While the $25.3 billion in gross merchandise volume that Alibaba raked in from its 11.11 Singles Day sales was the highlight after the tills closed on 12 November, it was the ecommerce giant’s new Retail strategy that was the main talking point.
The Hangzhou-based company’s new Retail Strategy, which was launched at the end of 2016, aims to connect online and offline businesses around China by digitising some operations at physical stores to provide a more seamless experience for customers.
One of the key components of its new retail strategy is using its supermarket chain, Hema, to offer consumers a connected omnichannel shopping experience. Hema supermarkets serve as warehouses for online orders, as well as fulfillment centres that enable faster delivery, allowing their customers to receive their goods within half an hour.
In Hangzhou, Alibaba optimised customers’ time spent in its new retail flagship store called Home Times, by putting QR codes on the products so that when a customer want to buy an item, they can scan the QR code with their phones and add it to their digital shopping cart. The QR code also provides details like names, prices and brief descriptions about the product to the customers.
This function allows customers to purchase the products on their mobiles rather than queuing up to pay and at the same time, making it easy for the store employees to do stocktaking.
The new retail strategy took centre stage for this year's Singles Day event as Alibaba digitised more than 500,000 mom-and-pop stores around China to allow them to sell goods through its "Ling Shao Tong”, or integrated retail platform.
In addition, it partnered with 1,000 brands, such as L'Oréal and Procter & Gamble, to create 100,000 "smart" pop-up stores, which are converted physical stores, into hubs that recommend products and offer discounts to shoppers, along with virtual fitting rooms.
Brands like Nike also opened two smart stores in Shanghai and Hanghzou to fulfill online orders at 10 distribution centers and 50 stores to close the gap of the final step of the delivery process with consumers.
Alibaba’s founder Jack Ma, who previously said that he was hoping that Singles Day would showcase how retailers are using its new retail strategy to make the transition from offline to online, which would revamp China’s $4 trillion saturated retail market and help Alibaba gain an edge in the retail sector, would be heartened to see the results of the strategy.
After this year's Singles' Day, Alibaba announced that that 167 merchants generated more than $15.1 million in sales each, while 17 merchants brought in more than $75.4 million and six merchants generated at least $150.9 million.
As the retailers and brands sit back to count their cash, they will note that the new retail strategy also allowed them to further understand consumer behaviours and interact closely with them during this past Singles’ Day.
Given the early success of its new retail strategy, the next step for Alibaba is to replicate this model in Southeast Asia, where Lazada represents its business, especially given that the retail sector in the region is currently struggling.
So when will Alibaba roll out the new retail strategy in SEA and how will it work with Lazada to execute this?
Daniel Zhang, chief executive officer of Alibaba says that while the company thinks that it will be interesting for other markets to copy this new retail model, he does not think it is a very mature model yet, in response to The Drum’s question at a press briefing in Shanghai.
He adds that as the model will be evolving over time, Alibaba does not want to replicate what it is doing in China in other markets, but will instead go down to the markets to understand what people want.
“In countries like Singapore, people's lifestyles are a little bit different, maybe quite similar to people in Shanghai, but a little bit different from Hangzhou and other cities in China. So we should be very careful to not create a straightforward replication, but also try to tailor-make and localise the model,” he says, adding that this has always been part of Alibaba’s international strategy and it will be very careful moving forward.
Experts like Doreen Wang, global head of BrandZ at Kantar Millward Brown and James Hebbert, managing director, United Kingdom at independent digital agency Hylink, agree with Zhang.
Wang says while it is potentially possible for Alibaba to use a similar model in SEA, the model needs to studied further as traditional retailers in that region are more advanced than their Chinese counterparts, while Hebbert adds that countries in SEA need the vast infrastructure and network behind this model to make it a success, which is why Alibaba succeeded with this model in China.
On Lazada’s part, it already has taken on Zhang’s advice by implementing its own new retail strategy model in Singapore, which is similar but not the exact replica of its owner’s, and that is to bridge the online-to-offline loop by equipping sellers with the knowledge and tools to succeed in e-commerce, Alexis Lanternier, CEO of Lazada Singapore tells The Drum.
“Through initiatives such as 99%SME which Lazada is a strategic partner to, and working closely with the Singapore Institute of Retail Studies, Lazada has grown its merchant base to more than 300 brands and over 5,000 sellers, hosting over 30 million products on the Lazada.SG marketplace,” he adds, while also highlighting that Lazada is also continuing to pursue new retail and the recent investment by Alibaba has unlocked new opportunities for innovation.
While Alibaba has managed to convince hundreds of Chinese retailers to come onboard, Lanternier is confident that Lazada can do the same thing, pointing to its recent partnership with CapitaLand, which saw the real estate company’s tenants taking their business online and take part in online mega sales like Lazada’s ‘Online Revolution’.
Like Alibaba’s new retail strategy, the Lazada-CapitalLand partnership also allows customers to shop from their favourite malls online and collect their parcels from a nearby CapitaLand-owned mall. They can even try on newly purchased clothes for size, which makes shopping even easier for customers with Lazada’s free delivery and free returns policy.
This gives customers more autonomy and engagement in online shopping, this closes the online-to-offline loop in shopping and encourages footfall in malls, Lanternier adds.
Sharing Wang and Hebbert’s sentiments, Lanternier is quick to preach caution when asked if both Alibaba and Lazada’s new retail strategy will revitalise the retail scene in Singapore and across SEA.
“Adopting this strategy SEA-wide has its challenges, since the Southeast Asian countries are at varying levels of development. However, the potential is huge – for example, online retail makes up for only 3-5% of retail sales in Singapore and less than 4% across SEA,” explains the executive.
The Frenchman adds that new retail and omni-channelisation will allow retail events, that were previously online-only to cross over to the offline space as both retailers and e-tailers can take part in ‘Online Revolution’, which has attractive promotions like discounts of up to 90%.
While Alibaba's strategy may not be copied verbatim in other markets, it is clear that the opportunity to better link online and offline is huge in Southeast Asia.