Takeaways from 2017 Alibaba Investor Day 1 June 9 2017...consumer journey to raise awareness,...

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June9,2017

DeborahWeinswig,ManagingDirector,FungGlobalRetail&Technologydeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.

Takeaways from 2017 Alibaba Investor Day 1

AtDay1ofthe2017AlibabaInvestorDay,theseniorexecutiveteamshareditsstrategicvisionforthecompany’scorecommercesegment,aswellasrecentdevelopments.

1) CEODanielZhangpresentedanoverviewofAlibaba’secosystem.Hebelievesthatdatatechnologywillbepivotalindrivingsynergiesacrossallbusinessunits,whicharedrivingnewinitiativesincommerceonaglobalscale.

2) CFOMaggieWuguidedforFY18revenuegrowthinthe45%–49%yearoveryearrange.ShereviewedAlibaba’ssatisfactoryfinancialperformancesinceitsIPO,drivenbystrongcash-flowgenerationofthecorecommercesegments.SheexpectsAliExpressandAliCloudtobethenextgrowthdrivers,followedbyinitiativescurrentlybeingincubatedsuchasNewRetail,internationalexpansion,IoT,AI,etc.

3) CMOChrisTungtalkedaboutUniMarketingandBrandDatabank—bothtoolswhichAlibabahasmadeavailabletobrandstoincreasetheirmarketingefficiency.HeillustratedthatbrandscanleverageAlibaba’splatformthroughouttheconsumerjourneytoraiseawareness,interest,purchasesandloyalty.

4) OneoftheleadingKeyOpinionLeaders(KOL)onTaobao,Cherie,statedthatlowertraffic-acquisitioncosts,inventorycostsandtrailingcostsarethekeyadvantagesthatKOL-drivencommercehasovertraditionalcommerce.

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June9,2017

DeborahWeinswig,ManagingDirector,FungGlobalRetail&Technologydeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.

AboutAlibaba2017InvestorDayFungGlobalRetail&TechnologyisattendingAlibaba’s2017InvestorDayatitsheadquartersinHangzhouonJune8–9.Day1oftheInvestorDayfocusedonthefollowing:

• CEODanielZhangprovidedanoverviewofAlibaba’secosystemanditsfuturestrategy

• CFOMaggieWutalkedaboutthefinancialprojectionsforthecompany

• CMOChrisTungpresentedonUniMarketingandhowbrandscanleverageAlibaba’splatformtointeractwithconsumers

• TaobaoKOLCherieprovidedademonstrationoflivebroadcasting

AStrategicPerspectiveontheAlibabaEconomyCEODanielZhangpresentedanoverviewofAlibaba’secosystemandthecompany’sfuturestrategy.Alibabahasbeenevolvingrapidlysinceitwasfoundedin1999.ZhanghighlightedthatTaobaowillremainanimportantplatformwithinitscorecommercesegment—ithastransformedfromamarketplacetobecomeasocialcommerceplatform,allowingconsumerstohavefunexploring.ThecompanyhasalsomovedintonewareassuchasdigitalentertainmentandlocalservicesthroughinvestmentsinKoubei,alocalcommerceplatform,andele.me,anonlinefooddeliveryplatform.

Hebelievesbigdatatechnologywillbepivotalindrivingsynergiesacrossallbusinessunits.

Source:FungGlobalRetail&Technology

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June9,2017

DeborahWeinswig,ManagingDirector,FungGlobalRetail&Technologydeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.

NewRetail:DigitizingtheCoreComponentsofRetailOperationsAlibabaaimstodigitizethedifferentstagesofthevaluechain,andhasbeenexperimentingwithNewRetailacrossdifferentretailformatsatitsstrategicpartnerssuchasIntime,Suning.com,SanjiangandBailian.ZhangregardsAlipay,whichprovidesdigitalpaymentsolutionsforofflineretailers,asimportant,asithelpsgiveconsumersaseamlessexperiencebothonlineandoffline,andisbeingintegratedatphysicalretailers.

Source:Companydata/FungGlobalRetail&Technology

TransitionsZhanghighlightedthesignificanttransitionsthatareongoing:

1. Frommakingconnectionstotransformingretail:Alibabahasshiftedfrommerelyconnectingbuyersandsellerstochangingthewayconsumerstransact,byintegratingmarketing,distribution,omnichannelandsupply-chainfunctionsthroughdatatechnology.

2. Cloud—frominfrastructureasaservicetoapplication-enhancedcloudasaservice:ThefunctionofAliCloudhasevolvedtosupportdifferentfunctionssuchasretail,digitalmarketing,logistics,digitalmedia,financialservices,customerservice,citybrainandindustry-tailoredsolutions.

3. Digitalmedia&entertainment—fromcommercetoentertainment:Alibabaseesstrongsynergiesbetweencommerceandentertainment.Ithasbeenbuildingitscontent-generationecosystemandleveragingitsmediaassetstotransformcommercetomaketheshoppingexperiencemoreenjoyableforconsumers.

4. LeveragingChina’sadvantagetomeetglobalconsumptiondemands:AlibabaaimstoleverageitsadvantageinChinatoselloverseasthroughAliExpress,across-borderdirect-to-consumerexportplatform;LazadaforSouth-EastAsianmarkets;andTmallGlobal,whichbringsqualityimportsintoChina.

Source:FungGlobalRetail&Technology

Customers Productmerchandising Orders Payment Loyalty

Program

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June9,2017

DeborahWeinswig,ManagingDirector,FungGlobalRetail&Technologydeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.

FinancialPerspectiveandRevenueGuidanceCFOMaggieWubeganherpresentationwitharecapofAlibaba’ssatisfactoryfinancialperformancesinceitsIPO,supportedbysustainablerevenueandgrossmerchandisevolume(GMV)growth,animprovingmobilemonetizationrateandhighgrowthinuseranduserengagement.WuprovidedFY18revenueguidanceforarangeof45%–49%yearoveryear.

Source:FungGlobalRetail&Technology

Wusharedwiththeaudienceherthoughtsonhowanewbusinessunitgenerallytakesoversevenyearsfrominitialincubationandgainingtractiontogeneratesustainablecashflow.Currently,thecorecommercedivisioniscash-flowgenerative.SheexpectsAliCloudandAliExpresstobenexttoreachthatstage,followedbyinvestmentscurrentlybeingincubated—i.e.,NewRetail,UniMarketing,content,internationalexpansion,etc.

Source:FungGlobalRetail&Technology

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June9,2017

DeborahWeinswig,ManagingDirector,FungGlobalRetail&Technologydeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.

TransformMarketing—HowBrandsCanLeveragetheAlibabaPlatformCMOChrisTungpresentedonAlibaba’smarketingcapabilities,whichprovidebrandswithafulldimensionaldatasetfromwhichtoconstructconsumers’lifestyles.Inordertoincreasetheeffectivenessofmarketing,AlibabalauncheditsBrandDatabank,whichhelpsbrandsbuildawareness,interest,purchasesandloyaltyamongconsumersbymakingdataactionableandvisible.TunggaveanexampleofhowbrandscanleverageAlibaba’splatformtoincreasemarketingefficiency:

Step1—Awareness:BrandscanuseYoukuandAlimama.comtoincreaseawarenessamongconsumers

Step2—Interest:BrandscanparticipateinshoppingfestivalssuchasSuperBrandDaytomakeconsumersmoreinterested

Step3—Purchase:Juhuasuan,agroup-buyingsite,canhelpconvertconsumers’interesttopurchase

Step4—Loyalty:TheBrandHubcantransformcustomerswhohavepurchasedintoloyalmembers

Source:FungGlobalRetail&Technology

ContentDrivesHigherConversionThelongerChineseconsumersstayonAlibabaplatforms,themoretheyspend.Theaveragecustomerplaced38ordersinthefirstyearofregisteringonanAlibabashoppingsite;fouryearslater,theyplacedanaverageof123orders.Theaveragespendingpercustomerrosefromaround¥3,000inthefirstyeartomorethan¥12,000inthefifthyear.

UniMarketingasaTooltoManageConsumerAssetsTungalsoprovidedadetailedexplanationofUniMarketing,whichhesawasaprocessofmanagingconsumerassetswiththefollowingthreecharacteristics:

1. Universaltouchpoints:Suchasthroughtheintegrationofmembershipsystems

2. Unitedchannels

3. Auniquerelationshipjourney:Tohelpmanagetherelationshipbetweenbrandsandconsumersthroughthedifferentstagesoftheconsumerjourney

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June9,2017

DeborahWeinswig,ManagingDirector,FungGlobalRetail&Technologydeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.

LiveDemonstrationofKOLOneoftheleadingKOLsonTaobao,Cherie,presentedonthetopic“TheRiseandBreakthroughoftheInternetCelebrity—TheEconomicModelunderChina’sE-CommerceEnvironment,”andtalkedabouttheadvantagesofusingKOLtoincreasee-commercetrafficandconversion.Shealsogavealivedemonstration.

Cheriebeganbysharingherviewonthecompetitivenessandkeyadvantagesofthebusinessmodelofe-commercedrivenbyKOLs.

1. Thetrafficacquisitioncostislower:Thesecostsarelowerfore-commercesupportedbyKOLs,astheyalreadyhaveafanbase.

2. Theinventorycostislowerthanphysicalretail:TheKOLe-commercemodelcanusepre-salestotheiradvantage.KOLshavebuilttrustwiththeirfanswhoarewillingtowaitthe11–15daysleadtimefrompre-salestodelivery.

3. KOLe-commercehasalowertrialingcost:Traditionalretailmodelshavelimitedknowledgeaboutthepotentialmarketreactiontonewproductlaunches.KOLscangainmorecoloronthemarketreactionbyfirstpostingphotosofproductstheyplantosell,andgaugeconsumers’reactions,asindicatedbythenumberoflikes.

4. ItemssoldbyKOLshavehighconversionrate:Over10%.

LivedemonstrationofKOLCheriesharedsnapshotsofherpreviouslivestreamingsessionsandalsogaveademonstrationoflivestreaming.Duringthesession,sheintroducedthefashionitemsthatshewaswearingandinteractedwithbuyerstoanswertheirqueriesonspecificproducts.Thenumberoflikesfromviewerstotaled500,000duringthe15-minutesession,anindicationofthepopularityofhershow.

Source:FungGlobalRetail&Technology

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June9,2017

DeborahWeinswig,ManagingDirector,FungGlobalRetail&Technologydeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.

ConclusionThepresentationsaboutthefuturestrategyandthecorecommercesegmentleftusconvincedthatAlibabaisonasolid,long-termgrowthtrajectory.TheFungGlobalRetail&TechnologyteamlooksforwardtoreportingthehighlightsofDay2of2017AlibabaInvestorDay,whichincludeskeynotepresentationsfromExecutiveChairmanJackMaandExecutiveViceChairmanJoeTsai,andthelatestdevelopmentsofAliCloud,thedigitalentertainmentsegment,AntFinancialandCainiaoNetwork.

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June9,2017

DeborahWeinswig,ManagingDirector,FungGlobalRetail&Technologydeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.

DeborahWeinswig,CPAManagingDirectorFungGlobalRetail&TechnologyNewYork:917.655.6790HongKong:852.6119.1779China:86.186.1420.3016deborahweinswig@fung1937.comEsmePauAnalyst

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