping websites generated an average of more than 12 million packages a day. That's up from an average of 8 million a day from Taobao Marketplace and Tmall combined in 2011. Taobao and Tmall sales accounted for an estimated 60 percent of all package deliveries in China last year.
Still, total retail sales in China, including bricks-and-mortar shops, was RMB 18.39 trillion last year, according to Chinese government statistics. RMB 1 trillion accounts for just 5.4 percent of total retail sales.
Alibaba officials have said if growth trends hold they expect total annual GMV on Taobao platforms could reach RMB 3 trillion in as few as five years.