According to Daniel Zhang, Alibaba’s CEO, it is about providing value, better utilising data and embracing constant change — but all based on the understanding that consumers are the same, whatever platform they use to shop.
In 2017, Alibaba founder and chairman Jack Ma coined the term ‘new retail’, and announced it as the group’s new strategy.
At the recent Consumer Goods Forum Global Summit, Zhang said: “People are always online any time, anywhere." For instance, people go out and visit stores but are still connected online through their smartphones.
The question to ask is, said Zhang, what kind of value we can provide people when they are online or when they go to the store?
For instance, he constantly reminds colleagues and partners, they need to find a strong reason to convince a young person to go to a supermarket as people can take out a phone and click and buy.
“The key thing when we look at (offline) retail is that we need to create new value for customers, to give them the experience, the service, that maybe we cannot achieve on the Internet,” said Zhang.
Digitisation and data
Zhang admitted that the Alibaba Group has been “moving very fast” into bricks and mortar retail, and referenced the Group’s “huge investment” (US$2.9bn) in the leading hypermarket chain in China, Sun Art.
While he acknowledged that the reason for this type of investment was that the firm strongly believed that bricks and mortar could create huge value, he stressed that the offline physical store retail model needs to be “upgraded” and operations need to be digitised.
“If we can digitalise this assortment — the order, the payment, the customer footprint in the store (and so on) — then we can get a lot of data from it like we do in e-commerce online. If we can be empowered by data, then we can do a lot of different things and can improve the efficiency of the store operations,” said Zhang.
“We can understand on a real-time basis, based on the behaviour of the people in the store, and know what they want and we can adjust our assortment on a real-time basis.”
He added that the marketing platform, payment, logistics and cloud (computing), were essential infrastructure for digital commerce.
“We are trying to provide infrastructure services to enable them (business partners) to have a successful digital transformation,” said Zhang.
An apt recent example would be Alibaba’s equipping of a quarter of RT-Mart’s 400 China stores with ‘new retail’ technology designed to bridge the gap between e-commerce and traditional bricks-and-mortar operations.
A series of newly-added features include in-store fulfilment of online orders to interactive kiosks, and the stocking a selection of popular products from Alibaba’s online Tmall.
“By digitising the store’s operation, the online and offline business merge into one. This will boost retailer’s online transaction volume,” Peter Huang, CEO of RT-Mart, had said.
Zhang further acknowledged that Alibaba is in many business segments but its core is in data.
Last year, Alibaba achieved US$760bn in gross merchandise value. About 600 million customers purchase goods through Alibaba every day.
Zhang said one of the main reasons for Alibaba’s growth from its founding as a B2B site helping Chinese SMEs find trading opportunities in overseas markets (without online purchases or transactions) into a data, digital services and e-commerce powerhouse was its core value of embracing change.
“We evolved our business first based on the needs of the customers. Secondly, from a business perspective, on how to enable our business partners to do successful business on our platform,” said Zhang.
Earlier this year, Alibaba also entered a new business area of food delivery, which Zhang said “is a very important component in local services”.
“Today, young people tend to stay at home and order food online,” he said.
He concluded with an interesting thought.
“Today, when we make payment in China and South East Asia markets, people enjoy mobile wallet payment. Tomorrow, we won’t need a mobile wallet. Everybody, every eye will be a wallet. This day will be coming soon,” he said.