The recent record-breaking IPO of Hangzhou-headquartered Alibaba marked a seismic shift taking place in the evolution of the internet and digital business. Alibaba, already the undisputed king of e-commerce, handling more sales than Amazon and eBay combined, is now the world’s fifth most valuable tech company, valued at over $200bn. With money comes deep pockets for innovation.
Where once the world saw Silicon Valley as the hub of all digital innovation this is fast shifting East towards the Hangzhou Hills, 180 kilometers south of Shanghai. China’s digital innovation is taking an excitingly different tack to that of the West too, a huge market to cater to it affords more possiblities.
As the world’s biggest and fastest growing e-commerce market, 600 million online Chinese consumers will spend an estimated $541bn online next year, each making over 100 purchases. Alibaba’s flamboyant founder, selfmade e-commerce billionaire Jack Ma (below), now the richest man in China, recently explained: “in other countries, e-commerce is a way to shop, in China it is a lifestyle.” With little legacy technology holding it back, China’s e-commerce market is not only big, it is advanced; the world’s highest penetration of post-PC devices means that e-commerce here means mobile commerce. Size combined with an advanced market offers plenty of opportunity for new directions in digital innovation.
In this huge, growing and advanced market, Eastern internet giants such as Alibaba, JD.com and Baidu still benefit from an enviable degree of market protection – at least from foreign firms. In the case of Alibaba, this has allowed the Hangzhou firm to build up an eyewatering 80 per cent share of the domestic e-commerce market. Four out of five purchases online in China are made via one of Alibaba’s B2B, B2C and C2C marketplaces, and half of all online payments are made using Alibaba’s ‘Alipay’ electronic wallet (below). Such market dominance in benevolent market conditions may help foster the confidence to buck innovation trends by creating new ones.
If Alibaba is anything to go by, we’ve some exciting new innovation trends to look forward to. Take, for example, micro-investments. We’re all familiar with micro-payments and micro-lending, but China’s Alibaba is leading the way in online micro-investing. Its innovative Yuebao feature (meaning ‘leftover treasure’) lets consumers make one-click micro-investments in a high-yield money-market fund using the small change from their online purchases.
Yuebao now has more investors than China’s stock markets and is the largest public fund in China. Positioning itself wherever money changes hands and without respect for industry verticals, Alibaba is also experimenting with a variety of commercial innovations from demand-led ‘team-buying’, to virtual malls and shoppable streaming video. There are also rumours afoot that the company may partner with Apple Inc. on mobile payments, resulting in an Alipay and Apple Pay tie up – a serious force to be reckoned with if it comes to pass.
Dismissed as imitators rather than innovators, the new Eastern internet giants are starting to flex their freshly-funded innovation muscles as Asia becomes a new hotbed of digital experimentation. It is quickly becoming the place where you’ll most likely find the ‘next big thing’ – and the company behind it.
So if you want to look to your digital future, look East. As William Gibson remarked – “the future is already here, it’s just unevenly distributed.” We now know that uneven distribution has shifted East. East is where the sun will rise on tomorrow’s breakthrough digital ideas, innovation and inspiration.
We need to open ourselves up to the truth that Western digital hegemony is finally over.
Dr Paul Marsden is a consumer psychologist at digital marketing group Syzygy.