Investor Day 2019

Sep 24, 2019

Slides

So we're entering the next session where our CFO and our CEO will present. So this will be live broadcasted. So unfortunately, this is the 3rd boring session of the day. I need to talk about the safe harbor. So for those watching, this is the I will officially welcome all of you to the 2019 Investor Day. We're here in the Shizui Hotel, very great weather versus last year was a little tricky. But let me start with the Safe Harbor for everyone. Presentations and discussion during Investor Day will contain forward looking statements. These forward looking statements involve inherent risks and uncertainties that may cause actual results to differ materially from our current expectations. For detailed discussions of these risks and uncertainties, please refer to our latest Annual Report on Form 20 F and other documents filed with the SEC. Any forward looking statements that we make are based on assumptions as of today, and we do not undertake any obligation to update these statements, except required under applicable law. Please also note that these presentations and discussions will contain certain financial measures that are not recognized under generally accepted accounting principle in the United States, such as adjusted EBITDA, adjusted EBITDA margin, adjusted EBITDA, adjusted EBITDA margin, marketplace based core commerce adjusted EBITDA, non GAAP net income, non GAAP diluted earnings per share or ADS and free cash flow. More information about these non GAAP measures and reconciliation of GAAP to non GAAP measure can be found on the filings with the SEC. So without further ado, let me introduce our CFO, Maggie Wu. Good afternoon. It's glad to have all of you here again this year. I hope that you find the previous days and this morning's presentations helpful. I asked some of my investor friends what do they want to hear from me in my presentation during Investor Day. They just without thinking said guidance. So in some of in the eyes of some of the investors, Maggie's presentation equals to guidance. This will not be the case this year because we've already given guidance to you. And let me reiterate, our revenue of the group for fiscal 2020 is going to be over RMB500 1,000,000,000. We remain that guidance unchanged. Okay. Today, I'm going to talk about 2 topics, financial perspective as well as investment. So three things to cover besides the financial updates, strategic investment, I also want to talk about the valuation framework. Okay. Under financial update, there are 3 things I want to discuss. 1st is our growth. 2nd, the efficiency gains. Third, how we think about invest for future. Okay. Here are some financial highlights for the last 12 months. At the end of June, our mobile MAU reached 755,000,000 and annual active consumer is 674,000,000. So we've added over 200,000,000 net adds for the AAC in the past 2 years and 100,000,000 in the past year. And if you think about it, total population for China is like 1,370,000,000 yen and it's pretty much one out of every 2 Chinese are buying things on our platform. And our revenue is US59.8 billion dollars representing 46% year on year. And both our core commerce and cloud computing shows very strong growth. Other business is also growing very nicely. And we've generated RMB 16,800,000,000 adjusted EBITDA profit in the past 12 months and RMB 15,200,000,000 free cash flows. So these are the powder for us to further invest for longer term growth. Okay. Our robust revenue growth has outperformed all of our global technology peers. While we are growing 46%, you can see that other peers are growing at 20 ish or teens. Even though we take out the newly acquired businesses, our growth is still very strong at 37%. We're way ahead of the other peer companies. This is not only the case for past year, but also the case for the past 5 years. In the last 5 years, our revenue has grown more than 7 times. Okay. Talk about profitability. We have a 30% CAGR the adjusted EBITDA growth. This is for a whole group. And then when you look at the market based core commerce business, it's even growing faster. So we use that as a part of that profit to invest back to our business. In fact, historically, we have been investing like 1 third of our market based core commerce profit back to the business to develop the logistics, to do the globalization, to invest in local service as well as the new retail. For those of you who have attended our 2017 Investor Day, you might still remember that year I give guidance and also I talk about how we're going to use of our incremental profit. I said that we're going to use that money to reinvest back to the business to expand our B2C market leadership. Now let me report back to you. Okay. So in the past 2 years, if you look at the national statistics, which is the 22%, the blue line, China Online Physical Goods has 22% growth, 20 ish, right? Tmall GMV has grown over 30%. So you can tell that although in this size, we're still growing faster and taking market share in that sector. In fact, we already become the driver for China consumption growth. If you look at fiscal 2019 versus 2018, China retail consumption has grown from RMB37,100,000,000 to RMB 38,800,000,000, which shows around RMB RMB 1,780,000,000 like RMB growth, right? This is a net adds. And then when you look at Alibaba platform, we grew from RMB 4,800,000,000 to RMB 5,700,000,000. This the growth is 907,000,000. So if you do the calculation, we are driving contributing to over 50% of the incremental China consumption growth. So we not only focusing on extending the user base experience and GMV growth, but also very focused on the customer loyalty. This is a slide I showed last year. So on our platform, over 100,000,000 consumers who spent over RMB 10000 per annum, we have seen retention of 98%, very high. Okay. That 100,000,000 number now grow into 130,000,000 and the retention still stays at 98%. That tells you the consumer experience, it tells you all of these efforts we've made and innovation we have and all of the different things we provided on the platform actually being paid back by the recognition of consumer. And then these days, I was asked a lot by the investors on how's the quality of your lower tier city consumers since 70% of new users are from the less developed areas. So let me share with you on the cohort of the lower tier city consumers. Longer consumer stay, higher their spending are. And if you look at the data here, so for the 1st year consumer, these are all for lower tier cities. They show average RMB 2,300 per annum. For 3 year consumer in larger cities, the spending level is $6,700 5 year, 10,600. So we're way ahead of the other peers. That's the consumption demands and power we see on our platform from the lower tier city. And we just announced that Alibaba Groups takes 33% of Ann's Financial. Now you should expect to see greater synergy coming from the whole we call the whole economy, Alibaba economy. So take this ANSYS example, 33% of Ele. Me's new users were actually from Alipay app. So if you look at Taobao and Tmall, in the past several months, around 20% of the new users on Taobao and Tmall are actually acquired through Alipay. If you look at the consumer base, we and Alipay each has, we are somewhere close to $700,000,000 Alipay is even bigger. And there are at least another like $200,000,000 $300,000,000 consumers to further penetrate. Alipay is really good at acquiring consumers offline from lower tier cities. And Taobao, Tmall, Oelyma, Youku is really good at retaining these consumers. So it's a perfect synergy that we could work together, don't have to spend double marketing dollars, right, which is planned out together to acquire and retain consumers. So synergy is not only coming from Ali Group and Ants between Ali Group, but also within Alibaba Group. To give you example, users on 5 of these platforms, Taobao, Youku and Gaoda, Autonivimab, Ooma UC, they are 3 times more active than single platform users. And so Daniel will also talk about that in a little bit more detail. And when you look at our 8 day VIP, this is our VIP members of Taobao. They show very high stickiness. So average spending per VIP member is about 9 times of overall users. We haven't reported the number of the VIP. We'll report back to you at due course when we reach the big milestone. So I've talked a lot about consumer side. When you look at the merchants, these are the customer who pay us directly, right? So our platform, the paying merchants, which is the revenue generating merchants, their retention rate is 63%. This is for more than 1 year. This is a 1 year retention. You would think 63% is that high or low? It seems a little bit low, because where are those 37% going? Don't forget about we're serving these SMEs who are whose business is more volatile and have higher churn rate. So national statistics shows that the natural churn for this group is somewhere around above 20%. So you can tell that the retention rate on our platform is quite high for merchant. And while the overall China consumption, online consumption is growing 20%, and if you add in the offline, the consumption is growing like 10%. 50% of our paying merchants actually achieved over 20% year on year sales growth, which means they could find additional value on this platform. So for those of you who attended our previous Investor Day, you might remember that the angle I would like to talk about value creation to merchants is a financial angle, which is through merchants P and L. If you look at merchants P and L, they have all of these items. And we have over 50 businesses right now. Each single one of them are helping to improve the merchants P and L basically. We help them to increase their sales, help them to reduce their cost of inventory and logistics, help them to be more efficient in distribution, brand and marketing in the IT side and also the ANS Financials helping on the financial side of the business. Currently, we've seen 3,500,000 of these paying merchants are using these services. So it includes a lot of business you're actually very familiar with and already in my previous year presentation, I wouldn't go through 1 by 1. And ANZ Financial now has 28,000,000 active merchants using their services. Alibaba Cloud is number 1 cloud service provider in Asia and number 3 in the world. And what's more important is just like our CTO said in the morning session is that the uniqueness of our Oli Cloud service. We're not only as pass service, we're also DaaS and ABOS. I'll leave to Daniel to talk about the Alibaba Business Operating System later. And in China, 59% of the listing companies are using Alibaba Cloud Service, grow up like 10 percentage point from last year's 49%. Okay. Let's take a look at the efficiency gains. Every $1 revenue we get, our marketing spending is coming down from $0.11 to $0.09 in the if you use a June quarter number, that is the trend actually. We are the most cost effective platform who has the lowest consumer acquisition cost. You can compare to the other commerce company, other whatever per company. And when you look at the staff call, right, the headcount has been added like a 19% last year and compared to last year. And our total revenue is growing 42%. That gives you a sense of the efficiency gains and productivity. Also, content cost is one of the biggest costs for DME. And if you look at our spending on content costs, Lan Fan this morning mentioned about his strategy of moving more towards building the self production capability from just leasing, right, buying from outside. And our acquisition of licensed copyright decreased. But at the same time, you might think about if this decrease your self production might increase, right? So what's your overall? So our overall content cost as a percentage of total DME revenue has come down. We haven't really disclosed the content cost absolute dollar amount, but we should be able to share with you that efficiency has been gained on the content costs. So these are the 3 big costs. We see all efficiency across the businesses, across different BUs. And overall, when you look at the whole group's profitability, it also shows quite a big improvement. So, you probably are very familiar with this waterfall, which I show every quarter when we do the earnings release. For example, like this June 2018, we have RMB37 1,000,000,000 EBITDA generated from our market based core commerce business. And then we spent RMB4 1,000,000,000 to reinvest back to the local service, logistics, globalization, new retail, etcetera. And then get that profit gets down to RMB30 1,000,000,000 and then we invest in cloud, right, and other new digital media entertainment, and then it gets to RMB27 1,000,000,000. That's our adjusted EBITDA for the whole group. And when you look at this year number, which is reported a month ago that the market based core commerce adjusted EBITDA went up to 47,000,000 yen and the overall group EBITDA was 35,000,000, which tells you that the EBITDA profit from the core, core of the core increased RMB10 1,000,000,000, but the spending only increased RMB2 1,000,000,000. So that gives us expanded profit. So how we think about Invest for Future? I was asked by investor so many times that, Maggie, why are you going to stop investing in these new things, the burning businesses, the local service and DME? Why do you want to get into those? Can you just get rid of them and be more profitable? Okay. I think it's very hard to imagine if we didn't invest into Taobao, Tmall, Ali Cloud, Alipay 10 years, 15 years ago, where we would be today. So the business you've seen today actually are from the investment we made 10 years ago. We invested in DME because this is there is huge demands. We call it cultural nourishment demands from our 700,000,000 consumers on Taobao and Tmall. Now DME business are showing progress. They have been growing the user base and member over 40%. And we invested in this local consumer service, because we want to tap into this over a trillion market and this sector consumer shows very high frequency of consumption and this business actually has grown quite well, 40% GMV growth year on year. And we invested into this international commerce retail, because we talked about our 2,000,000,000 consumer target for 2,036. We're very serious about it. And Lazada AE plus the other part of SS, they're showing Lazada is showing like over 100% of DAU growth. And we invested in Sanyao Logistics, because this is just simply the infrastructure, not only for our platform, but also for the commerce of whole China. So you heard, Wanling, about the China development, very good development. And we have shown 100% -plus growth for a lot of things. I wouldn't read out 1 by 1. And we also invest in innovation initiatives. Automated map has already become the number one app in China, map app in China. They reached over 100,000,000 DAU. Great infrastructure for our multiple services, particularly local service and as well as the logistics. And BingDing 200,000,000 of the users and also like Tmogini, right? We haven't really talked about that business, but that's already a huge business. It's selling over 10,000,000 devices. This is like an Alta type of device. So that's the financial updates. And this year, like 2 months ago, I started to oversee our strategic investment fashion. Joe is still with me. And we are asked that what are the changes after you overseas this business. I want to talk about 3 things. First of all, the strategic investment, how we think about it, the themes, etcetera and then the what we emphasize and our portfolio review. So talk about the goals of MA and investment. These are what I steal from Joe's slide from last year. These are exactly the same. Number 1, we want to solidify core business market position and we want to make investment to help on the globalization and we also want to invest in the technology to identify new tech trends and help our business to grow. And if you look at all of these investments we made in the past months, they all fall into these 3 buckets. And this is one thing very different between us and the other peer companies that we don't make a financial investment. We only make strategic investment. Every single investment we make, we have a business sponsor on it and then we're going to follow-up with them on the integration. So we do see greater the synergy generated from this investment. Give you some example. The first one, Lazada, we talked about no, the Asar. We talked about over 400 stores being digitalized and 6.5% of the online revenue being added to that business. And also another example is that you've seen we made investment in EHOME and Hongxinmei Keilong, I don't know their English name. But this is a very new investment. And we've already so far connected 56 malls to this digital operation system. And also at the same time, we're working on this same city online offer the local delivery and installation service for the 2 businesses. And then, Lazada, we talked about there are now already over 50,000,000 of annual active consumer base in Southeast Asia and their year on year order growth is over 120%. And another investment we made is Sky, that's a technology investment. After it's a semiconductor and after we made that investment actually our Ali NPU performance has improved 10 times and the cost being reduced by 50%. So we are not only invest, but also device, because for some of these investment who has lost the strategic value to us, we just make we dispose them. So far, we've disposed over 50 investments and the net total net realized gains is about RMB 18,000,000,000. Okay. Valuation. This is actually is a challenge for all of you, right? How you value this company. In the past year, I've give you a valuation framework. I want to give you updates on that. So we list out all of these business we have and their growth on the revenue and the EBITDA and the user base, etcetera. And then we've also listed our peer companies. You've seen Amazon show a lot of these categories. Amazon is a company we respected a lot and they also have a lot of businesses that are similar to ours. And you can do the calculation by yourself. But the question is that, we're such a huge business, still growing so fast. And we are positioned on every single key areas of the commerce, right? We have the all of these infrastructure being built, not only logistics, but also payment, but also the map, but also the financial services, etcetera, so many things. How you should look at this business? Today, I want to provide you with another angle, just give a reference, right, thinking. Because how to value Alibaba could be a world class conjecture kind of a challenge to you. Okay. So our business is, if you want to put it in a simple way, it's like a C business plus B business. It's consumer face business and to be and the business part of face the business. For the C business, we reported 670,000,000 annual active consumer for the China retail business, right? But if you really add those other part of this like logo service, like Youku, DME and these things and deduce them, the annual active consumer turns out to be RMB730,000,000. And then if you add our international business, then we have a 860,000,000 AEC, okay? So then what's the value of that? Who would be the most comparable company to us? We think Amazon could be a good comparison. If you look at Amazon, today they have a market cap of somewhere around US900 $1,000,000,000 If you exclude Cloud, there is somewhere around US400 billion dollars to US500 billion dollars I don't have the exact number. You know better than I do. But let's say, dollars 400,000,000 to $500,000,000,000 Their consumer base is somewhere around 400,000,000. So if you use that market cap for their commerce business divided their number of consumers, active consumers. So they you come around US1000 dollars to US1200 dollars market cap per AAC, use our term. If you apply that to our AEC base, right, 860,000,000 times 1,000 U. S. Dollar, Our consumer faced business should worth US860 billion dollars dollars This is not a most important thing. Most important thing is that our AAC is so unique. What's unique about it? Our AAC brings profits to us. To be exact, our C phase business generated 17 I couldn't see plus 1,000,000,000 EBITDA and profit per AEC is $20 So think about it. You can merely find another commerce company in this world nowadays could generate profit from their AAC, from their user base. Why can't we do that, Right? Because when you look at all of these value we provided and we have the lowest user acquisition costs, because Taobao Qumu in our China retail market list is already the shopping destiny for Chinese consumers. And we have so many efforts made on retaining the consumer and we provide a broader range of services, the entertainment, the local service to increase the ARPU, the spending of these consumers. Isn't that something really unique, special and exciting? Then we have a B business, don't forget about that. So the last 12 months beef facing business revenue is US6.8 billion dollars Then I don't know what method you will use, but you know that the market position, all of these investment strengths we have on our cloud and the wholesale platform, you can do the valuation yourself. And then we have another part, strategic investments. This includes and this includes a lot of things we've invested. I have a list of names here. This part, if you use fair value, today they are over USD 83,000,000,000. So hope this is helpful to give you another perspective, just different angle to look at this, because nobody really have the exact answer. We have our belief and strong expectation for this business growth. We're very committed to meet our longer term goals. Therefore, as investor as you just do your valuation. Hope my presentations helps you understand the business and financial and the investment. That's all from me today. Thank you. Okay. Thank you, Maggie, for that great presentation. Now we will welcome our Executive Chairman and CEO, Daniel Zhang. Good afternoon. So in the previous sections, our business presidents provided you with a big picture of each of their business. And I think this is also not only an elaboration of the business, but also show of their personality. And I think this is these 2 days, like we did in the previous years, is a good opportunity for all of you not only to understand our business, our strategy, but also know more about our people. And I was told that this morning's session, our Lao Fan, Head of our Entertainment business bring you a lot of entertainment, right? It's good news. And I'm sure now you have higher confidence that we have the right people in the right business. Now it's my turn before the closing section to give you the big picture of Alibaba Digital Economy. As always, I want to start my presentation by mission. Our mission actually is same as we had on day 1, no change. Today, our customers are entering into a new chapter, a new journey, which is digital error. On how we can fulfill our mission. The answer is very simple. The answer is digital technology. Our customers need to be empowered by digital technologies to easily do this anywhere. So this is my message to the entire Alibaba team. I always said to them that after 20 years of development, actually today in this digital era, our mission, our path to fulfill our mission is so clear and so straightforward. So let's do it. This is the big picture of Alibaba digital economy. In the previous years, I consistently show this map this picture to all of you. Actually, this is my favorite map. Just use one slide show everything of Alibaba. So when we look at this picture, we have actually our business evolved during the past 20 years. Actually, this picture also evolved in the last 20 years. We start with core commerce. We start with wholesale. Then over years, we move to retail. Today, we have many consumer facing brands, consumer facing business in the retail world, including the recent acquired Kaola, and we have added 1 more animal in our Alibaba Big Zoom. And over the past few years, we invest and participate the retail a new retail revolution of the offline retail in China. So we work with many retail partners in different sectors and help them not only digital their business, but also improve their operation via data technology and data insight. And we not only work in the physical goods sector, we're moving to other sectors such as local services and the digital entertainments. But when we look at the evolvement of our business, but we never change one thing, which is we view all these consumer facing business as one single integrated business. Instead of these are separate consumer business, because we share the same user base, We share the entire user population customer population in Alibaba ecosystem. So we want our each of our business provide different consumption category, different consumption opportunities to meet the increasing demand of the customers and even create their new demand for our customers. When we look at the infrastructure, the horizontal layers, the horizontal pillars we show in this slide. Logistics, Financial and Payment, on the Myanmar marketing platform compared to previous years no change. But this year, we add one more layer in this picture, which is a MAP, our map and navigation services. A MAP today is the number one business application, a map net service application for users. But I think all of you can understand why I put this here is because today this map service is not only relevant to individual users, but highly relevant to many, many location based services to enterprises. And today, we are going to 5 gs and going to IoT era. I think going forward, this AMAP infrastructure, this Map and Navigation Service as an infrastructure is super important for future Alibaba. Our Cloud Intelligence, Alibaba Cloud and Intelligence Platform, which includes our Cloud Infrastructure, our IoT PaaS platform, our data platform and our mobility applications play a very, very critical role in the entire Alibaba Digital Economy. Because of this support, all the data, all the personal ID, all the enterprise ID are highly integrated. So when we look at this picture, I have to emphasize once again, as I did in many years, data is the lifeblood of this Alibaba Digital Economy, and is the core of this big picture. Where many business applications, where many business cases, we generate real time data. Because of the data computing capability, we can create the value from the real time data generated from various business and to fill this value back to each of the business even go beyond so that we build a super closed loop data cycle to form this digital economy. So you may ask that in Alibaba you have so many business even with one big picture. How can I understand even in a more efficient way? So I will say this time I just show you that actually in Alibaba if we forget about each name of this business, we just focus on 2 flywheels, which is consumer facing strategy and the businesses, the other is enterprise facing strategy and the business. Let me start with consumer facing strategy first. We have 3 drivers to grow our consumer facing businesses. 1st, user growth. 2nd, consumption 2nd, category expansion. As I said, we don't view local service, we don't view entertainment as separate business. Instead, we view them as expansion of consumption categories. The 3rd driver is globalization. In the past few years, we continued the rapid growth of our user base. As of June 13, our AAC increased to 674,000,000 and net add about 98,000,000 in the past 1 year. So we are very happy with this results. And on global on the international market front of you, we also have a very good start. As of June 30, we have 130,000,000 AEC, which we think is a good starting point for our long globalization journey. So if you look at the customer base we have today, 85% of the people from developer areas. So we have very high penetration in the metro city areas. On the other side, we still see a high potential in many less developed areas, where we only have 40% penetration. So we will continue to invest and grow our user base especially in the less developed areas, but based on a strategy of differentiated product strategies. When we look at the substance of the product supply, rather than look at the business which supply from which business, what we can see is here, I like to categorize them into 5 types. We have branded products from our brand partners via our Tmall platform. We have many manufacturers working with us in Taobao on its OEM products, but still sell through a platform model. Today, we are working very hard and with many farmers with many wholesalers in the origins to sell agricultural products through our digital platform to the people living in urban cities. We have our teamwork global together with in the future together with Kaola to have more imported products directly from other markets. Then as part of the very amazing Taobao platform, which is long tail, a very, very unique and long tail products, which meet the niche demand of the customers. So we want to match the right product supply with the right user segment to grow and meet the demand of our customers. At the same time, we have dynamic consumer interface, consumer communities, consumer scenarios to offer people offer our customers the fun of discovery, very different digital features, for example, live streaming. On the way here, I didn't get a chance to look at the live streaming of this conference, but I spent some time on our live streaming in Taobao to see a lady to sell her dress and a very famous KOL on our platform. And today is another record breaking day for her. So we add people, product, community together. We want to serve our customers better. So just now, we only talked about our China retail marketplace who cover the physical goods. But today, we have other categories in local services, in DME, in Digital Media Entertainment. So if we compare the overlap of the user base of these individual consumption scenario, actually we see huge opportunity. Over the 674,000,000 AAC in China in Taobao and Tmall, only 25% of them are the users of Kubei and Ele. Me of the local services. And only 12 of these Taobao Tmall user AAC are the users are the subscribers for Youku. So going forward, we our team will work hard, try to penetrate as much as possible the existing user base in Power and Tmall and convert them into a local service user and into a DME user, DME subscriber. But on the other hand, we also see very good synergies from because of these new categories, new services we provide on the platform, which enhance our users' engagement and stickiness to the entire Alibaba ecosystem. So if we aggregate all of our customers. We have a very strong growth in our business. We have a very strong growth in our business. We have a very strong growth in our business. Dollars 730,000,000 in China and don't forget about Alipay and Financial. We just announced a good news to all of you. And I think with the joint efforts between Ali AGH team and AliPay team, today, AliPay has 900,000,000 annual active user in China. So if we add all these together, how about the size of the populations of Alibaba Digital Economy in China? Let me give you the answer. It's 916,000,000. So this is the entire user base, custom base we have in China for Alibaba Digital Economy. Now let me talk a little bit about globalization. We adopt a multi brand strategies in Globalization in International Markets for both Wholesale and Retail businesses. Today, we have a couple of business in International Markets. We have Lazada. I think Pierre did a good job and show you for the first time how he think about Lazada, how we do in Lazada. Lazada today cover 6 countries in Southeast Asia and enjoy very robust user growth and show very strong user engagement. We have local to local business in Lazada in Southeast Asia, which is local seller to local buyer, but also we have very robust China to Southeast Asia supply. And today, we are also start to work on the cross border intra Asia market. For example, most Ring products from Indo, from Malaysia to other countries. The second business we have in international markets is AliExpress, which starts from the China cross border export to the world. Over time, we start to acquire more and more local sellers from for example from Europe, from Italian, from Spain to sell their products through our platform to other markets. We have DIRAs in Southern Asia, which cover couple of interesting countries Bangladesh, Pakistan, so on and so forth, which also have a total population over 400,000,000. And we are very happy to incubate and to work with the founder of a very interesting business Trendyol, which is in Turkey. He start with a vertical apparel e commerce platform. Today, it's already evolved to a European supply hub for apparel products. So that's what we have in retail marketplaces, in retail world, in the international market. And we have our alibaba.com, actually which is the first business in Alibaba Big Family starting from 20 years ago, which is a wholesale platform, international wholesale platform to help the Chinese SMEs sell to the world, but actually today we have many, many SMEs from other market from Indo, from Japan, from Brazil, they are finding training opportunities via this platform in the world. So this is about commerce landscape, the commerce picture we have in international market. Together with the commerce footprint, we are working very hard on the Logistics network. So far, we are in the process of building a global fulfillment delivery network with the combined efforts of Cainiao, of Lazada, of Trendyol, of Daras, of these business. And Payment, the digital transformation of our digital transformation. We are also investing in our digital transformation and So today, our AliPay have already worked with many local partners in different markets to develop the local e wallet. Online shopping is not the only but is not the only payment use case, but very important use case also for this payment penetration. And of course, at the same time, our team together with partners working closely with many off line brick motor stores, payment use cases to promote this e wallet. So we add Commerce, Logistics, Payment together and form a once integrated picture of our international business map. So we will continue to grow our international business. As I said, I strongly believe that this is a long journey, but we have a good start with 130,000,000 AAC already. And we will continue to grow our user base and again like what we did in China to expand the consumption category, to have people more engaged and more stick with our platform. So as I said before, in China for today, for the entire Alibaba Group, we have a unit AEC of 730,000,000 if we aggregate all the consumer facing business together. And we have 130,000,000 AEC outside China. So this is where we are today, 860,000,000 global annual active user in Alibaba Group. Next one is about new retail. In recent years, we make continuous efforts in new retail. We want to by this effort, we want to expand the addressable market of Alibaba. We are trying to help the entire retail consumption in China, which the size of this is RMB 38,000,000,000,000 to go digital. We strongly believe in this digital era, there is no distinction between online and offline. Online and offline cannot be distinguished by web page or location. Actually, it's distinct instead, it is they are distinguished by do they digitalize their business or capture the business data or not. So that's our strong view. And we work with many retail partners in different sectors, starting with helping them to digitalize their existing business, then empower them with data technology to put a greater value from the data insights back and pull up investment back to their existing business and to help them to grow. So we have our new town like Hema and at the same time, we are still working with many existing retailers in each of the sectors, starting from the shopping mall model, the Tmall online Tmall and offline Tmall, shopping mall model integrate together and the consumer electronics, home improvements and the restaurants and the farmers and finally our LST provide a new I mean digital opportunity for the millions of mom and pop stores in China across China. As I said, we cannot distinguish online, offline just by web page and location. So today, we see a highly integrated operation onlineoffline. If the offline store, their orders, their products, their product offerings, their payments, their customers, their in store traffics are digitalized. Then actually you generate data same as you have operation on a website, on a mobile app. So today, what we do in our new retail efforts is trying to help people to digitalize their customer base across the channel in omni channel and manage their customers in omni channel. At the same time, because of the digitalized customer behavior, so we have a real time insights about the customer needs, so that we can help our merchants to quickly respond the change in customer needs, and also help them to improve their retail operations. So this is what we do in New Retail. Before we finish this consumer facing strategy, I want to share with you a very interesting phenomenon. If you read this slide carefully, you will realize that we are approaching to the status of living at Alibaba, which we shared with you many years ago. We said if we look at the Alibaba long journey, we start with meet at Alibaba, meet at Alibaba, work at Alibaba. We are going to meet live at Alibaba. We are very happy to see that we are approaching to this. So these are we just show you the top 5 most frequent use app in Alibaba Big Family. And you see that if people use 5 apps, then every month they spend 27 days with us. And I hope in near term, we can reach 30 days a month. Okay. Now let's move to the other very important main Alibaba growth flywheel to be enterprise facing strategy. So when we talk about Alibaba's enterprise facing strategy, we still have to think about what we do with our consumers. As I said, we build a consumer strategy. We build a strong consumer platform. We serve and grow our consumer base and meet their needs. But the key point is that as a platform, we don't the way how we fulfill meet their needs, meet our customer needs is not our customers. We have a very strong growth in our business. We have a very strong growth in our business. We have a very strong growth in our business. We have a very strong growth in our business. We have a very strong growth in our business. We is the starting point of our enterprise facing strategy. But over time, in our China retail marketplaces, after many years' efforts, we start to roll out our service to many areas, to digital marketing, to channel management, to even data driven product innovation. Actually today, I'm not sure whether you know or not, we have very famous Tmall Highbox, which is a new IP in Tmall platform. We all the local multinational brands want to work with us, not only to launch new product on our platform, but also to incubate and to develop new products via the insight we share with them from Tmall platform. So we over time, we built a lifecycle management of customers and also the lifecycle management of products. Of course, all these activities are driven by data technology. And while these efforts, we are in the process of digitization of the entire value chain of commerce. So we realize that actually what we do is not only a marketplace only to serve the consumers, but if we look at this from an enterprise perspective, actually we are render them a business as a service. And in order to improve the operating efficiency, to better utilize the data generated from this digital platform from this digital business, we invest a lot in the past 10 years on the technology, on the data capability and on the cloud infrastructure. And we build all these for our own development, for the development of the Alibaba Commerce Ecosystem. But over years, we realize actually these data capability, these cloud infrastructure is not only relevant to Alibaba, not only relevant the 3rd party's business on Alibaba, but also are highly relevant to all the business who want to achieve a successful digital transformation. So that's why today, we are thinking about how can we move this together with technology and Commerce Ecosystem to build a new model. Before we move to the new model, let's look at what happened on the tech side in Alibaba. This is a classic tech picture, very simple, but very straightforward. I think all the world share the same picture. When people talk about cloud, people start with us, talk about PARS and SARS. And because of Alibaba's digital economy, e commerce and digital commerce ecosystem, we invest a lot on the data capability. As our as Jeff Zhang, our CTO and Head of President of Cloud Intelligence shared with you this morning, we strongly believe that data capability is the core of Alibaba Cloud Intelligence. And of course, we work with the partners in SaaS Ecosystem. So today, we are in the process of marriage these 2 Alibaba Commerce Ecosystem and Cloud Infrastructure, Cloud Intelligence together, we strongly believe that this marriage will bring Alibaba a very unique value proposition, and we name this marriage as Alibaba Business Operating System. So today, I define this methodology together with my team. As I said, going forward, for Alibaba's cloud, for Alibaba's business operating system is not only about us, PaaS and SaaS, it's about us PaaS this real Cloud IT infrastructure plus the data platform and data as a service. And most importantly, I think we are so unique in the world is that we also provide Business as a Service. Each of our retail businesses in different sectors actually play a role of business as a services. We start this journey by retail, because we have such a strong retail marketplaces in China. So we start with retail business as a service. And when we work with many brand companies, retailers today to help them to go to digital, it's not only about can we provide you the virtual server services, Can you provide you a cloud based storage? Can we provide you this cloud IT infrastructure? Instead, we help them to build the data middle platform. We help them to apply all of these technologies into the real business applications through our Alibaba Retail Marketplaces. This Retail Business as a Service is a starting point of our ABOS, Alibaba Business Operating System. But as you can imagine, this can this also applicable to many other industries in finance, in financial services, in logistics, in transportations, local services and DME. And for Alibaba, so we want to provide the holistic data driven solutions, data infra, data platform and business applications in the sectors, we have strong business application, we have strong business platform. But of course, we are very, very happy to work with 3rd parties in other areas where we don't have business applications. So let me just give you example how we do this. We talked a lot about retail. Let's use another example in other category. Here, Xi Hotel, hotel, Xi Hotel is very beautiful view. West Lake, right? I hope you have on top of this meeting, you have flexible time to go along the lakeside, and you will enjoy the you can experience the real beauty of Hangzhou of this city. While I talk about this destination, this West Lake is because today we are working with the local partners to digitalize this Westlake, digitalize the travel business, how to manage, how to monitor on a real time basis the traffic around the West Lake, the boat on the West Lake. Can we give people, give tourists a real time information about which car parks you should go when you drive here, rather than people drive to the destination and found that car parks is full, because today for all of the map services, people can only find the nearest car parks, but they don't know the real time occupancy of the car parks. So while this way, we try to develop applications together with many partners to do these smart things. I call this smart travel, smart destination. So on top of the ABOS, Alibaba Business Operating System, which we want to cover many, many sectors, I think in ABOS, I think on top of these business applications, logistics still play a very important role. So as our Changyou President share with you, we are making great progress in growing our logistics network. We've already digitalized the parcel delivery network in China. We built this last mile drop off and pick ups network. We build a crowdsourced parcel delivery system, which we believe very, very important to be the user interface in Logistics business. And we are working on build a hybrid fulfill and delivery network. We have the we do have some hub and spoke fulfillment network. Many of you, I think, I believe are familiar with this model. But why I use the word I like to use the word hybrid is because we add our on demand delivery network driven by our food delivery business to this hybrid network, so that we can do not only the same day delivery, Nestle delivery, but also we can do the on demand delivery and we can do a complete whole co chain across the country. And on the international front, we are working to build an international fulfillment and delivery network. Same as logistics, we also believe that payment and micro and financial services are very, very important pillar in Alibaba Business Operating System. So when you look at this picture, you may understand the core relationship, the core synergies between and M Finance. Creates more and more business application, payment use cases, which enable people to pay. But M Finance, especially the digital wallet, when they well penetrated through online, through off line in many, many payment use cases. Then people also give us a lot of I mean give the business applications many, many new user referral. But on the other side, with the development of the digital business, we create opportunities for consumer credits. We create opportunity for micro lending. So now is September. Let me give you one example. And if you ask many, many sellers on our platform, now they are applying for the working capital loan to prepare for November 11, upcoming November 11. So it's an ecosystem, it's a real ecosystem in this digital landscape. Now I want to put all our talk together, show you the whole picture of Alibaba Business Operating System And 4 pillars are consumer driven, business driven, lifecycle management of the products, life cycle management of the consumers and supported by the finance and payment pillar, supported by the logistic pillar and also, of course, by the cloud infrastructure. But once again, this Cloud is not only the Cloud IT, it's not only about server, it's not about storage, it's not about the CDN, it's far more than that. It's about the cloud and intelligence and the ability not only to generate data. So when we talk about digital world, I will always say there are 2 key things. The first thing is the ability to generate data so that we can talk about the big data. But we always have to emphasize the other very important thing is if you have more and more data, then it's so important to have the ability to compute the data to create a high value, but with lower cost and on a real time. So that's how we position our ABOS in this digital era. Okay. Before conclude my presentation, I want to bring you some fun. And this is an overview, a track record of Alibaba's innovation in the last 20 years. You see, we are very active. We are so busy. Every year, we generate new stuff or we acquire new stuff, never stop. We never stop innovation because we believe that to enrich this ecosystem, the key thing is about innovation. I always said to many, many partners and recently this quote always used by many medias. I said, if we don't think about kill our existing business, then we must be killed by someone else. So that's the driver for us to continue our innovation. And I think in the next 20 years and in the long journey to the 102 years, we will continue to do that. Finally, let me reemphasize our goal, which I share with Alibaba entire Alibaba family in our 20 years anniversary party. We want to live 102 years. We still have 82 years to go. So we need a long term goal and we need a near term goal. Let's start with next 5 years. So we set a near term goal, we want to achieve annual active consumers over 1,000,000,000 at least 1,000,000,000 annual active consumers in China, which contribute at least RMB 10,000,000,000,000 GMV in China. Then we have very famous long term goal, which is by 2,036, we want to serve 2,000,000,000 consumers around the world, create 100,000,000 jobs and help 10,000,000 SMEs to be profitable. That's the end of my presentation. Thank you.