For Alibaba, Ecommerce's Future Lies in Brick-and-Mortar

Alibaba's new supermarkets are a step into the company’s 'new retail' concept

Author: Man-Chung Cheung

August 1, 2017

Alibaba has made no secret of its “new retail” strategy—one that calls for the marriage of online and offline retail worlds with a shopper experience shaped by data and technology. The strategy is intended to provide a seamless shopping experience to customers regardless of whether they are on a desktop, mobile device or in a brick-and-mortar store.

Data supports the idea that consumers in China want to meld the online and offline shopping experience. A survey of digital buyers in China conducted by McKinsey & Company in Q1 2017 found that a majority of respondents were interested in features like click and collect, using QR codes to complete purchases, and checking a physical store’s inventory through an online platform.

As part of its new retail strategy, Alibaba opened three Hema supermarket locations in July, expanding its total number to 13. The stores, first launched in 2015, are a sort of digitalized supermarket that can be found in major cities like Beijing, Shanghai and Ningbo.

Hema shoppers are encouraged to download the store’s mobile app, which is linked to Alibaba’s other retail services, including its online marketplace Taobao and the digital payment platform Alipay. In-store customers can use the app to scan a product barcode to obtain information or receive recommendations. Once done with their shopping, customers can even check out using the app.

Since the stores also double as fulfillment centers, shoppers within a roughly 2-mile radius of a store can also make purchases remotely using the app, and then have goods delivered within 30 minutes.

Alibaba uses data collected on these shoppers and their app usage to build a more personalized shopping experience, as well as to improve its understanding of a consumer’s online and offline journey.

According to data from Cheetah Lab, Hema app users are 56.0% male and 44.0% female. In addition, the app appears to have strong appeal among young adults. Cheetah found that 42.8% of Hema app users are ages 31 to 40, while roughly one-quarter are ages 25 to 30.

Alibaba’s Hema stores are sometimes compared with Amazon Go, the cashier-less brick-and-mortar supermarket concept store from Amazon that relies on cameras and sensors to process purchases. However, while Amazon Go is intended to create an easy checkout experience for consumers on the go, Hema stores are designed to encourage shoppers to learn about products and spend time experiencing the store.

Alibaba’s move to launch Hema supermarkets reflects the retail revolution in China. Many consumers have chosen to bypass in-store retail for online shopping, leading to a large-scale closing of inefficient and uncompetitive shopping malls. However, retailers that have worked to bridge the gap between online and offline in China have proliferated, among them adidas, lululemon athletica, Toys “R” Us and Starbucks. 

Photo by Clark Young on Unsplash