While building a mobile and e-commerce powerhouse, Alibaba is not ignoring the brick-and-mortar retail world. As the following Investor’s Business Daily article reports, Alibaba is continuing to invest in retail businesses.
Several years ago China e-commerce giant Alibaba (BABA) set out on a path to change the face of retailing. Billions of dollars and several acquisitions later, you could say it’s well on its way to accomplishing its mission.
It started in 2014, when the Amazon (AMZN) of China paid $692 million for a stake in department store chain and mall operator Intime Retail Group, in a move to digitize brick-and-mortar department stores. A year later Alibaba paid $4.6 billion for a 20% stake in Sunning, an electronics retailer with 1,600 outlets. The company then forked over $2.9 billion for a 36% stake in Hong Kong-based Sun Art Retail. It’s the largest operator of supermarkets in China, with about 446 stores in 224 cities.
Part of the overall strategy involves attracting customers online, then directing them to physical stores and service centers. The partnerships also involve companies working together on integrating e-commerce platforms and logistics, in part to provide speedier delivery or in-store pickup. And they often include exclusive partnerships with retailers and brands.
Alibaba is also developing algorithms to analyze customer data. It looks at brand affiliation, purchasing history and even tracks store visit time. The idea is to better understand shopper preferences and predict changes in habits. The results can then be used to adjust product offerings. It can also help design fresh marketing campaigns as well as build faster supply chains.
Yes, in-store retail has been going through major disruption and transformation. Most of this has been due to e-commerce growth and the ubiquity of mobile apps that bring convenience and immediacy to consumers’ daily routine. However, merchants that develop successful omnichannel sales strategies realize that the physical stores can still create unique experiences. These typically attract their best customers. In-store sales continue to comprise the majority of total retail sales, which the leading e-commerce players recognize. So watch for more significant brick-and-mortar retail investments from the online giants, including Alibaba and Amazon.
Overview by Raymond Pucci, Associate Director, Research Services at Mercator Advisory Group