Improving core business
The core of Alibaba's strategy is to improve its current core business, which dominates the e-commerce market in China's higher-tier, wealthier cities.
The plan contains several elements. First, Alibaba wants to increase the number of “VIP” customers that pay for the Alibaba 88VIP subscription, similar to Amazon Prime. 88VIP members spend about eight times as much as regular customers, but only about 50 million of Alibaba's 946 million monthly active users have paid subscriptions. In the presentation, management set a goal of doubling this number in the future.
E-commerce services are more accustomed to using and are more price sensitive during the pandemic. Alibaba is also upgrading hands-on services related to large products, such as installing home decor.
At the same time, management aims to use artificial intelligence and automation to improve the efficiency of its digital advertising. Remember, digital advertising is Alibaba's core profit center. Management is now transforming its digital advertising system from a “product-based” advertising system to a “business goal-driven” system that appears to use more artificial intelligence and automation. According to management, the change has led to a 30% increase in return on investment for advertisers, which will drive higher advertising rates in the future.
New areas of investment
In addition to its core markets, Alibaba has also invested heavily in new growth areas. While the company often touts these new businesses, basically all are at a loss, and returns are uncertain. Despite this, management proposed aggressive new investment plans.