Published December 3, 2014
By Jim Tompkins
CEO, Tompkins International
A week after Alibaba’s mid-September IPO, Jin Jianhang (Alibaba Group President) said: “Business-customer e-commerce in the agriculture sector, along with big data and cross-border e-commerce, will be the company’s main business focuses after the stock market listing.”
Mr. Jianhang also explained Alibaba’s commitment to establishing a dedicated agriculture platform on Taobao.com for farmers to sell products. They could enjoy services including marketing and logistics support, as well as product tracing. These comments are of significant interest to all consumers, farmers, and grocery businesses even though they are not new thoughts coming from Alibaba. In fact, they are a continuation of many of Alibaba’s philosophies and actions in the past few years:
- Alibaba’s philosophy of helping small business in China.
- Alibaba’s focus on cross-border trade: China to the world and the world to China.
- The growth of the Alibaba cold chain agri-food business that has grown 18 times from 2010 to 2014. It will be greater than $13 billion in 2014.
- Alibaba is harnessing the desires of the fast-growing middle and upper classes; they are hungry and thirsty for delicious agricultural products. (See the new book China’s Super Consumers by Michael Zakkour to learn more.)
- The evolution of Alibaba’s interest to expand upon its online grocery business. Two interesting facts here:
- My search on Alibaba.com for “Sell Fruit” yielded 4,764 suppliers. These suppliers were 72% East Asia, 6% South Asia, 6% Southeast Asia, 2% North America, and 14% other. The markets included 3,612 wholesalers in North America, 3,502 in Western Europe, 3,373 in Eastern Europe, 3,302 in South America, and many more throughout the world.
- Alibaba’s Taobao grocery business continues rapid growth in both “center-of-the-store” pantry items and “outer ring” cold chain items. Add to this the prediction made in the video The Alibaba Effect that Alibaba will be entering the U.S. online grocery business over the next two years, and the importance of the role Alibaba plays in the global food chain is clear.
Online grocery in the U.S. today is only 3.5% or about $23 billion per year. Over the next 5 years, I believe this number will surge to more than $100 billion. Alibaba has good experience in this sector in China and has a good start working with suppliers, plus a strong desire to pursue the U.S. market.
So, is Alibaba the global farmers market? I’m not convinced yet, but stay tuned. I do know that Alibaba will soon have a substantial outreach in filling your pantry, refrigerator, and freezer in the years to come.