Starbucks partners with Alibaba Group to deliver coffee in China

Starbucks joins with Alibaba Group to deliver its coffee in Chinese cities beginning this fall. The company hopes the move will revive the growth of sales in its second largest market where it faces aggressive local competition.

In June Starbucks noted that it was seeking such a tie after it reported a slow down in the growth of Chinese sales. This was partly caused by a government crackdown on third-party delivery firms that had been helping drive orders from its cafes.

Starbucks CEO, Kevin Johnson told reporters: “I consider this strategic partnership to be one that ... will just be rocket fuel for Starbucks’ growth and continued expansion in China.”

Pilot delivery services begin in Beijing and Shanghai

A pilot project will see 150 Starbucks stores in Beijing and Shanghai begin delivery services. By the end of the year, the company and Alibaba hope to expand delivery to more than 2,000 stores in 30 different cities.

The partnership will involve collaboration with other Alibaba group businesses including the delivery platform Ele.me, the supermarket chain Hema, and online retailers Tmall and Taobao. Moble and online payment platforms, Allpay will also be involved.

Partnerships should improve Starbucks' delivery system

The delivery program should leverage Ele.me's already 3 million registered subscribers. The aim is to deliver orders within a half hour. Inside Hema stores Starbucks will establish "Starbucks Delivery Kitchens" and will use the supermarket's own delivery system to deliver orders. A local startup, Luckin Coffee, wants to go in competition with Starbucks and charges less than a dollar per order and claims its deliveries take only an average of 18 minutes.

No financial details of the deal released

There were no details of the agreement released and neither would say whether there had been discussing of equity stakes. The companies said they had been discussing the deal for more than a year.

China is a rich market for Starbucks but with fierce competition

There is a burgeoning cafe culture in China that has helped Starbucks grow in spit of saturation in the US. It has 3,400 stores in China and by 2022 it hopes that number will double.

However, competitors such as Luckin have rapidly expanded and offer cheap delivery, online ordering, big discounts, and good pay for its staff.

China has offered Starbucks rich pickings in recent years, thanks to a burgeoning cafe culture which has helped offset saturation in the United States. It has 3,400 stores in the country and plans to almost double that number by 2022. Luckin said that it planned to more than double its stores to 2,000 just by the end of this year. Starbuck's partnership with Alibaba is no doubt meant to also provide the same services as Luckin.

Starbucks

According to Wikipedia: "Starbucks Corporation is an American coffee company and coffeehouse chain. Starbucks was founded in Seattle, Washington in 1971. As of 2018, the company operates 28,218 locations worldwide...Starbucks locations serve hot and cold drinks, whole-bean coffee, microground instant coffee known as VIA, espresso, caffe latte, full- and loose-leaf teas including Teavana tea products,[7] Evolution Fresh juices, Frappuccino beverages, La Boulange pastries, and snacks including items such as chips and crackers; some offerings (including their annual fall launch of the Pumpkin Spice Latte) are seasonal or specific to the locality of the store. Many stores sell pre-packaged food items, hot and cold sandwiches, and drinkware including mugs and tumblers; select "Starbucks Evenings" locations offer beer, wine, and appetizers.[8] Starbucks-brand coffee, ice cream, and bottled cold coffee drinks are also sold at grocery stores. "

The first Starbucks location outside North America was in Tokyo in 1996 but now overseas locations make up almost a third of its stores. Between 1987 and 2007 the company has opened up an average of two locations daily.

Alibaba Group

Wikipedia describes Alibaba as follows: "Alibaba Group Holding Limited... is a Chinese multinational e-commerce, retail, Internet, AI and technology conglomerate founded in 1999 that provides consumer-to-consumer, business-to-consumer and business-to-business sales services via web portals, as well as electronic payment services, shopping search engines and cloud computing services. It owns and operates a diverse array of businesses around the world in numerous sectors, and is named as one of the world's most admired companies by Fortune."

As of June this year the market cap of the company was at $542 billion. It is one of the world's top ten most valuable and largest corporations. As of this year it has the 9th highest global brand value. The company operates in more than 200 countries. It is the world's largest retailer and one of the largest Internet and AI companies.

Previously published in Digital Journal

Amazon competing with China's Alibaba for global e-commerce dominance

Amazon and Alibaba together are the largest e-commerce companies on the globe. Together, their market cap is a whopping $1.1 trillion — and both are competing to expand their global reach.

Amazon is aggressively entering India, Singapore, and Australia while Aliibaba is expanding in Australia and also betting on successes in India and Southeast Asia.

Up until now the two competing giants have mostly avoided direct competition as they have been dominant in different areas of the world but this is likely to change as the two are both expanding their global reach.

Alibaba Holdings

Alibaba Group Holding Limited is a China-based multinational company providing e-commerce, Internet, AI and technology. In January this year, the company's market cap was $527 billion making it one of the top ten most valuable companies in the world.

Alibaba has operations in over 200 countries in 2016. Online sales surpassed those of Walmart, Amazon, and eBay combined since 2015. Revenues have been rising three percent each year.

Jack Ma co-founder of the Alibaba Group said: “We believe that globalization is the future.”

Amazon

In 2015 Amazon overtook Walmart to become the most valuable U.S. retailer by market cap. It is the 4th most valuable public company in the world, and also the largest Internet company by revenue in the world. It is also the 8th largest employer in the U.S. with about 566,000 employees as of 2017. In the same year, Amazon acquired Whole Foods Market for $13.4 billion increasing its market presence as a brick and mortar retailer.

The companies use different expansion strategies

Amazon expands by acquiring companies. On the other hand, Alibaba invests and acquires stakes in companies. Outside the U.S. and China, Alibaba has taken a minority stake in twice as many companies as Amazon. In contrast, Amazon has acquired five times more companies than Alibaba.

While both companies are trying to take their e-commerce and logistical expertise to a global level, Amazon is focusing on its Marketplace brand with a model of low prices, with a vast selection and quick delivery. Alibaba is expanding its logistic net around the world and wants to connect its global e-commerce markets.

Conclusions

Both companies are constantly expanding their presence around the globe as there are still many parts of the world where online retail markets remain undeveloped and untapped. Both companies have considerable growth potential in the short term.

By merger and acquisition, investment and partnerships the two companies will continue expanding in high growth markets such as India, Australia and Singapore. Competition between the two companies is likely to ramp up. Soon other areas such as Latin America and Africa could become areas where both companies want to expand their reach.

Previously published in DIgital Journal

AI software from Alibaba beats humans at reading comprehension

An AI program by China's Alibaba Holdings based on a deep neural network model has scored higher than humans in a reading comprehension test. As a result, bots may be developed to replace humans employed in customer service positions.

The Alibaba Group

The Alibaba Group Holdings Limited is a Chinese multinational, e-commerce, retail, internet and technology conglomerate founded in 1999. Co-founder Jack Ma is still CEO. Via web portals, Alibaba provides consumer-to-consumer, business-to-consumer, and business-to-business sales. It also provides electronic payment services, shopping search engines and even cloud-centric computing services. It also operates numerous other businesses around the world.

Even though the Alibaba Group is less than two decades old, it has a market cap of $490 billion U.S. It is one of the top most valuable companies in the world. Since 2015 it online sales and profits surpassed the combined that of Walmart, Amazon, and eBay combined. Year on year revenues have been increasing by triple digit percentages.

Jack Ma, CEO, is one of the richest people in China or even Asia with an estimated net worth of $48.3 billion

Alibaba's AI is only slightly superior to humans at reading comprehension.

The AI research arm of Alibaba created a machine learning model that received a higher score on the Stanford Question Answering Datase than humans. The database consists of more than 100,000 questions to test reading comprehension.

In early January, this year the Alibaba AI software machine scored 82.44 on the test while humans scored 82.304.

In other areas, computers and AI have already bested humans, for example in games such as chess. However, until now it seemed that language skills were superior in humans, as machines find languages hard to master. Anyone reading translations of Arabic into English on Twitter or elsewhere, and from other languages as well, will no doubt agree often a knowledgeable human translator would be much superior.

No doubt, the new software will be used to replace customer service jobs now occupied by humans by bots with embedded AI. The myriad call-center employees, often in developing countries, may be out of work soon — assuming the AI bots are cheaper and as effective as human labor.

Si Luo, who is a chief scientist of natural language processing at Alibaba's research noted that questions such as "What causes rain?" can now be answered with a high degree of accuracy by bots. Luo said: “We believe the underlying technology can be gradually applied to numerous applications such as customer service, museum tutorials, and online response to inquiries from patients, freeing up human efforts in an unprecedented way.”

Customer Service Chatbots

Si Luo's team is working closely with Ali Xiaomi a mobile customer service chatbot. Ali Xiaomi can be customized to be used on Alibaba's platforms such as Taobao and Tmall. The new AI bots could answer consumer questions as it did the Stanford questions. The bots would look for relevant answers from prepared documents.

There are limits to what the system will be able to do. If questions do not have clear cut answers, or the questions asked are too vague or ungrammatical the bot may not be able to deal with them.

Soon when you phone a company for information the conversation will go like this: "We are sorry but all our bots are busy right now. We value your call. Please stay on the line until a bot is free to serve you. There are just 12 callers ahead of you." A bot will serve you random popular tunes while you wait.

Previously published in Digital Journal.

Over next 3 years Chinese giant Alibaba will invest $15 billion in new technology

The Chinese giant firm Alibaba has announced that it will invest $15 billion over the next three years into cutting edge technology including artificial intelligence (AI) and quantum computing.

Alibaba has called its new initiative "DAMO Academy" standing for Discovery, Adventure, Momentum, and Outlook. Research labs will be created not only in the Chinese cities of Beijing and Hangzhou but in San Mateo and Bellevue in the United States. Other cities in which there will be new facilities include Moscow in Russia, Tel Aviv in Israel, and Singapore, Malaysia. All the facilities will be overseen by an advisory board of the best researchers and professors from leading global universities including the MIT in the US. The new units will explore developing technologies relating to data intelligence, Internet of Things (IoT), quantum computing, and human-machine interacting. Jeff Zang, Alibaba's chief technology officer said: "We aim to discover breakthrough technologies that will enable greater efficiency, network security and ecosystem synergy for end-users and businesses everywhere."

Facebook CEO Mark Zuckerberg, is a big supporter of AI and claims it could be used to build safer cars and better detect diseases. However others such as Elon Musk of Tesla suggest that government regulation of research is needed to ensure that research does not threaten humanity. Other critics such as John Giannandrea AI chief at Google are concerned about biased algorithms used in AI as discussed in a recent Digital Journal article.

The DAMO Academy project is just part of a much broader plan that would see Alibaba serve 2 billion customers and create 100 million jobs in 20 years the company maintains. The company is busy trying to entice US small businesses to sell their goods to its huge Chinese market of 443 million customers.

As of last April, Alibaba was the world's largest retailer surpassing Walmart. It operates in more than 200 countries. It is also one of the largest internet companies. Since 2015 its online sales and profits have surpassed those of Walmart, Amazon, and eBay combined. It is expanding quickly into the media industry. As of August this year, Alibaba has over 529 million mobile users across its platforms. It also hosts a digital distribution service 9Apps that hosts a huge amount of content plus apps for downloads. As of this October, the market cap of Alibaba was $463 billion making it one of the top ten most valuable companies in the world.

China puts strict controls on use of anonymous browsers

The Chinese government has issued a warning to websites that are selling virtual private networks (VPNs). The country outlawed the sale of VPN except those approved by the government in July.


While many articles speak of China having outlawed all VPN's in July that is not technically correct. What it did was require all VPN services to be certified and licensed by the government. This would require them to agree to censor those websites the government blocks. Businesses and individuals would still find VPN services significant for security purposes.

However China has issued a warning to websites that are selling VPNs. The Cyberspace Administration of China demanded that five different website remove vendors who sell VPNs that are not government approved. The VPNs are used to evade what is called the Great Firewall of China. Even such common websites as Twitter and Facebook are blocked by the Great Firewall. VPN's also keep ones Internet activity private from the government or others who might be spying on you. They are important for both both businesses and individuals.

One of the websites that received the warning is Alibaba's Taoba which is China's largest online retailer. The Cyberspace Administration ordered that the sites "immediately carry out a comprehensive c,lean-up of harmful information, close corresponding illegal accounts and submit a rectification report" according to Reuters. The government also ordered Apple to remove all VPN apps on its Chinese stores. Presumably they were all not government approved VPNs.
The VPNs that are being banned are able to route traffic through routers overseas that are free of the filters China used to block sites such as Twitter and Facebook. GreenVPN already stopped service as of July 1st in China after being ordered to cease operating. However, other popular services may also be blocked by now. The Chinese government has also intervened on its own local media platforms such as Weibo where it has blocked "negative talk".

The Chinese government requires all VPN services to apply for a licence, which will not be granted unless the service agrees to the government censorship policies. They have set a deadline of February 1 next year for all three of China's mobile operators to block all unlicensed VPN services. The Ministry of Information Technology said back in January of this year that the VPN and cloud computing market was undergoing "disorderly development" and there was an "urgent need for regulation norms". Russia also has recently passed legislation that will have effects similar to that of China's new rules.