Analysis: Alibaba and fund distribution

Alibaba, the Chinese online e-commerce firm, recently, ran a ‘Singles Day’ event. The event – which saw Alibaba sell $17.8 billion (€16.5 billion) worth of goods and services to Chinese singletons – resonates with a 2014 report looking at the future of asset management.

Singles Day on November 11 is when young Chinese people celebrate being single and it has grown since the 1990s to become one of the largest online shopping days in the world.

Jimmy Huang, an associate professor of information systems at Warwick Business School, has researched digital ventures in China and says the success of Singles Day reflects the “experience economy”.

“Users are consuming products or services for more than just utility purposes. For digital ventures it is now a question of understanding your users and being able to provide products, services and apps that fulfill their experience expectations,” the professor said.

How prescient, then, of the ‘Asset Management 2020’ report from PwC, which imagined in its introduction a young Chinese woman, Wei, boarding her train in a Beijing suburb.

Checking her mobile device, she notices a message from the sister company of an international dating site she belongs to.

And what does this message lead to? Not a romantic meal for two, nor marriage and children, that’s for sure. This is PwC, not Mills & Boon.

It leads to the purchase of an investment fund, of course.

The sister company to the dating site is a financial adviser and analysed Wei’s financial strategy to automatically match her “dating style” with the funds and fund companies most likely to meet her future needs, which turn out to be her presumably as yet unborn son’s university fees.

The PwC report said: “The way many asset managers operate in 2020 will be significantly different compared with the 2013 model. Our fictional investor, Wei, represents just one example of how funds might be sold and distributed in 2020.”

PwC also noted that this is already evident. Alipay – part of the Alibaba empire – bought Tianhong Asset Management in 2013, and Alipay’s customers are able to invest their idle money in the Yu’E Bao fund, one of the world’s largest money market products.

Back at Warwick University, Professor Huang says: “As one of China’s digital entrepreneurs told us, in the experience economy ‘there is nothing more powerful than emotionalising your users’. Is this exactly what Alibaba has managed to do with the Singles Day – emotionalising their users? 

“Digital ventures are able to exploit their user base to innovate and with one of the largest user bases in China, Alibaba is not just strong in its Singles Day sales, but powerful in virtually every business it enters.”

©2016 funds europe

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