Eddie Wu’s Alibaba: The Rise of an AI-First Ecommerce Empire (Tech Strategy)

Posted on January 16, 2025 by Prof Jeff

Alibaba, the Chinese e-commerce giant, is undergoing a strategic shift under the leadership of its new CEO, Eddie Wu. This shift is driven by two main factors:

A renewed focus on its core platform businesses (especially e-commerce and cloud).
A rapid move into generative AI services.

That moves the business back into asset-lite businesses that benefit from the most powerful business models (i.e., platforms and likely AI services).

Based on this, here are five things Alibaba will likely focus on in the near future:

1. Re-Igniting Growth in Their Now Re-Organized Ecommerce Biz

Alibaba is refocusing on its core e-commerce businesses: Taobao, Tmall, 1688, Alibaba.com and AIDC.

And they are largely exiting Sun Art, Freshippo and Intime. Basically, the new retail strategy of former CEO Daniel Zhang is done. That strategy was about building out extensive physical retail assets as strategic infrastructure. They are going back to ecommerce marketplaces.

They have consolidated international and domestic ecommerce into one business. And young hotshot Fan Jiang is now in charge as its CEO.

That’s all great.

Here’s what I’m watching for going forward.

Leveraging Cainiao for Faster and Cheaper Delivery:

Cainiao, Alibaba’s logistics arm, is playing a crucial role in enabling faster and more affordable delivery for Alibaba’s e-commerce platforms, both within China and cross-border. AliExpress Choice, which guarantees five-day delivery to several countries, exemplifies this winning strategy.
Overall, Cainiao looks like it is reverting to its previous role as a strategic advantage for ecommerce. And not a standalone business unit with its own income statement.
I expect the expansion of Cainiao’s global logistics network to accelerate. And I expect continued big spending big on new logistics technologies, like smart routing and automated warehouses. More on this in the next point.

Attracting More Merchants, Especially SMEs:

Alibaba is focusing on attracting a broader selection of merchants to its platforms, particularly small and medium-sized enterprises (SMEs). This strategy is aimed at offering consumers a wider variety of products at lower price points. This is mostly about countering the threat of Pinduoduo which is strong in these low-cost markets.

Enhancing the Shopping Experience with GenAI:

Alibaba is rapidly integrating generative AI into its e-commerce platforms to improve the shopping experience for customers and to empower merchants. This includes AI-powered chatbots for customer service, personalized recommendations, and AI-driven search functions.

2. Accelerating the Build Out of their Global Smart Logistics Network – Starting with Cross-Border Express Delivery

The playbook for Cainiao is pretty clear.

They have built powerful domestic networks (express delivery, supply chain) in China.
Now they are expanding this to cross border networks (starting with China to the world. But then adding other cross-border routes).
Then they will add domestic networks (local-to-local) in other countries.
And finally, they have a global network.

And at each step, they use their existing scale to expand from a position of strength into the next network. It’s really powerful and I expect it to work.

Here is what I am expecting from Cainiao:

Rapid expansion of their global network:

Cainiao is aggressively expanding its global network of warehouses, sorting centers, and transportation routes. This expansion is focused on key international markets and aims to offer comprehensive logistics services covering the entire supply chain, from first-mile pickup to last-mile delivery. Cainiao’s goal is to build a cost-effective global network that allows for fast and reliable shipping between different regions. And at a price that smaller competitors cannot match.

Big investments in logistics tech and automation:

Cainiao is investing heavily in cutting-edge technologies like AI, machine learning, robotics, and IoT to automate and optimize its logistics operations. This includes implementing automated sorting systems, robotic warehouses, and smart routing algorithms. These technologies are essential to improving efficiency, reducing costs, and enhancing the speed and reliability of its logistics services. And smaller competitors cannot really match them in this.

Continued struggles with the efficiency of last-mile delivery:

While Cainiao has achieved significant scale advantages in its core warehouse and line networks, last-mile delivery remains a challenge due to its variable cost nature. Nobody really has a great solution to this yet. And it can impact their delivery guarantees (which is the key to AliExpress Choice). To address this, Cainiao is experimenting with various solutions, including:
- Cainiao Post Stations (in China): They have these everywhere in China and they offer convenient pickup and drop-off points for customers. This strategy allows for greater order density within specific geographies, enabling Cainiao to leverage machine learning for smarter routing and batching, leading to cost savings. They are increasingly automated. I asked if they were going to take these international and the answer appears to be no (for now).
- Automated Delivery Vehicles: Investing in the development and deployment of automated delivery vehicles, such as delivery robots and drones, to reduce reliance on manual labor and increase efficiency in last-mile delivery. Interesting but I’ve yet to see these deployed anywhere at scale.
- Strategic Partnerships: Partnering with local delivery companies is their standard strategy. But this is problematic. They recently bought a delivery company in Spain to have more control.

Offering Differentiated Services That Competitors Can’t Match:

They like to offer innovative and cost-effective services that leverage their scale advantages. And that competitors can’t easily match. These include:
- Guaranteed Delivery Services: They are going to expand their 5-day guaranteed delivery service, AliExpress Choice, to more countries. This service leverages Cainiao’s scale advantages and smart technologies to provide fast and reliable cross-border shipping at really low prices.
- Local-to-Local Delivery Services: Expanding into local-to-local express deliveries is interesting. The idea is to use superior infrastructure and technology to offer services at significantly lower prices than local competitors. I’m watching for this in Spain and France.

3. Big Investments in Alibaba Cloud. With Price Cuts to Push Adoption.

Alibaba Cloud is, in theory, their next huge business. Like AWS is for Amazon. And they are definitely the leading player in Asia. But adoption has been slower than hoped.

I expect Cloud CEO and technologist Eddie Wu to really lean into cloud services. They want to expand their capabilities with investment. And expand adoption with price cuts. Here’s what I’m expecting:

Aggressive Investment in AI and Technology:

Alibaba Cloud is heavily investing in AI, particularly generative AI. This changing tech paradigm is an opportunity to own the tech stack, similar how Chinese EVs have used shifting tech to jump into automotive. I expect them to keep flooding money into their own foundation models, models services and cloud offerings. Eddie Wu is the right guy to do this.

Focus on Market Share and Growth over Profits:

Alibaba Cloud is definitely prioritizing market share growth over near-term profitability. This is evident in their recent price cuts of up to 50% for core cloud services.

Targeting a Wider Range of Clients:

I expect them to expand sales and service operations to cater to different customer segments, including SMEs and multinational corporations operating in China. This includes offering customized solutions tailored to specific industries and business needs. I’m watching for Asia and Europe as their core international markets.

4. Pioneering New and Game Changing GenAI Services

Alibaba is rapidly building its capabilities in generative AI services, aiming to become a leading player in this emerging field. You can see them incorporating this into their ecommerce and cloud services.

But the big move will be launching entirely new AI services. If the digital platform was the most powerful business model of the past 20 years, I expect AI services to be the powerhouses of the next twenty. I like that they are pushing into this.

Here’s what I think the playbook is:

Developing their Own Foundation Models:

Alibaba is investing in research and development to create its own foundation models for AI, rather than relying solely on external providers. This gives them greater control over their AI technology and allows them to tailor solutions to their specific needs.

Leveraging GenAI to Enhance Existing Products:

Alibaba is integrating generative AI into its existing products and services, including e-commerce platforms and cloud offerings. This is aimed at improving efficiency, enhancing user experience, and creating new features and functionalities.

Launching New AI-Powered Products and Services:

Alibaba is developing and launching new AI-powered products and services, such as the DingTalk AI Assistant, which is positioned to become a full-fledged AI agent. They are also building an AI agent marketplace to connect businesses and individuals with various AI agents.

5. Becoming One of the Main Open-Source Ecosystems for GenAI:

I mentioned that Alibaba wants to be a major player in the new AI tech stack. Going all the way from apps to models to semiconductors.

However, they also want to be a major player in the emerging global AI ecosystem. That means getting developers and companies building using their tools, services and standard. So, unlike some competitors who rely heavily on proprietary AI models, Alibaba has made a strategic decision to focus on open source for generative AI. This goal is to encourage collaboration, innovation, and wider adoption of their AI technologies.

That’s a really good strategy for a GenAI business that has an ecommerce cash machine in their back pocket.

Here’s what I’m watching for:

Open Sourcing its Newest GenAI Tools and Models:

As they keep rolling out new versions of Qwen, I’m watching to see if they stay open source. So far that has been the case. This fosters a community-driven approach to AI development and accelerates the pace of innovation.

Developing Platforms for Sharing and Collaboration:

Alibaba has launched platforms like ModelScope and Model Studio, where developers and researchers can share AI models, collaborate on projects, and access training resources. The key with these is to watch developer adoption. When in doubt about an industry, always follow the developers. So far it looks good.

***

That’s it. Things have really accelerated at Alibaba in the past year. New leadership. New org structure. New strategy. And it all looks really good.

Cheers, Jeff

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From the Concept Library, concepts for this article are:

Generative AI
Cloud Services
Ecommerce
Logistics

From the Company Library, companies for this article are:

Alibaba Cloud
Cainiao
Alibaba
Tmall and Taobao

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I write, speak and consult about how to win (and not lose) in digital strategy and transformation.

I am the founder of TechMoat Consulting, a boutique consulting firm that helps retailers, brands, and technology companies exploit digital change to grow faster, innovate better and build digital moats. Get in touch here.

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Jeffrey Towson 陶迅

Consultant and keynote speaker on digital and AI strategy, transformation and disruption