China. The triumph of ‘New Retail’
Exciting and frightening, ‘New retail’ is everywhere in Shanghai. Alongside the C.I.R.I.S. conference, Global Retail News met the Vice Presidents of Alibaba at their Hangzhou HQ, together with an array of well-established retailers. We explored how ‘New Retail’ may be infused among traditional retailers and why such technological e-giants are so interested in brick & mortar.
In China, the so-called ‘New Retail’ sector is organised around two behemoths. These are Alibaba in Hangzhou and rival Tencent in Shenzhen, the local Silicon Valley. Altogether, they control 75% of China’s total e-commerce market, and 86% if we include China’s B2C online retail market. Such groups are unrivalled in the Western world. These are also the fastest companies in retail to multiply by alliances and partnerships. Faced with such agility, it seems that Facebook, Amazon and Google have missed an opportunity. “Creating a similar equivalent of Tencent or Alibaba would mean merging Amazon and Facebook, but it would still be uncomplete compared to these Chinese players”, said Marcos Gouvea de Souza at the C.I.R.I.S. conference during late April in Shanghai.
On one hand, these two companies are expanding investments in ‘brick & mortar’ retailers. Alibaba purchased Hema and took shares in Auchan’s Chinese business, in Suning, a Chinese home electrical retailer equivalent of Best Buy, etc. Alibaba also invested in Intime department stores while Tencent became a shareholder in Carrefour, 7-Fresh and Wanda shopping centres, etc.
On the other hand, both firms are prime service providers for the retail industry. They rent a technology to a retailer, which sells them services in exchange. Examples are where an Auchan hypermarket in Shanghai has an identical system of roofing rails as Hema for in-store picking. This equipment represents an investment of €1.5 million and is profitable from 2,000 orders per day. Alibaba is a shareholder in both firms.