Creating Smart Shopping Malls – The Wanda Way

Creating Smart
Shopping Malls

29 August, 2014 – Speech from the Strategic Cooperation
Agreement Signing Ceremony for Wanda E-Commerce

First, on behalf of my one hundred thousand colleagues I would like to give a warm welcome and many thanks to chairman Robin Li and chairman Pony Ma, the leaders of Baidu and Tencent, and all of our friends from the media for your presence at today’s signing ceremony, and offer my congratulations on the establishment of Wanda E-Commerce.

When we were just chatting in the lounge, chairman Pony Ma mentioned that the “Commerce” in “E-Commerce” is not appropriate for the company I aim to establish. Internally we originally thought of calling it Electronic Information Technology Company, but didn’t think it was well thought out, so we temporarily called it E-Commerce. However, this name probably led you all to mistakenly think E-Commerce is going to sell merchandise, so we still need to mull over the name.

Today I will cover four points: Number one, O2O is the largest piece of the e-commerce pie. Regardless of whether worldwide or in China, e-commerce has developed for so many years, and all kinds of large e-commerce business platforms have been built up. However, there still is no O2O integration platform. The total of China’s consumer market is expected to be around 30 trillion yuan this year, of which roughly little more than one third goes in a shopping bag. A part of what belongs in a shopping bag can be bought online: essentially books, cosmetics and clothing – the latter taking up the biggest chunk. But nearly two thirds can neither be carried in a bag, nor be sold online. This is the larger market: the consumption of experiences – watching movies, dining out, entertainment, etc. I have yet to see a platform able to turn this into a smart consumer market – a platform achieving the integration between online and offline. Because of this, the three of us have spoken about the need to create such an e-commerce platform. This will be the biggest piece of the e-commerce pie. With the rise in purchasing power, more and more experiences will be consumed, rather than purchased as tradable goods. This is true everywhere you look around the world. O2O may well become the biggest piece of the e-commerce market pie, but this pie has not yet been sliced. Such a platform has not yet emerged.

Number two, the opportunities are equal. O2O has only just begun. Numerous online platforms are considering how to infiltrate the offline market. Some offline companies, like Wanda, are looking for ways to go online and to integrate. As all have just begun, there is no genuine O2O platform with platform technologies. Under these circumstances, I think the opportunities will be equal for everyone. Since there is not yet a major platform, we are willing to exert efforts in this regard.

Number three, there must be a genuine Internet Line of Thought. What do I mean by this? Currently almost all the companies that claim to be O2O are online, so there seems to be a consensus – as though only online companies can do O2O. In reality, I don’t think this is an Internet Line of Thought. An Internet Line of Thought is innovative and has no set formula. Some people have questioned how Wanda could do e-commerce as it normally does real estate. Today our company is being established at a formal signing ceremony, but we have actually been building the team for more than six months. Many of my colleagues asked me whether we are going from online-to-offline or from offline-to-online. I told them both of these ideas are wrong; we should not have a fixed notion of online and offline. We want to integrate online and offline and form an interactive, integrated consumption model. Wanda E-Commerce will certainly not sell merchandise, but will sell services and make good use of its offline terminals. China’s current shopping malls have been developing for decades and its bazaars for a century. There are plenty of parking lots, but currently no smart parking technology is even connected to the parking lots. When customers come, they don’t know if there is a parking space or not. Some people complain that from the entrance it takes two hours until they are even able to go down. Once inside, they do not know where the parking space is as every floor has over 1,000 parking spaces, so they waste a lot of time driving around in circles looking for a parking space. After they have finished their shopping and leave the mall, they have forgotten where in the parking lot they have parked and amble around one or two floors of the parking lot in vain. With O2O and an intelligent positioning application, finding the car has become a piece of cake.

My thinking is very much in line with that of Pony and Robin. We are establishing this company out of a desire to research how to make the offline mall, etc. smart. This is O2O, not selling things. As for when the physical image of e-commerce will emerge, I think it may be next year. Some people say that Wanda E-Commerce has already been established for two years, but this is actually not true. Our own data center, our own smart systems, our software… none of it has been fully developed. The soft launch is at the end of this year, and it will officially go online at the end of next year. Measured from the end of this year, maybe in two or three years’ time – or possibly a little sooner, in one or two years – it will become clear what kind of company Wanda E-Commerce is and what kind of value it generates.

Number four, being in e-commerce is both a need and a responsibility. This is not just bragging. The worldwide consumer market is tens of trillions of US dollars and by 2020, China’s consumer market alone will certainly surpass US$10 trillion. This year it has already surpassed 30 trillion yuan. Still, no O2O platform has emerged so far for such a large consumer market. Our O2O company has announced plans to invest five billion yuan, the first investment in which all three of us have participated in. In reality, over the last five years we have invested a total of close to 20 billion yuan. Also, we may introduce strategic investors. For an O2O experiment, the amount of money is certainly enormous. So many colleagues in the industry have told us they will wait until we have done e-commerce, because they cannot afford to do it and it is too much effort. They want to see whether we can do it. If one day our experiment is a success, there will be five billion users in 2020, excluding Wanda itself. And there is the possibility of transforming into an open platform accessible to all Chinese resorts, cinema, culture and dining. This would have tremendous value. We are doing all the exploration for the sake of the entire offline industry. I want to again thank chairmans Robin Li and Pony Ma for attending the signing ceremony and express my gratitude for Baidu, Tencent and Wanda reaching a cooperation agreement. Thank you everyone.

Appendix 1

Chairman and CEO of Baidu Robin Li: Leader of Online and Offline Convergence

Dear Chairman Wang Jianlin and Chairman Pony Ma, I am truly happy to be able to attend the Wanda E-Commerce Cooperation Agreement Signing Ceremony. I think this cooperation is representative of a trend, a trend that chairman Jianlin just spoke about; it is a trend of integration. It is not going from one direction to the other; it isn’t about moving from online to offline or offline to online. In fact, I often say the same internally, that both sides should meet in the middle. Bridges start from both sides and rise together in the middle, and this is the best way. The integration of online and offline is such a way as well, moreover I firmly believe that this way is representative of a trend, representative of the trend of future development and representative of the trend of the development of the mobile Internet.

In Baidu’s operating history of over ten years in China, we have been continuously been trying to persuade businesses in the real economy to go online. To date there may be hundreds of thousands of businesses that have acquired new customers and business through the Baidu platform. The entire IT industry is changing rapidly, and technology is progressing quickly. Our real economy is embracing the new technologies and changes, but the pace is not that fast. Since last year I’ve been anxious, and at the 2015 Baidu Union Summit I spoke about the accelerated elimination of traditional industries by the Internet. If they do not embrace the Internet, new technologies and the mobile Internet their elimination may be complete.

After so many years in this industry, we have gotten the perception that the businesses accepting new technologies are not large businesses, not mature businesses, but rather small businesses. Baidu’s earliest customers were online fresh flower stores, and they were the first to accept new technology. It will mark quite a change, the day that large businesses too are ready to fully embrace the possibilities brought about by Internet technology. About six months ago, chairman Jianlin and I both realized that such opportunities are pretty good for us. On one hand, China’s Internet has gone through many years of development, has six or seven hundred million Netizens, and the mobile Internet is growing even faster. While we used to think that Internet technologies and innovations came primarily from the United States, nowadays a lot of new technologies and new commerce models are sprouting in China. Many innovations are originating in China too.

A few years ago I went to America and spoke with famous industry founders and CEOs. They kept on asking: “What does China have? Isn’t China just copying American things?” Now, I’ll go talk to them, and they'll say, “China has a lot of innovations; we should pay close attention to China.” I told my American friend that I have a house in America, and he replied, “And I want to buy a house in China to visit often and see the country.” A group of American businessmen and entrepreneurs have been coming regularly to China of late, not to figure out how to get their products into China, but to see what innovations are made in China every day. This is a truly encouraging sign. We live in a very encouraging era. Sometimes I say that we live in a magical era: China’s market is tremendously attractive and is growing fast. Technological innovation and progress are faster than ever. The innovations in a single year are equivalent to the innovations that used to take a decade or more. The continuous development of artificial intelligence, in particular, has brought us many opportunities, including O2O opportunities. If someone is shopping at Wanda and sees a beautiful skirt, they can take a picture, and you know it is sold at Wanda. You may see a poster and know that Wanda Cinemas has several screenings of this specific movie, so you can complete seat selection and payment. The combination of online and offline has already moved away from the era of the PC. The PC era, using Baidu as a representative search engine, has been about connecting people and information. As people enter keywords on the keyboard, we help them find the information they want. In the mobile Internet era, what we do more of is connecting people with services. When you have a demand, not only can we tell you where it can be satisfied, but we can also immediately satisfy your demand. Take movie tickets, for example. I want to watch a movie, and I can choose a seat online, walk in and watch the movie. I think this is a trend that has only just begun.

Such a trend requires that Internet companies and the real economy have tighter integration. Wanda, Tencent and Baidu are able to effectively advance the connection of people and services and to better advance the rapid and healthy growth of the entire economy. Often we see that offline businesses don’t have sufficiently effective business models. Take plane tickets for instance. Aircraft are never full. If they could be filled to capacity, the operating costs would be lower. It is the same principle not only for plane tickets but for cinemas, restaurants and karaoke bars. I think how we use technology, operational means and a combined mode of online and offline to enhance the operating results of all levels of the economy is a challenge. But, even more than that, it is an opportunity for us. I hope that through the announcement of Wanda E-Commerce and with the cooperation among three companies, we can witness the creation of new standards for many companies over many, many years, so that the integration between online and offline is done flawlessly. I hope that Wanda E-Commerce continues to create new glories with each passing day. Thank you!

Tencent Chairman of the Board of Directors and CEO Pony Ma: Connecting Cooperation Partners to Transform Open Platforms

Good morning dear Chairman Jianlin and Chairman Robin, all colleagues of Wanda and Baidu!

I am honored to be able to attend today’s Wanda E-Commerce launch ceremony. The name still doesn’t seem to fit perfectly. I think the word may create a lot of misunderstanding for friends of the industry – with questions about whether or not we are three “local tycoons” getting together, redeveloping the field of e-commerce (which has already been developed for more than ten years) and initiating an attack. This would be a mistake, because it fails to clearly see the nature of the trend. Both chairmen just raised a number of points that were mentioned when we were chatting before the meeting. The word ‘e-commerce’ is not entirely accurate.

After reflecting for a moment, I thought that the difference lies in how we use the Internet and the mobile Internet technology to turn the immense undeveloped offline economic entity into smart commerce. I think this is putting it a bit more accurately.

Here is an enormous market, but it is complex, and it would be absolutely impossible to create using the line of thought and the abilities of a pure internet company. Mobile Internet and the Internet used to see the Internet as overturning, replacing and updating traditional businesses, but I feel that this is only the preliminary stage. In the future, the internet will allow many industries to move to a higher level. If a company refuses to use internet technology, it may fall behind its industry peers and be eliminated. There is nothing mysterious about the internet. It can be understood, just as electricity could be understood. Before there was electricity, banking and stock brokers developed, insurance and a great many industries thrived. Once electric power arrived, could the power companies destroy all other industries? Impossible! Could energy companies achieve a complete monopoly? Also impossible. All sectors in all industries have used new technologies and new capabilities to elevate their industry. There are plenty of opportunities. Of those that can seize opportunities in this wave, their competitiveness in the vertical market will far exceed unresponsive and slow-to-act companies.

Based on such a premise, we greatly respect every major player in the traditional industries. Deep industry support is not something that pure internet companies can do alone. Over the last six months to a year, much of the developmental thinking at Tencent has changed significantly. We have let go of many areas where we used to have no chance of using our own technology, our own capabilities and where we had to rely on cooperation with partners in the vertical market. We focus our energy on doing what we are best at: communications, social networking, and entertainment industries. Also using our core platform technologies, Tencent hopes to become a connector not only between people, but equally between people and services and a connector between people and businesses. We are not demanding to be in charge. We just need to contribute our value as a connector. We want to connect with other end connectors as partners and business organizations; this is why we have today’s cooperation.

Over the past year or two, I’ve been in contact with Chairman Wang Jianlin several times. Robin and I paid a visit to Wanda, and Chairman Wang Jianlin introduced several cases, which were indeed eye-opening. In the past we thought that Wanda was just real estate, but actually after real estate Wanda developed many offline cultural industries and expanded in many areas, all of which were big eye-openers for us. Both Wang Jianlin and I say there are a lot of opportunities here in the entertainment field, online and offline, we happen to be doing the maximum with billions of yuan in sales. At present, online entertainment and offline entertainment are completely separate, and we feel that the future holds great business opportunities. These can’t be completed through the computer or mobile phones but must be experienced offline. Through this example, one can see the multitude of collaboration opportunities.

When WeChat proposed the slogan “Connecting all,” I actively promoted it. Using the mobile Internet has allowed many services to become more intelligent, and we see that all sectors are included, not only retail or only cultural. A lot of finance, telecommunications and other industries are involved. They all have so many O2O opportunities. Today we take the first step to discovering how Baidu and Tencent can participate in Wanda’s tremendous O2O integration. Through Internet technologies, people will be able to make people’s lives more convenient, more intelligent, more efficient, more creative, and cooler. I think this is a highly beneficial attempt.

Abroad there is likewise no clear case that can serve as a reference. China’s Internet is still developing. Many people used to ask how we could do it if it didn’t exist abroad. But it has become clear that China’s business models and many other aspects can lead the world. Take our own core communication; we see WeChat and QQ both use mobile Internet methods to blaze entirely new trails. As a lot of innovations in China do not have their match abroad, China has the ability to apply its own characteristics. As long as you are able to grasp what users need and what users feel is important, then business opportunities will exist. With this platform, I strongly support what Chairman Jianlin spoke about – that this is not just for Wanda. The released platform can be transformed into an open platform. On this basis, each vertical market, including the just-mentioned smart parking lot, smart tours and cultural industries’ programm, can develop a brand new set of smart systems, fully open to all competitors and partners, to be further integrated.

You’ve seen today’s cooperation. We all spoke of BAT (Baidu, Alibaba and Tencent). Rarely have we had major cooperation with Baidu. This time, for the first time, we go hand in hand. Many Internet businesses have clearly understood that the trend is towards integration with competitors. I am taking this opportunity to issue a message to the industry: you shouldn’t consider competition among Internet companies as a cloud of smoke filling the air or a game of life and death. Actually, everyone has their own advantages and their own shortcomings; we should work together hand in hand to do something more. As long as the demands of the customers are met, we should attempt more cooperation.

I am last; thanks all media friends in attendance. Our prior press release was already written, and the outside world had some misunderstandings. We did not arrange a special question and answer session, and today we did not read manuscripts. We hope that we have answered all of your questions, thank you everyone.