The Halal Market on Alibaba

The e-commerce market for the Muslim world - a market that encompasses USD 1.6 trillion in value across eight silos - presents a great deal of homework.

In what was potentially the largest IPO in the United States, Alibaba Group Holding generated more buzz than the combined media hype around Facebook, Weibo, Groupon and even Google. Alibaba's charismatic chairman, Professor Jack Ma, began in a challenging environment to demonstrate a leap of the online-commerce template into a non-Amazon business. Yet Alibaba, after a rocket-like 14-year trajectory in China, would ultimately see it land on the New York Stock Exchange (NYSE), raising a market value of about USD 200 billion.

For the e-commerce market of the Muslim world - a market encompassing USD 1.6 trillion in value across eight silos - there is a great deal of homework. Those who try to capture this space must first identify the six gaps and connections.

But Alibaba has not yet figured out an operating model for the Muslim lifestyle market, even though many Muslim-majority countries exist, and Muslims living in non-Muslim countries form a similar (but larger) parallel external environment.

So, "if you (understand and) build it (right), they will come." - lofty ambition.

External environment: I think Alibaba has interests in three areas:

Alibaba's prospectus points to the "internet + mobile phone" macro-consumption environment in China:

"China's actual consumption in 2013 was 36.5% of GDP... As of December 31, 2013, the world's largest internet population had 618 million users... 302 million online shoppers... Consumers are expanding the categories of products and services they buy online, which will further increase online and mobile commerce activity... We believe that increased use of mobile devices will make accessing the internet more convenient, drive higher participation by online shoppers and support new applications... With 500 million users, it is the world's largest mobile internet user base... and is expected to increase... The offline retail market faces significant challenges due to a number of national brick-and-mortar retailers, underdeveloped physical retail infrastructure, limited product selection and inconsistent product quality..."

Arguably, the Muslim world has a similar external environment, so is the development of the USD 1.6 trillion Muslim consumer market now equivalent to Alibaba's mining of e-commerce back in 1999?

Second, again, the prospectus points to the network effect:

"The interaction between buyers and sellers creates more merchant network effects: it attracts more consumers, while more consumers attract more merchants. In addition, the many buyers and sellers in one of our marketplaces also participate in activity on our other marketplaces, interconnecting them... further strengthening our ecosystem."

Now, will the merchant effect apply to Muslim consumption? Yes, but it is a global B2B and national B2C and P2P approach.

Finally, an observation from the Alibaba website on September 12, 2014 regarding Halal products and suppliers:

Total Halal products: 773,769.

China: 755,343 products, or 97%.

India: 6,552 products.

Pakistan: 159 products.

Malaysia: 885 products.

UAE: 193.

Thus, Halal products on the Alibaba platform can be said to be purely (97%) China-dominated. There are still some challenges regarding the integrity of the food supply chain in China, similar to the recent scandal involving McDonald's and expired meat.

In China, according to the Malaysian website of the Halal Industry Development Corporation (HDC), there are only three Halal certification bodies. However, the highly influential Malaysian Halal certification authority, JAKIM, recently withdrew its recognition of those certification bodies in February 2014.

Moreover, since only 885 products, or 0.00000129%, of Halal products come from Malaysia - the global leader in Halal certification - this seems to suggest that only a small number of Malaysian suppliers (39, see below) have trust and confidence in the platform.

Query: Why are the remaining 4,400-plus Halal SMEs from Malaysia not on the Alibaba platform, when it costs them nothing (unless they subscribe to paid services)?

Arguably, Halal food is something linked to the Islamic finance space - a "standards challenge" or "Halal face," or an issue that leads to negative perceptions of certification/standards providers.

The total number of Halal food suppliers was 2,071 on September 12, 2014, but 6,471 on September 10; yet on September 8, 2014 there were more than ten thousand "Halal" suppliers. But weeks later, why only 1,800 suppliers (reputation?).

China: 1,525 "Halal" suppliers, or 73%.

India: 94.

Malaysia: 39.

UAE: 10.

There seems to be an integration gap - among other issues - between the certification bodies, the vendors' products, and Alibaba's Halal.

Conclusion

The world where Muslims live is waiting for a "champion of SMEs... that believes the internet will create a level playing field by enabling small businesses to leverage innovation and technology to grow and compete more effectively in the domestic and global economy."

Dubai's World Islamic Economic Forum has already begun to champion this.