What is retail's destination? Alibaba has some good answers
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The Kroger/Alibaba talks are all the buzz right now, but what does it mean to you? If you work in food distribution or retailing, it means you need to be actively reworking (or at minimum refreshing) your organization’s vision for the future of food retailing.
The urgency of this need is underscored by two other recent developments: Chinese attendees to the recent 2017 CES Show concluded that US technology leadership was no longer a source of inspiration, and automated AmazonGo stores are now opening to the public.
This triple whammy signals how fundamental technology will be to the future of food retailing and distribution, and how big players like Alibaba and Amazon are busy advancing highly technical versions of the “store.” Some will work, others will not – but in either case, they will not wait for you to catch up. Don’t delay any longer.
Where to turn? Alibaba’s approach offers some valuable insights to those who are developing their game plan. Here’s why, and how those insights can help.
Why look to Alibaba?
Alibaba is more than just a technology company. It’s a trading company with technology at its core, and it plays an increasingly important role in the modernization of the Chinese retail sector – now the world’s largest retail market with sales reaching $4.9 trillion in 2016. There, ecommerce sales are more than double the US and represent 22% of total retail versus 14% in the US, and mobile payment accounts for $9 trillion compared to $112 billion in the US.
The company operates three major ecommerce platforms:
- Toahao – a C2C marketplace similar to eBay that launched in 2003.
- T-Mall – the largest B2C platform in Asia. A storefront on T-Mall is the most effective way to penetrate the Chinese market and essential for any supplier with serious intentions.
- Alibaba.com – a B2B platform that sells mainly to foreigners.
Over the last several years Alibaba has broadened its scope to include several next-gen physical retail ventures including Hema Supermarkets and automated convenience stores. These new ventures showcase what Alibaba calls “New Retail,” which blends digital into the physical store.
Alibaba’s “… goal is not to build a lot of offline stores, but to lay down an infrastructure for doing commerce using our tried-and-tested new retail experience and technology,” Alibaba chief executive Hou Yi said in an interview with Forbes in 2017. “When the model is more established, it can be shared with other traditional retailers to help them transform in the digital age.”
Rapid transformation
We’ve been watching Alibaba for years, and below is a list of Brick Meets Click posts that give you a sense of how that company has pushed technology boundaries and built key connections between digital and physical retail.
- Nov 14, 2013 – Alibaba creates the “Singles Day” holiday to mass market ecommerce. (See sidebar for the growth in Singles Day sales.)
- Sept 10, 2015 – Alibaba invests in offline brick and mortar to complement the growth of its online business.
- March 24, 2016 – Alibaba invests in a startup to encourage delivery of online grocery orders.
- July 21, 2016 – Alibaba leverages artificial reality as a way to reduce retail labor and inventory costs.
- May 8, 2017 – Alibaba partners with Aldi to give that hard discounter a presence in the Chinese market without a brick and mortar storefront.
- July 24, 2017 – Alibaba opens its 13th Hema supermarket to showcase in-store technology-enhanced food shopping.
- Sept 15, 2017 – Alibaba’s automated cafés leapfrog Amazon Go.
- Jan 18, 2018 – Alibaba offers digital tools and support to small retail stores to help them make the transition to the digital/physical marketplace.
What you can learn from Alibaba’s approach
Three pivotal insights from Alibaba’s approach will be extremely valuable to US food retailers and distributors who are developing their respective visions of the future.
It takes a blend
Alibaba recognized early on that the retail marketplace would be both physical and digital – not a competition between the two – and it has deliberately planned to thrive in this integrated retail environment.
Collaboration is key
Collaboration with physical retailers is a key driver in Alibaba’s growth strategy, and the company has made consistent investments in building connections between physical and digital – from enabling physical retailers to open digital storefronts on T-mall to (just recently) supplying convenience retailers with digital tools and support to help them make the transition to the blended marketplace.
Mobile rules
Mobile, much like its role in modern life, plays a huge role in Alibaba’s vision of the future of retail – it’s the way customers access both digital and physical stores, learn more about products, and check out and pay for them.
Winning in today’s market
It’s essential to figure out where you fit in the market, and the insights from Alibaba’s model can help, but it’s also critical that the game plan reduce your vulnerabilities.
Here are the most important vulnerabilities and suggestions for how to reduce them.
Implementing technology without strategy >>>
Companies need to move faster to put their own digital/physical strategies in place, and they need to adopt technologies that allow them to prosper in an integrated marketplace – not just survive.
Waiting to react >>>
US grocery retailers, distributors, and suppliers need to do more than just be “open” to partnering with technology companies; they need to actively search out opportunities to collaborate with them in areas like voice ordering, online fulfillment, and cost-saving programs.
Underleveraging/underestimating mobile >>>
Voice and IOT are hot topics on the home front, but mobile will be the key to the blended digital/physical experience for the foreseeable future. Mobile wallets and payment systems are a clear priority, but much more needs to be done to fully integrate mobile throughout the path to purchase.
Focus on the consumer
No matter where your organization is in the process of defining its future vision – just starting or on your way – don’t fall into the trap of thinking that it will be enough just to respond to the moves of competitors.
The real challenge for defining the vision and digital destination of food retail lies in having an unrelenting focus on the fact that
Consumers are looking for more from their shopping experiences – including those for food and groceries.
How your organization chooses to rise to those occasions and fill those customer needs is where it gets exciting.
Related Posts
> 2017 grocery retail refresh: Why Kroger, Lidl, and Walmart will have a bigger impact than you think
> What will the grocery business look like in 5 years? (blog)
> Walmart and Kroger show what the grocery industry can expect in near term
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Comments
Our "best" might be Amazon ... and no doubt Bezos and the Amazon brand have been transformative in their own right. However, for a perspective ... Amazon posted $1 billion in sales in 30 hours during their July 5th 2017 event. Alibaba sold $1 billion in 47 minutes according to reports. Alibaba's 2017 Singles' Day sale amassed $25.3 billion, doubling the US's 2016's Black Friday and Cyber Monday sales combined. What kind of infrastructure is required to operate at that scale?
Then there is the issue of tech companies. From the NY Times, "The technology world's $400 billion-and-up club — long a group of exclusively American names like Apple, Google, Facebook, Microsoft and Amazon — needs to make room for two Chinese members." American logisticians would also be wise to look at JD.com's (Walmart's Asian partner) Asia No 1 warehouse.
https://www.youtube.com/watch?v=RFV8IkY52iY
I hope I have misdiagnosed the situation ... 'cause guess who's coming to America!
Users want mobile for ordering (iOS and Android apps) and they want to be able to text their confirmation information to receive their order (at home, curbside, or at the eCommerce desk within their favorite store). The speed, accessibility, and seamlessness are a requirement. Very few people want to have to write down information which can be communicated electronically. Eliminating paper should be a requirement in the solution you choose.
When it comes to being proactive, we are finding first to market is a substantial factor in eCommerce success. Think of it like choosing a new doctor or dentist when you move to town. Once you’ve selected this professional, you will likely be with them for a very long time. The same thing is true for grocery shopping and online grocery shopping. Once you are your favorites bookmarked and your shopping lists for different occasions figured out and you understand the acquisition process - you don’t want to have to learn this again and switch services. Being "First to market" creates long time loyalty. Take action.