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Business
New Retail Era
China is shaping the future of e-commerce, global consumption and supply chains
By Michael Zakkour | NO. 45 NOVEMBER 9, 2017

Employees sort out parcels from China at a distribution center of Chile’s postal service Correos in the capital city Santiago on August 25. According to Correos, AliExpress, Alibaba’s global online marketplace for consumers to buy directly from China, has emerged as the leading source of exposure for Chinese businesses looking to sell their products to Chilean consumers (XINHUA)

On October 19, Alibaba Group officially launched its Global Shopping Festival with the announcement of three weeks' worth of special events, sales, and activities that will culminate with the 24-hour consumption frenzy on November 11, dubbed "Singles Day."

This year's festival will be the biggest, in terms of gross merchandise value, the number of companies participating and the number of shoppers taking part, since the festival's e-commerce launch in 2009.

We will see a much bigger O2O (online to offline) offering and Alibaba is expected to fully demonstrate the power of its ecosystem to serve participating merchants by boosting the number of sales, the value of each sale, and the geographic and demographic reach of the festival to new customers.

Last year, I predicted that Alibaba would "go tech," "go global" and "go glam" as a first step to building the "New Retail," making November 11 a global shopping holiday, and to harnessing the power of its ecosystem. All of these happened, while the festival produced $18 billion in gross merchandise value for the company.

This year Alibaba will make a statement to the world that they are now a global technology, retail, entertainment and supply chain company that is serious about building its own ecosystem and global trade model.

The bigger picture is how this Singles Day will be the coming out party for Chinese technologies, Chinese e-commerce and the New Retail model, the centerpiece of Jack Ma's vision for transforming the entire retail experience, from how companies and individuals make and sell products to how, where and why consumers shop.

I have written for years about how global brands and retailers do not have to wonder about what their future holds, they only need to look to China. In many important ways China is years ahead of the rest of the world in the utilization of technology for every aspect of life, and shopping and consumption are the most conspicuous examples of this lead. This year's festival will not only produce massive sales for merchants who participate, but will also provide a roadmap for their future in all markets.

The New Retail concept

From a global perspective, the stakes for the shopping season are even higher because New Retail is the launching point for Alibaba's "Five New" strategy. In a letter to shareholders Ma explains: "E-commerce is rapidly evolving into 'New Retail.' The boundary between offline and online commerce disappears as we focus on fulfilling the personalized needs of each customer. In China, our New Retail initiatives are taking shape as the starting point to our 'Five New' strategy, comprised of New Retail, New Finance, New Manufacturing, New Technology and New Energy."

Alibaba's vision for the future is to build an ecosystem from the "Five New" strategy that empowers and makes it easy for individuals, small and medium-sized businesses, farmers and companies of all sizes to do business globally.

The implications for the future of China's economy, Chinese technologies and China as a leader in global free trade are enormous. This shopping festival will also be a powerful demonstration of how China is shaping the future of e-commerce, global consumption and supply chains.

As Ma points out "New Retail will bring about a restructuring of the global supply chain and change the complexion of globalization from the domain of big companies to small businesses."

Alibaba is also focused on further developing China's rural areas through New Retail and making it a model that can be exported. Ma wrote: "If Alibaba can help rural villages and impoverished areas across China to improve their conditions through technology, then we will have a chance to make an impact in other places around the world. Technology does not have to be the culprit in widening the wealth gap around the world."

A businessman (left) talks with Alibaba staff at the Alibaba Group's Gateway'17 Canada conference in the Toronto Exhibition Place on September 26. The event, aiming at educating enterprises about what and how to sell to China, especially through e-commerce platforms, attracted a variety of leading brands and small- and medium-sized enterprises (XINHUA)

Joining global competition

Having conquered China's e-commerce market, Alibaba is now ready to compete with the world's biggest and best-known technology and retail companies.

A year after announcing its intention to reshape the consumer experience through its New Retail strategy, this year's festival will build on the technology, globalization and early bricks-and-mortar integration introduced last year. The end goal is the digitization of global trade to provide producers and shoppers with a "Uni-channel" experience—the complete integration of making, selling and moving products and the erasure of the online versus offline distinction.

Last year Alibaba started integrating bricks-and-mortar stores into the Singles Day experience and demonstrated the power of its cloud computing arm, which processed 120,000 orders per second, its massive supply chain and the logistics capabilities of its Cainiao network, which shipped 637 million packages for 24 hours' worth of orders.

A lot has changed in the last year on the global retail and e-commerce stage. There are a select few global titans now competing to serve a global audience at the confluence of trade, consumption, technology, entertainment and supply chain.

The most important development of the year is the massive investments in bricks-and-mortar operations that Alibaba and Amazon are making in their respective markets (and the concurrent investment by titans like Walmart in e-commerce) to eliminate the distinction between online and offline and to create a Uni-channel experience. Alibaba understands it is no longer about whether online or offline will win out. Success will come through integrating the strengths of both to provide a customer-centric and customized experience for everyone.

Alibaba and Amazon are the current leaders in the race to reshape the entire six mega-processes—plan, make, buy, store, distribute and sell—of the supply chain that are integral to business, life and trade in a "digital globalization" environment.

Further, Alibaba's vision of global expansion dovetails nicely with China's Belt and Road Initiative. China's vision of using technology, supply chains, infrastructure and free trade to shape the future of the global economy is a fit for China's technology and commercial titans.

Highlights of Alibaba's Global Shopping Festival In 2017

• 140,000 brands will participate in promotions on 15 million unique product listings

• 60,000 non-Chinese brands will be available to 500 million Chinese consumers

• More than 1,000 brands are converting 100,000 of their physical stores into "smart stores" that will feature O2O experiences like browsing, shopping tours, virtual fitting rooms, payments and delivery

• More than 600,000 neighborhood convenience stores and 30,000 Rural Taobao service centers will use Alibaba's "one-stop" solution to digitize their businesses and will partner with brands such as Mondelez, Lay's, Ferrero and P&G

• Augmented reality games like Catch the Cat will let Chinese consumers earn special coupons and prizes by finding mascots in thousands of retail stores (including Starbucks) across China

• For the first time Tmall is taking 100 Chinese brands overseas, targeting 100 million Chinese consumers in Asia and the rest of the world.

(Source: Alibaba Group)

The author is a columnist of Beijing Review, vice president of China/APAC & e-Commerce Practice at Tompkins International and co-author of China's Super Consumers

Comments to yushujun@bjreview.com

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