For a company synonymous with e-commerce, Alibaba has a lot of physical retail stores but the strategy is to integrate offline with online channels to boost overall sales.
The ‘New Retail’ page of Alibaba’s newsite Alizila reveals how Alibaba is actually trying to create ‘seamless digital integration’ of online and offline commerce (meaning physical places). The latest posting is dated 30 April when it said e-commerce platform Taobao has teamed up with local retailers to launch a bricks-and-mortar, multi-label store to host independent clothing brands that are sold on its online marketplace.
The Taostyle store is being piloted at the Hangzhou Kerry Centre shopping mall where frequent product reshuffling will take place. The store allows consumers to place orders online in addition to buying in-store, as it receives the same commission for both online and offline transactions made through Taostyle. ‘We don’t just want to open a traditional shop to sell clothes. We want to explore a new way of merging online with offline,’ said Xia Yu, the general manager of Hangzhou Shunhong, which operates Taostyle.
This is just one innovation tying the digital world to physical stores or places. Another is creating buzz and awareness of products being sold on Alibaba’s platforms via events and pop-up stores. On 11 April, Tmall co-hosted an exclusive party with Yves Saint Laurent Beauté in Palm Springs in the California desert, for instance. It created a pop-up store looking like a retro petrol filling station, livestreaming it all back home to Chinese customers.
‘Tmall is not just a platform we use to sell products, but we also work together to bring new experiences, new services to our consumers, as we’re doing here at the Palm Springs event,’ said Sebastien Xing, brand director of YSL China. Livestreaming is becoming an increasingly popular way of merchandising in China. Taobao says it generated more than 100 bn RMB ($15 bn) of sales this way in 2018.
Furniture and grocery stores
But pop-up stores and the pilot concepts like Taostyle are small fry compared to what Alibaba already has in China in terms of stores. It has investments in Sun Art Retail (hypermarkets) and EasyHome (furniture malls). Sun Art has embarked on a digital upgrade of all of its physical RT-Mart stores in China. The group also operates around 77 Freshippo (Hema) stores and the ‘Freshippo ideal living community’.
It is at grocery stores such as Hema that the integration of digital and physical can be seen most vividly. Not only is it a store where customers can physically go to choose fresh food, but it acts as a distribution hub too where pickers are employed to fulfil online orders before distributing them to wherever the customer wants. An Alibaba app allows customers in the physical stores to point at items and read reams of information about each product. The app also makes product suggestions.
Retail property experts at the major London-based property services firms told PropertyEU they had yet to see any sign or hear any rumours of Alibaba or one of its group companies considering a move to open a physical store format in the UK or on mainland Europe. But one gets the sense that Alibaba could decide to expand to Europe over time.
Why not? Justin Taylor, head of EMEA retail at Cushman & Wakefield, said: ‘Alibaba has a very ambitious programme in China around New Retail, their convergence strategy of online and offline as demonstrated by Hema stores and More Mall, which also doubles up as distribution centres to customers, with goods paid for on Alipay. It is a fearsome model and as their growth matures in their domestic market, it will be fascinating to see which other global markets they target over time.’
And will Alibaba stop at retail? Unlikely. In November last year, the group announced it was making a move into hotels. The brand is called Future Hotel, with the first being opened in Hangzhou, the Chinese city where Alibaba is based. It is heavily digital, of course; guests are greeted by artificially intelligent robots. As per usual, Alibaba has launched this physical manifestation of travel after first creating an online travel platform called Fliggy.