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Online vs Offline Commerce

Sources: Click here
February 20, 2017

The world’s largest online shopping platform operator will bring its big data and technology to bear on China’s biggest and oldest supermarket chain Alibaba Group Holdings Ltd., whose e-commerce sites have upended brick-and-mortar retailing, is bringing the power of its big data and technology to shake up one of China’s oldest and largest retail chains for the digital age.

Alibaba and Shanghai Bailian Group Co. will use the e-commerce company’s data to integrate “offline stores, merchandise, logistics and payment tools with the ultimate aim of elevating efficiency and overall consumer experience,” the two companies said in a Monday statement.

Similar to its 2015 investment in Chinese electronics chain Suning Commerce Group Co., and its US$2.6 billion bid to buy Chinese department store chain Intime Retail Group Co., Alibaba is seeking to combine analytics about retail behaviour with offline physical stores, part of what founder Jack Ma calls the “New Retail.”

The partnership, which doesn’t involve Alibaba buying a Bailian stake, reflects the new reality of retailing, especially in major Chinese cities where e-commerce has taken the lion’s share of business from brick-and-mortar shops because of the sheer convenience of shopping online, said Shanghai Wanqing Commerce Consulting’s founder Lu Zhenwang.“In smaller Chinese cities, which lack the logistic infrastructure, offline retailors still enjoy advantages,” Lu said.

Bailian, which operates a chain of 4,700 shopping malls, department stores, Lianhua (聯華) supermarkets and outlets in 200 Chinese cities, defined large-scale retail consumption in the country.

Its flagship property, the Shanghai No. 1 Department Store, was the only place to find foreign goods such as Sony’s televisions, or Swiss watches, in the 1980s during China’s early attempt at becoming a market economy.

For decades, the chain of Lianhua and Hualian supermarkets stood for value and convenience for Chinese consumers, redirecting them from mom’n’pop corner sundry shops into large, well stocked shopping aisles.

As the internet and smartphone usage took off in China, so did online shopping, boosting Alibaba’s Taobao and Tmall applications to surpass Ebay and Amazon to become the largest e-commerce sites on the planet.

With more consumers shopping online, for everything from groceries to food to furniture, Bailian’s sales shrank from a peak of 51.44 billion yuan (US$7.48 billion) in 2013 to 48.73 billion yuan two years later.

The company’s shares jumped Monday by their daily 10 per cent limit to 17.82 yuan, the highest since December 31, 2015 after the tie-up was announced. Shares of its Lianhua unit jumped 10 per cent in Hong Kong trading to an intraday high of HK$3.56.

Businesses are increasingly embracing big data and new innovations to better identify, reach, analyse and serve customers, and their digital transformation will be empowered by Alibaba’s ecosystem, the company’s chief executive Daniel Zhang said.

“Our partnership with Bailian is an important milestone in the evolution of Chinese retail, where the distinction between physical and virtual commerce is becoming obsolete,” he said in a statement. Alibaba is the owner of the South China Morning Post.

As the growth of online retail slows in China, Alibaba is gearing up to leverage its online retail knowhow to help retail operators across the world to grow their businesses too.The Hangzhou-based company coined the term “New Retail” to describe a world where the distinction between online and offline commerce becomes obsolete, as internet users continue to migrate to mobile devices from desktop computers.

Ye Yongming, Bailian’c chairman, said the new retail deal is not just the convergence of online and offline worlds.

“It means we need to leverage technologies such as the Internet of Things, AI and big data to provide consumers with new and immersive shopping experience across channels and product categories anytime and anywhere,” he said.

Alipay, China’s widely used mobile payment service backed by Alibaba, will be made available at all Bailian stores, while Bailian’s payment tools Safepass and Bailian OK Card will be integrated with Alipay to provide a unified third-party payment solution for consumers.