Five ways Alibaba is changing the face of retail

During Singles’ Day 2017, aka 11.11 – the world’s biggest online shopping event – Alibaba posted a running sales counter on its Alizila news website, showing the gross merchandise volume that it was fulfilling orders for. The company breezed past last year’s sales with over $25 billion in merchandise flying out the door. Essential Retail takes a look at what retailers around the world can learn from this global phenomenon

1. Reimagining physical stores

The key to Alibaba’s New Retail concept is leveraging digital technologies to blend the on and offline worlds into a single, immersive shopping experience. An aspiration which in itself is nothing new. But the online marketplace giant is taking the omnichannel dream in various interesting new directions.

“This year’s Single’s Day demonstrated how Alibaba is reimagining the physical retail store,” says Christopher Baird, senior retail consultant at Capgemini Consulting. “The company has invested heavily in back-end infrastructure, including servers for storing vast quantities of data, and robot-managed distribution centres, which has helped it create innovative, data-driven stores.”

“We know that for Chinese consumers, shopping is about much more than passively adding items to your virtual cart. It is a social activity and, ultimately, a form of entertainment. Through New Retail, Alibaba is ideally placed to provide the rich shopping experiences that today’s shoppers have come to expect,” says David Lloyd, UK managing director, Alibaba Group.

“The best example of this is our cutting-edge supermarket chain, Hema. In the stores, everything happens through the customer’s smartphone; ordering for home delivery, finding out more about the products for sale and then paying for your shopping, too.”

It’s omnichannel, but not as we know it. Xiaofeng Wang, senior analyst at Forrester Singapore, explains: “With ‘smart stores’, it is working with big brands and offline retailers, enabling new technologies like AR and AI for Pokémon Go-like coupon hunting and virtual product display.”

Then there’s Tmallised mom-and-pop stores, teaming with these retailers to digitise inventory management, automate ordering, optimise logistics and delivery. “Smarter eCommerce is leveraging big data to deliver personalisation at scale, such as AI technologies for personalised creative design and chatbot customer service,” adds Wang. “The ultimate goal is a better customer shopping experience throughout online and offline.”

2. Going global, beating Amazon at its own game

Singles’ Day is no longer just for domestic companies. “Alibaba recognises the power of western brands and it is the addition of these that have made Singles’ Day such a success as Chinese consumers aspire to western brands,” says Martin Newman, founder and chairman at Practicology.

“Singles’ Day is an extremely well marketed event. Alibaba does significant on and offline advertising to drive awareness. The evening of the event is a gala with a mix of global and local starts and a TV audience in the hundreds of millions. They are leveraging personalisation and AI in a big way to drive segmented and personalised product recommendations to customers.”

He adds: “Alibaba is empowering retailers and brands of all shapes and sizes to drive demand, both in their stores and online. They are the conduit for this. Amazon wants to sell us stuff, Alibaba provides a route to market for others to sell us products.”

3. Mobile records

“Singles’ Day is a phenomenon,” Newman continues. “812 million orders, $25.4 billion of sales, and 90% of orders placed on mobile devices. All in one day. The scale is off the charts.”

This year, Alibaba set a world record for mobile payment transactions on Alipay, processing over 256,000 payment transactions per second.”

The mobile-first strategy is key here, explains Capgemini’s Baird: “The majority of today’s consumers don’t leave home without a mobile device, with which they can compare prices, share their retail experiences with friends and make payments.”

4. The retailer doesn’t own the customer

Sounds like a no brainer, but arguably many have failed to grasp the shift in power from retailers to customers. As highlighted by recent Webloyalty research, there is no longer such a thing as the typical consumer profile, instead there are multiple profiles and their needs are complex. Few, if any, understand this better than Alibaba.

Whilst selling stuff to consumers is obviously important, it is not the only thing that matters. “The brands that took part in Singles’ Day didn’t just do so for increased sales, but because they realised it was ideal for consumer engagement and brand-building,” continues Alibaba’s Lloyd.

“Its success this year was down to the many innovative and immersive ways that brands connected with their customers during the day,” he adds. “This was the first year where we had really been able to put the concept of New Retail into action, creating unique experiences such as virtual reality fitting rooms, augmented reality mobile app games to drive consumers in-store and vending machines for lipsticks which let consumers make a quick purchases without having to queue at the checkout.”

Examples of this include Pizza Hut taking part in a Catch the Cat augmented-reality game, which offered customers discount coupons for items purchased during 11.11. Others, like Nike, participated in an interactive trivia game that Alibaba launched on its Tmall and Taobao apps.

5. That’s retailtainment

Alibaba kicked off the festival with a star-studded variety show, as the likes of Jessie J, Nicole Kidman and Zhang Ziy entertained millions of viewers watching on TV or via livestream. But watching the show remotely didn’t mean missing out, thanks to nifty interactive mobile features designed to engage viewers in real-time via mobile. For example, when the hosts introduced an interactive segment on the show, such as big giveaways of red packets worth up to RMB$4,999 ($755), the TV stations simultaneously sent out signals to consumers via satellite. By shaking their smartphones, viewers could see this interactive content on their phones and take part in the competition.

“Our ‘See Now, Buy Now’ fashion show is another great example of retail as entertainment or ‘retailtainment’,” says Lloyd. “Adidas used 3D mapping to project images onto the models’ clothing as they walked down the runway. Ralph Lauren used virtual reality through a ‘virtual fitting room’, where consumers could upload photos of themselves on the Taobao app and see themselves wearing different clothes and Pandora combined its designs with video and light projections to create a unique brand experience for the show.”

In conclusion

There is much that retailers in the UK and around the world could learn from how Alibaba is transforming Chinese shopping experiences, both online and in physical stores. “For us, it’s all about how we can use our technology and our scale to innovate and bring fun and engaging experiences to our customers while they shop,” Lloyd comments.

A key to success in retail today is utilising data effectively, stresses Baird. “Tmall Smart Selection allows Alibaba to recognise and respond to user demand spikes and is a great example of data-driven decision making. Retailers also need to converge their online and offline operations. Innovation and technology in-store must still be backed up by a robust and seamless supply chain and fulfilment process. The results of this are clear – in the case of Alibaba, delivery can be achieved in 30 minutes,” he comments.

“However, the key learning is that experience is critical to customer engagement. Alibaba managed to convert 100,000 physical stores into ‘smart stores’ by implementing an array of technical features, such as the ability to make purchases on the spot and browse featured merchandise. Driving a frictionless digital experience should be a key priority for any retailer.”