What is New Retail? This phrase was coined back in 2017, by Alibaba’s co-founder and former Executive Chairman, Jack Ma. In a letter to shareholders, he wrote that commerce is changing and evolving into New Retail.
And what is New Retail?
It is the starting point of something much bigger: The Five New strategy. This plan involves the convergence of: “New Retail, New Finance, New Manufacturing, New Technology, and New Energy.” According to Ma, Alibaba has already geared their organization structure “toward the support of their ‘Five New’ strategy for the coming decades.”
Though we are still in its early stages, and we don’t know exactly how the Five New idea will transform China, we do know though that New Retail is already changing the way we look at commerce. It has already made great strides in reducing the boundaries between online and offline commerce.
The boundaries between online and offline? Does it sound familiar?
Yes, it reminds us of the old, ‘traditional’, omnichannel experience we’ve heard so much about.
The idea behind New Retail is not new and it is not revolutionary. Brands from all over the world have been working for years on shifting their businesses so they can offer a true omnichannel experience to their customers. Timberland, Sephora, and Topshop are just a few examples of companies investing heavily in offering a unique omnichannel experience.
So, what’s the difference between ‘traditional’ omnichannel and New Retail? Is it just marketing? Yes and no.
The concept itself is not new, but the way it’s being deployed is something we’ve never seen before. Quoting Jon Bird, what sets New Retail apart “is the scale and speed of the implementation, and the variety of formats to which it is being applied.” Because, with Alibaba’s strength behind it, New Retail will revolutionize the way commerce works in China.
If you want to find out a bit more, this is Alibaba’s video explaining New Retail in their own words:
Is New Retail Working, Then?
On November 1st, 2019, Alibaba shared its results for Q2, and its net profit amounted to 7.26 billion Chinese yuan, which means an increase of 262.1% if we compare it to the same period last year. Up until recently, Alibaba’s earnings were mostly based on advertising and commissions of their marketplace. New Retail is changing this landscape.
New Retail income has exceeded e-commerce commissions and is the second-largest source of revenue for the Chinese company. Commission revenue for Q2 was 16.275 billion yuan (24% more than the same period last year) and what Alibaba calls “Others” (which includes Freshippo, Tmall Supermarket, direct import and Intime) has generated 18.210 billion yuan (125% more than last year.)
But enough theory for today. In order to really explain how New Retail is being applied, we’re going to list a few examples of what’s happening in China.
Freshippo (Hema): 30-Minute Delivery and 60% of Online Orders
Freshippo (if you’re in China, you'll find it under the name of Hema Xiansheng) is owned by Alibaba, and it’s the perfect example of New Retail in China.
Hema is a mix of supermarket and restaurant that focuses on fresh food. Nowadays, there are more than 100 Hemas in 19 Chinese cities.
How Is Hema Implementing New Retail?
In many ways. They have managed to seamlessly combine online and offline commerce, and these are just some examples of it:
- The Hema app is the starting point for everything that happens in their stores. With over 11 million sign-ups, this app accounts for 60% of all customer orders.
- They have conveyor belts that carry online orders over the customers’ heads and towards fulfillment. See how it works in this video:
- Payments are (mostly) online. Customers pay for their orders through Alibaba’s payment service, Alipay. You can pay via QR code or even via facial recognition.
Not all payments are online, though. It’s illegal in China not to accept cash payments, so Hema had to reconsider this policy. They’re allowed now, even though they can seem a bit out of place in stores like these.
- And a huge milestone: 30-minute delivery for anyone in a 2-mile radius from a Hema.
- They have also partnered with Starbucks to give the coffee company a delivery option in this country. Hemas include ‘Star Kitchens’, where they prepare Starbucks coffee that can be ordered and delivered in a matter of minutes.
And in response to COVID-19, Hema has been able to stand apart. It opened its flagship store on the company’s B2C e-commerce platform Tmall. In response to the global pandemic, Hema has been working with farmers across the country to ensure that consumers have access to groceries and fresh produce. They have 700 million customers in their network and are able to provide next-day, nationwide delivery. The foundation they had laid with New Retail allowed them to respond effectively to this unprecedented situation, providing an essential service and helping many people.
Carrefour China: Flash delivery services
Carrefour China was acquired by Suning, the Chinese e-commerce giant, back in September 2020. “With our smart retail capabilities, Suning can transform the Carrefour stores into fully integrated online-and-offline supermarkets to meet evolving consumer demands,” said Zhang Jindong, Chairman of Suning Holdings Group.
Apparently, this collaboration has proved to be a good thing for Carrefour China. They have focused on the digital transformation of their stores, and in Q4 2019 they achieved “its first quarterly profit among the last seven years.”
How is Carrefour China Implementing New Retail?
- They’re offering a one-hour delivery service within 2 miles of the surrounding area.
- They’re also offering a half-day delivery service for those within 6 miles of the same city.
- During the epidemic, Carrefour China launched flash delivery services with Suning's convenience stores to meet residents' demands. According to them, the average daily order increased by 202 % month on month.
7Fresh: Robotic Carts & RFID Readers for Vegetables
JD.com is the second largest e-commerce company in China, and they are Alibaba’s direct competitor. They have come up with their own strategy, called “Unbounded Retail”, which is quite similar to New Retail in how it seeks to merge offline and online experiences. They also sell fresh products, and their main target is high-income consumers.
JD.com created 7Fresh as a response to Hema supermarkets. They are relatively new, (their first store opened in 2018), but they are expanding rapidly. In their search to become the first grocery business in China, they plan to open 1,000 new stores in the next three to five years.
How Is 7Fresh Implementing New (or Unbounded) Retail?
- Similarly to Hema and Luckin Coffee, 7Fresh offers a fast delivery service of just 30 minutes if you are located within a four-mile radius of one of their stores.
- You can walk around their huge grocery stores (their first outlet in Beijing’s Dazu Plaza shopping center is 4,000 square feet) and never get lost. How? Their robotic smart carts, which guide customers wherever they want to go. You can follow them (or they can follow you!).
- They also offer payments via facial recognition.
- You can scan QR codes that will show you product information. Or you can even place fruits or vegetables on RFID readers and all their details will appear on a digital screen in front of you.
New Retail Is Not Just Coffee and Supermarkets
We have listed three examples of companies that are implementing the New Retail (or Unbounded Retail). Before you finish reading this article, bear something in mind: New Retail is so much more than groceries and cafés!
According to Jeffrey Townson, a Peking University professor, New Retail is a “bold extension of Alibaba’s strategy of pure digital competition into the physical world.” For a pure player such as Alibaba, going offline means collecting data of new consumers, products, trends and a lot more. And, used wisely, this vast amount of data means growth.
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