Steve Jobs and Bill Gates traded plenty of barbs over the years (Jobs said that Gates’ firm had “absolutely no taste”, while Microsoft’s founder described Apple’s software as nothing more than “warmed-over Unix”).
But to the surprise of onlookers, when the two industry titans made a rare joint appearance at the All Things Digital conference in 2007 their exchange was marked more by respect than bitter rivalry.
In fact, Gates said he’d “give a lot to have Steve’s taste… The way he does things is just different, and I think it’s magical.”
A similarly convivial tone wasn’t in evidence when Jack Ma and Wang Jianlin took the stage together in December. The tycoons – who founded Alibaba Group and Dalian Wanda respectively – appeared at CCTV’s 2012 Economic Figures of the Year event. Within minutes their exchange was a feisty one, escalating into a Rmb100 million ($16 million) bet.
It started with Ma challenging Wang, chairman of one of China’s largest commercial property developers, about the need for physical storefronts. Bricks-and-mortar retailers were a dying breed, the chairman of China’s largest e-commerce company argued.
Ma was in provocative mood. “I’ll tell people like boss Wang that the good news is that e-commerce will not completely replace bricks-and-mortar. But the bad news is that e-commerce will essentially replace bricks-and-mortar,” Ma warned, in a joking tone.
But Wang wasn’t in the mood for humour. His retort? Even at a historic high of Rmb1 trillion in online sales in the first eleven months of 2012, e-commerce still only comprised 3% of total retail spending. Then the property developer went through the top 10 US e-commerce businesses one by one, noting that almost all had their roots in bricks-and-mortar businesses (the exception is Amazon).
To prove his point, Wang then made a bet: if online consumption had surpassed 50% of China’s total retail volume by 2022, he’d give Ma Rmb100 million. But he was to receive the same amount if online consumption fell short of that ratio. (Ma didn’t agree to the wager: gambling is illegal in China, so that may have been a wise course.)
But beneath Wang’s dramatic gesture is a genuine worry in the property sector that e-commerce will undermine the rental yield at traditional retailers. Wang has a lot at stake. Dalian Wanda, which claims to be the world’s second largest property developer by floor area, is one of the biggest landlords in China. Last year its malls generated customer traffic of around 1.1 billion shoppers.
Its business model relies heavily too on mall throughput to drive sales for adjacent office and residential developments.
China’s e-commerce sector is expected to overtake the United States to become the world’s largest online retail market this year. If it continues at current growth rates, the gain could come at the expense of more conventional shopping channels. The story seems a similar one in more developed markets. In the UK, for instance, high street mainstay HMV went into administration in January. In the US, the property group Savills told the Financial Times that 200 American shopping malls are also set to go out of business (out of a national total of about 1,300, defined by Savills as shopping complexes larger than 450,000 square feet).
By contrast, the race is on to make e-commerce a more integral part of China’s retail industry, so much so that Wen Jiabao, the outgoing premier, specially invited Ma to one of his final government meetings in late January to ask about how to stimulate consumer spending online.
During the session, Ma suggested elevating e-commerce to the status of a ‘national strategic industry’ (joining the ranks of sectors like biotechnology and new energy), says Beijing Business Times.
Although he didn’t take Wang’s wager, Ma has been professing his confidence that he would have been the winner.
“E-commerce is not a business model, it is a lifestyle change. It is a kind of social progress and it is irreversible,” he told CCTV Dialogue, a current affairs show.
© ChinTell Ltd. All rights reserved.
Exclusively sponsored by HSBC.
The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.