New Retail: shopping, the Chinese way
Retailers all over the world are struggling with the question: how much online and how much brick & mortar should the ‘survive potion’ contain? In China, Alibaba promotes a new model – New Retail – that brings together the best of both in-shop and online experiences.
Alibaba operates the country’s largest e-commerce platforms and has more than half a billion consumers shopping on its marketplaces. Online sales penetration in China is the highest in the world, but brick-and-mortar retail still accounts for more than 80% of total retail sales. According Alizila, Alibaba’s own news hub, New Retail may be still young, but it is already a game-changer for many different types of retail experiences in China.
New Retail is largely based on online shopping, in line with Alibaba’s strategy of pure digital competition into the physical world. In this concept, there is little need for pushing a shopping cart up and down the aisles, searching the shelves, standing in line to pay and carrying the heavy bags back home.
You can witness a lot of New Retail at Alibaba’s Freshippo (also known as Hema) supermarkets, which the company created to incubate new retail innovations that could be applied to the broader industry. Freshippo sells groceries, fruits and vegetables, and fresh seafood. Shopping at Freshippo is a smartphone-powered experience – to be done from home or in the store. When you’re in the store, you’re able to scan a bar code with your phone to get product information. Payment is also cashless, done through the Alipay platform embedded in the Freshippo app. As a customer, you can choose your own fresh seafood and decide whether you want it to go home with you—raw or cooked—or have it prepared to eat in-store. If you live within three kilometers of the market, Freshippo’s can deliver in as fast as 30 minutes. Each store serves as its own warehouse and logistics center that collects, fulfills and delivers customer orders as fast as they come in, online or offline.
New Retail is also changing the car purchasing experience in China, saving time and energy. Alibaba is rolling out ‘auto vending machines’. The first Ford auto vending machine in Guangzhou lets customers browse makes and models inside their app, choose one they want to test drive, pick it up from an unmanned vending machine and drive it for up to three days. After experiencing the car in a no-pressure situation, they can make an appointment to visit a dealer when they’re ready to buy.
New Retail even brings change to the mom-and-pop convenience store. Some six million of the drinks-smokes-and-snacks shops dot neighborhoods and street corners across China. Most are family-run businesses, with proprietors ordering by gut feel and when products run out. An Alibaba custom-built app digitizes the inventory management of each store. That lets proprietors know what they need to order, how much and when. It also ties these business into a central warehousing and logistics system.
New Retail offers ‘virtual shelves’ in shopping malls. If you are shopping for pants and you don’t find your size or color in stock, you can still select the product you want on a screen, punch in your size, color and other specs, scan with your app, and have exactly what you want delivered directly to your home. Also, the powder room of malls is also becoming a New Retail experience. Step into the ladies’ room, and while you’re waiting, check out the ‘magic mirror’ on the wall to experiment, virtually, with new makeup colors. Like what you see? You can buy it from the vending machine.
New Retail in restaurants? Certainly, and it means efficiency. Koubei, Alibaba’s local-services company, offers proprietors digitized and modernized operations, letting customers order from their table via scannable QR codes and collect their orders from food ‘lockers’ abutting the kitchen.
Why does New Retail work so well in China?
As a marketplace operator, Alibaba offers a multitude of services to brands, from advertising and marketing tools, payment systems, logistics and cloud computing, media and entertainment properties. Brands selling on its B2C platform, Tmall, build storefronts that look just like their own online stores, because the brands own the customer experience and relationship. They also own all of the related analytics. It is in Alibaba’s interest to help brands go omnichannel. The Alizila report: “An increasing number of brands are doing just that, tapping Alibaba’s New Retail tools, erasing the lines between online and offline.” “The key to New Retail is the mobile phone, which provides the critical connection between online and offline retail to consumers. Brands in China have an advantage here because they don’t need to convince consumers to download and use their apps. That’s because they know 500 million consumers already have the Tmall app.”