3 Things US Retailers Can Learn from China's Largest Ecommerce Company
Alibaba's "New Retail" concept revives physical retail through digital innovation
The death of the American mall appears inexorable. Store footprint for legacy retailers is shrinking at a net negative. Direct-to-consumer seems the wisest recourse for brands to reach buyers.
While we take these clichéd predictions for granted in the US, none of these things is true in China.
Global ecommerce mammoth Alibaba Group facilitated $803 billion in transactions last year – far outstripping total US ecommerce, which is valued at $513.61 billion. This year, the company is expected to corner 56 percent of the Chinese market for online retail, in a country with a population of 1.4 billion people.
They’re taking the world by storm with their concept of “New Retail,” which erases the distinction between online and offline shopping by combining ecommerce with logistics, payments and cloud computing. It’s easy to draw comparisons to Amazon, but there’s more to it than that.
Here are three things US retailers can learn from the world’s largest ecommerce company.
1. Erase the lines between physical and digital retail
There’s an epidemic of self-sabotage in US retail. Research shows the same few customer pain points cause online shoppers to desert brick-and-mortar stores – elemental annoyances like dirty bathrooms, long checkout lines, out-of-stock inventory and unhelpful or uninformed store clerks.
In China, the Hema line of reimagined supermarkets are such a draw that those who can afford to live in “tier 1” and “tier 2” cities base their housing choices on proximity to a store.
Image credit: Flickr
Billed as “an experience center plus consumption center plus logistics center” rolled into one, shoppers have blended online and offline options for purchasing ready-to-eat food and groceries.
“What we want to focus on is combining online and offline retail to make it seamless. It’s about digitizing the entire value chain,” Candice Huang, senior manager of international corporate affairs at Alibaba, said at the Annual Retail Forum at Columbia University.
You can buy items in-store and have them shipped home – with guaranteed delivery in 30 minutes for those who live within 3km (1.86 miles) of a store. While browsing the aisles, customers use a mobile app to scan items for product information, ratings and reviews.
To checkout, you use Alibaba’s proprietary mobile payment system, Alipay, which verifies your identity using biometric facial recognition.
What’s more, each store serves as its own fulfillment center. Every time a customer makes a purchase, that data is logged on the store’s order management system and inventory accounting log so items are never understocked.
Their purchase data is consolidated onto the app as part of the customer’s entire purchase history, and goes towards providing a more personalized experience the next time they log onto the mobile app.
Contrary to what you might think, increased digitization has led to more creativity in physical retail – not less. TMall, Alibaba’s website for B2C online retail, launched its first Experience Center in July at one of Shanghai’s trendiest shopping malls, K11.
Image credit: Alizila.com of Alibaba Group
The company is partnering with brands to feature pop-up activations exclusive to the venue, such as a street-culture exhibition by California-based skate-shoe brand Vans, and upcoming appearances from other US brands like Bobbi Brown, Abercrombie & Fitch, Oral-B and Scotch whisky.
Brands looking to connect with consumers on an experiential level can’t do so without physical retail space – be it a permanent or semi-permanent store or pop-up activation. But the popularity of branded experiences attests to the importance of connecting with consumers in person.
2018 Taobao Maker Festival (Image credit: Alibaba Group)
T-Mall has partnered with over 200 brands to offer premium shoppers what it calls “ultimate experiences,” such as swimming in the Dead Sea to feel the minerals used in beauty company Ahava’s products, dining on the Great Wall of China and test-driving cars at the Porsche Experience Center.
2. Combine entertainment with retail
Whatever you want to do, be or have, there’s an app for it. This creates a splintered purchase experience and reduces apps to purely transactional platforms.
“You want to get consumers to not only use your platform to shop; they’re also coming to find entertainment,” said Huang. “We also have digital and entertainment services and local services for ordering food and beverage – and all these different types of services are underpinned by enabling services like Alipay, our payment platform.”
Image credit: Alibaba Group
Alibaba’s all-in-one mobile app is a virtual mall for C2C and B2C retailers as well as a social networking site. Think Amazon, GrubHub, Apple Pay and eBay rolled into one – oh, and Instagram, Twitter and Facebook (all of which are banned in China).
Aside from shopping, its main lure is livestreams featuring social media influencers – known as Key Opinion Leaders (KOLs). Live streams are one of the main reasons why the average user spends an astounding 25 minutes per day on the app; they’re also an organic way to convert viewers through product reviews featuring full-time, paid KOLs using a “see now, buy now” flash sale-type model.
Last year, Alibaba generated $15 billion in sales from live streaming, a 400 percent increase from the year before. Austin Li, a full-time livestreamer for Taobao, helped the company sell a record-breaking 15,000 tubes of lipstick in 15 minutes when he reportedly applied over 380 swatches in a 2-hour livestream.
“We make retail fun, we make it entertainment,” Huang explained. “People are there to spend time to explore things, talk to their friends, see what their friends bought and watch short videos and livestreams.”
3. Collaborate with other retailers and brands where possible
Since Alibaba is a platform, not a retailer, it’s in their best interests to help retailers and brands boost their presence in the Chinese market without fear of cannibalization. Amazon, on the other hand, is a retailer, so it seeks to divert market share from other retailers instead of raising them up.
In China, November 11 is designated as ‘Single’s Day,’ an anti-Valentine’s Day for the happily or unhappily single – and one of the most highest-grossing days for retail in the calendar year.
“In 2009, Alibaba started to run these campaigns to invite Chinese consumers to shop on the platform and buy themselves gifts as part of this anti-Valentines effort and people really got into it,” said Huang.
When the campaign first launched, 27 brands jumped on board. Last year, 180,000 brands chipped in limited-edition anti-Valentine’s Day products, netting Alibaba $30.8 billion in sales in one day.
The company also works with brands to tailor their products for the Chinese market – all of it using insights based on consumer data from their various apps and physical retail touchpoints.
Last year, Alibaba collaborated with Mars Corporation to launch a chili-infused Spicy Snickers designed for Chinese sensibilities. It also worked with Johnson & Johnson to to roll out fruit and floral flavors for Listerine mouthwash, contending that Chinese consumers wouldn’t like the antiseptic taste of peppermint.