More About Alibaba And Its New Retail
Last week, I published a piece about Alibaba’s foray into grocery stores. At the time, I thought it was their first entry into the world of what they call “New Retail” and what we would call “Omnichannel” or “converged” commerce.
Well, I was wrong. It turns out the mammoth Chinese retailer is going into store-based retailing across multiple segments. On May 29, the company announced a co-branded megastore in Beijing, forged by a partnership between Tmall (Alibaba’s retail marketplace) and Intersport, a leading retailer of sporting goods and outdoor equipment. The store name, “Tmall x Intersport” makes it clear that this is a partnership and includes a variety of interactive features to make shopping more engaging and fun.
Apparently, according to this release, Tmall has already provided technology to over 400 brands, including Burberry and Zara, and is only just beginning. The goal for the next twelve months is…wait for it…collaboration with 1,000 brands and “digitizing” 200,000 storefronts nationwide.
This makes Amazon’s purchase of 430+ Whole Foods Market stores seem pretty puny, doesn’t it?
Take a look at this quote I found on the site where you can find all things Alibaba-related, www.alizila.com.
“‘New Retail’ is not just supermarkets and convenience stores. It’s much bigger and more-sweeping than this,” wrote Jeffrey Towson, a Peking University professor and private equity investor who closely follows the development of China’s retail sector, in his blog earlier this year. “‘New Retail’ is a bold extension of Alibaba’s strategy of pure digital competition into the physical world. And it hinges on the strange ‘economics of participation’…’New Retail’ means a massive expansion in their brands and merchants and in the participation and activities of their consumers.”
While we, as a country, are busily threatening China and others with trade tariffs, and Jeff Bezos continues to get acres of free press every time he tosses a new fantasy into the ether, Jack Ma is making this “New Retail” a reality. We talk about Amazon’s “trillion dollar valuation” with awe and wonder, and analysts have started muttering about breaking the company up. In the meanwhile, Alibaba continues to grow in its own growing market. A lot.
Like many people, I assumed after Alibaba’s poor entrée into the US that we’d never hear from them much again…but it turns out the company is doing everything Amazon is doing…only more, better and faster.
According to Alibaba Group’s annual report, the company grew its revenue 58% in FYE 2018, its profits over 40% and generated free cash flow of USD $15.8 billion. The revenue base is “only” USD $39 billion, but at its current growth rates, it will be catching up to Amazon’s $200 billion quickly. They’ve gone from 454 million annual shoppers in March 2017 to 552 million annual shoppers in 2018…that’s 22% YoY growth. And they’ve only just begun their “New Retail” enterprises. Just wow.
I suspect sooner or later, Alibaba will get it right and have offerings for US consumers that are more attractive than its original website, 11Main.
A long time ago (over a decade), I coined a term that never quite caught on. It was TECC….technology-enabled customer centricity. It’s too many words to be catchy, but that’s really where we’ve gone, and it’s really the essence of the New Retail. The combination of people, product and technology is powerful and leads to a superior customer experience. Perhaps we can finally recognize that the possibility does exist, and that retailers (besides Amazon) have made some real progress in the US as well.
I truly believe Amazon, with its 3rd party Prime sellers (I remain completely unsatisfied with many of those experiences), has opened a crease for other retailers who can be reasonably fast and on-point with their pricing and products. Fun fact: if you buy something from a 3rd party Prime seller, you cannot get a replacement product. The only thing that Amazon can/will do is give you your money back. That means you have to be willing, as a consumer, to start the whole process over again. I’m not, and now my never-Amazon purchases have extended from big screen TVs to cases of cat food, to cases of baby food, to Indian spices.
It’s time to shake off the forces of negativity. US retailers really can succeed in an Amazon world…because as it turns out, Amazon has to make money too. And when you have to make money, you cut corners here and there.
It’s also time to shake off the forces of denial. While we remain, for now, the world’s richest market, other countries are rapidly coming up behind us, and will likely take the lead. And the retailers who service those markets are rising to meet them. Let’s not forget, China has been around for thousands of years. The country is recovering from years of Communist control, and becoming a market to be reckoned with.
Alibaba really surprised me this week, and you can be sure I’m going to be watching the company far more closely in the future.