High employee turnover can be bad news for companies, especially at a senior level. So when Alibaba, China’s leading e-commerce brand, announced the appointment of its third chief executive in two years, should it be a cause for concern?
Early this month, company chairman Jack Ma said that Daniel Zhang, currently Alibaba’s chief operating officer, will take over from Jonathan Lu as chief executive of the group. (Lu, who took the helm from Ma in 2013, will stay on the board as vice chairman.)
“We complement each other very well,” Lu had told Bloomberg on news of his appointment two years ago. “He looks forward and outside of the box. I focus on the present.”
Indeed, focusing only on the present, Lu’s departure isn’t that surprising. After its record-breaking IPO last November, Alibaba’s shares have been in steady decline, falling from $115 to $80 early this month.
Ma, meanwhile, has tried to put a positive spin on the turnover at the top, saying that it is part of his plan to hand over the company’s operations to a generation of internet-mad youngsters born after 1970 (albeit Zhang was born in 1972, only 3 years after Lu).
When Ma stepped aside from the chief executive role two years ago, he said that he had grown too old to run a technology company.
Investors seemed to welcome the news of the change in personnel, sending the company’s shares up 5% the day after the announcement.
Zhang joined Alibaba in 2007 as chief financial officer of its online shopping site Taobao, before moving to his current role as chief operating officer for the group. CBN says Zhang is reckoned to have been the driving force behind Singles’ Day, the shopping bonanza held on November 11 (see WiC216). And judging by the flurry of announcements in the two weeks since Zhang took office, the new CEO will maintain a brisk pace. First, the e-commerce firm announced that it will take an unspecified stake in domestic parcel delivery firm YTO Express. Meanwhile Securities Times has reported that Alibaba is in talks with Lenovo to produce a smart TV that runs on Alibaba’s YunOS operating system. And on Monday shares in Intime Retail, a department store operator partially owned by Alibaba, soared 16% when it disclosed that Zhang would become new chairman of its board too.
The new leader has also made some bold declarations about Alibaba’s future. In an internal meeting, Zhang told employees that he expects Alibaba’s total turnover to surpass $1 trillion in five years. For comparison, it had gross merchandising volume of $370 billion in the 2014 calendar year. To get to the new total, Zhang says Alibaba needs to go global. The international push will include AliExpress, a sales platform that helps to sell Chinese goods to consumers abroad, and Tmall Global, a service for foreign brands to reach Chinese consumers.
“Today, you can say Alibaba is in the process of achieving globalisation. Over the next five, 10 years, 30 years, this is the journey. We must absolutely globalise and it must be a successful effort – if not Alibaba won’t be able to last,” Zhang told employees.
But one of the more immediate challenges for Zhang is how to deal with sales of counterfeit goods on its consumer site Taobao. In the past Alibaba has claimed that it hires thousands of employees to remove more than 100 million fraudulent listings a year. But last week, Kering, the parent company of luxury brands like Gucci and Yves Saint Laurent, sued Alibaba, alleging that the internet firm profits from the sale of counterfeit goods on Taobao. Kering claims Alibaba is complicit in the sale of fake handbags, watches and other items on the consumer-to-consumer site in a manner that constitutes “racketeering”, according to the lawsuit, which was filed in New York.
Alibaba has rejected the claim, claiming that Kering’s challenge will be counterproductive.
“We continue to work in partnership with numerous brands to help them protect their intellectual property, and we have a strong track record of doing so. Unfortunately, Kering Group has chosen the path of wasteful litigation instead of the path of constructive cooperation. We believe this complaint has no basis and we will fight it vigorously,” a company statement promised.
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