BEIJING, CHINA - DECEMBER 10, 2016: Alibaba Group sign
Source: Shutterstock
BEIJING, CHINA - DECEMBER 10, 2016: Alibaba Group sign
In January, Alibaba announced a bid to privatize Intime Retail, a leading Chinese department store and mall operator. The proposed privatization did not come as a surprise, as it is consistent with Alibaba’s strategic goal of enhancing its integration with physical stores and developing its “New Retail” concept.
Alibaba Founder and Chairman Jack Ma coined the term “New Retail” in a letter to Alibaba’s shareholders in October last year. Ma said, “Pure e-commerce will be reduced to a traditional business and replaced by the concept of New Retail―the integration of online, offline, logistics and data across a single value chain.” We believe that this is very much how next-generation commerce will look globally, with large retailers and niche category specialists leveraging technology to provide an integrated service with the consumer at its core.
Alibaba is pioneering the development of this model in China and has made bold and quick steps in expanding its physical retail capabilities. In just over a year, the company went from opening its first physical store to moving to acquire a major department store chain in the country. The speed with which Alibaba took these steps suggests that it is taking a play out of its e-commerce book, focusing on achieving a sizable presence in the market before any of its potential competitors do.
 
Alibaba: Recent Key Events
Alibaba Recent Key Events
Source: Company reports/Fung Global Retail & Technology
Alibaba Recent Key Events
To more accurately gauge what Alibaba’s foray into physical retail will look like, the Fung Global Retail & Technology team attended the first Intime analyst briefing after the proposed privatization was announced. Intime’s management commented at the event that the New Retail strategy aims to establish the business as a consumption solution provider, leveraging big data to enhance consumers’ shopping experiences. The approach focuses on:
 
  • Digitalization: Overhauling Intime’s operating model—with a particular focus on redefining its brand and digitalizing its supply chain to improve efficiency.
  • Omnichannelization: Leveraging Alibaba’s big data capabilities and Internet mindset to enhance the omnichannel experience.
  • Platformization: Further integrating Alibaba’s data platform by unifying online and offline information regarding customers, products and services.
  • Entertainmentization: Integrating leading fashion, art and lifestyle icons into Intime’s malls, in line with consumers’ growing preference for experiential retail.
While these are common themes in retail globally, it will be immensely interesting to see how Intime’s and Alibaba’s teams execute the strategy at scale. Intime’s privatization will allow it more flexibility and margin for error in finding the right New Retail operational model—but based on the speed at which Alibaba operates, we expect to see developments materialize quickly. Alibaba’s leadership believes that New Retail can leapfrog the retail models in developed markets such as the US and Europe and put China at the frontier of global retail innovation. This makes a big case for Western retailers to follow the Chinese market even more closely going forward.