Amazon and Alibaba – where’s the link? They’re both well-known online businesses and the biggest in their respective countries, but they’re also both branching out into the world of supermarket shopping.
Amazon grabbed the headlines with their $13.7 billion purchase of Whole Foods last year, and Alibaba, the Chinese e-commerce giants, have also been experimenting offline. Read on as we explore what they’ve been up to, and how other companies might look to emulate their transformation.
Moving into physical retail
When it comes to ecommerce, companies don’t come bigger than Amazon. The American online giants employ over half a million people worldwide and bring in more than a hundred billion dollars each year. Their acquisition of Whole Foods was more than just an offline adventure. As well as integrating Amazon Prime into the Whole Foods customer rewards service, offering in-store benefits for customers, they have made a range of Whole Foods products available online.
And, while it appeared Alibaba were following suit with their $3 billion investment in Sun Art, they were actually a few steps ahead of Amazon. Under their Hema brand, Alibaba has already opened over 25 supermarkets across China. And these are far from ‘regular’ supermarkets.
Alibaba’s tech-fuelled supermarkets
Customers use the Hema mobile app to scan barcodes in-store or order online, and staff deliver their items in the next half an hour, or they can have the produce cooked by Hema chefs and brought to their home ready to eat. On top of techy boasts like facial recognition payment, their “new retail” strategy uses big data analytics to customise recommendations and give customers a completely tailored shopping experience.
JD – another Alibaba company – also has big plans for in-store shopping. They opened their first tech-enabled 7FRESH store in January, complete with smart carts that follow customers around the stores and mirrors that give information as they pick up goods. It’s not just tech though. Their commitment to fresh food is also being boosted. Eggs arrive in store within 12 hours of being laid, and – like Hema – 30 minutes delivery is available.
Merging online and offline
So, what’s prompted this move into physical stores?
It’s down to a clear opportunity. China has the world’s largest grocery market, overtaking the US in 2012. Now worth an estimated $1.5 trillion, it’s a logical next step for the country’s eCommerce leaders. This is especially the case as the growth of online sales has declined over the past few years, with e-commerce only accounting for 15% of consumption in China.
However, it’s far from a case of jumping ship. The merger with online is an attempt to drive sales across the spectrum. Alibaba’s smart stores, both Hema and 7FRESH, are bridging the gap between on and offline. By integrating technology into physical stores, they’re enabling easier inventory management and seamless customer data.
What they’re also doing, is collaborating across two major sectors to provide a better overall service for customers. By combining warehouse networks and cold storage for on and offline sales, they can cover far more areas and shorten delivery times. All in all – a better service for the end user, and more chance of growth for the company. Xiaosong Wang, CEO of 7Fresh and President of JD Fresh, said
“With the highest efficiency and the greatest knowledge of consumer preferences, as well as access to the highest-quality products, we can invest in a premium experience far beyond anything Chinese consumers have experienced before.”
The challenges of collaboration and integration
Of course, creating collaborative business models is far more complex than Alibaba’s journey makes it seem. They aren’t just acquiring new companies and brands, they’re creating a hybrid of online and physical. Not only does it involve the implementation of seriously innovative supply chain technology, but the management of transport networks and the transformation of the customer journey to create a more personalised experience.
That said, this kind of transformation isn’t impossible for other eCommerce merchants. Taking a chance on a new strategic partnership has countless benefits for both businesses where both sides value change and evolution. It is a case of understanding where the gains are, how to get all individuals on board and whether you can easily align the strategic direction of both businesses. Once this is understood, companies can begin preparation, execution of their plan and aim to get their retail expansion on the road.
Feel free to get in touch
At Bis Henderson Consulting, we help businesses effectively manage business integrations and the aligning of new partnerships, including every aspect of migration, programme implementation and supply chain consulting. Should you be considering how to grow your business in line with modern technology, feel free to get in touch with our team to discuss about your plans.