Alibaba’s chair Joe Tsai commented that by not focusing on truly creating customer value, they had “stepped on our own foot” in recent years, when explaining why he thought the e-commerce giant had been “falling behind”. Tsai’s remarks were made in an interview with Nicolai Tangen, chief executive of Norway’s Norges Bank Investment Management, at a time when the Chinese tech giant has undergone frequent organizational restructures.

“We forgot about who our real customers are,” Tsai told Tangen. “Our customers are the users who use our apps, that are shopping, and we did not give them the best experience.”

Why it matters: Tsai’s conversation with Tangen ranged in topics from Alibaba’s internal reckoning and competitiveness in artificial intelligence, to China’s consumer market potential, in a major signal to the outside world that Alibaba is aware it needs to make changes to keep its customers.

Details: The biggest reorganization in Alibaba’s history, which began last March when it decided to split the group into six units and give multiple businesses the freedom to seek funds or go public, has been fraught with twists and turns. It has now suspended its logistics arm Cainiao’s Hong Kong IPO application and canceled plans to divest from its cloud operation.

• Tsai said China is “probably two years behind the top [large language] models,” with the US’s curbs on exporting high-end chips to China part of the reason the country is behind in the AI space. But he mentioned Alibaba has “made some efforts” when it came to the manufacture of high-end GPUs, while also sourcing chips from other players, without giving further details.
• In China, where consumers are highly price-sensitive, Tsai said he believed the ability to spend among Chinese “is there”, but that the downturn in the real estate and job markets has put a dent in consumers’ confidence and willingness to spend. He struck a more positive note when he said he still saw “great potential” for growth in China’s overall consumption rates that would eventually reach levels comparable with markets in the West. 
• The chair of Alibaba also noted in the interview that giving incentives and confidence to investors, as well as hired people, is “important”, especially for private businesses, and that the company is buying back stock at a rapid pace to bolster market value. Alibaba spent $4.8 billion on buybacks in the first quarter, the second-largest quarterly buyback amount in its history.

Context: Norges Bank Investment Management looks after Norway’s sovereign wealth fund,  a major Alibaba shareholder with a stake worth $3.5 billion at the end of last year. The world’s largest sovereign wealth fund also owns shares in Alibaba’s top competitors, PDD and JD. The fund raised its position in Temu parent PDD by 117.9% last year, compared to a less than 10% increase in its Alibaba holding.