Seamless Shopping Experience

For Hao Xufeng, a 25-year-old woman living in Beijing, shopping for clothes online has become a habit.

“It’s a lot cheaper, but it also creates new problems,” she said, adding that she often has to browse online shops for many hours before finding things that she likes. More often than not, she said, the clothes she fi nds do not fi t her. Hao is not the only one. In the current era of e-commerce, many customers spend a lot of time online selecting commodi- ties that they eventually return to vendors. Moreover, Hao said she never buys fresh food products online. “When it reaches me, it’s already musty. I prefer to see meat and vegetables in front of me in the store when I buy them,” she explained.

It is precisely to solve these consumer headaches that New Retail was born, a concept first proposed in October 2016 by Jack Ma, founder and CEO of Chinese e-commerce giant Alibaba Group. “In 10 or 20 years, e-commerce will have made way for New Retail,” he said.

Role models

According to AliResearch, the research arm of Alibaba Group, New Retail revolves around building a sales ecosystem merging online and offl ine channels by leveraging big data, cloud computing and artificial intelligence, with a focus on consumers. Rather than trying to convert online users into offline customers, or vice versa, Alibaba wants to use data and technology to enhance the re- tail experience, including offl ine.

Alibaba is not alone in wanting to “revo- lutionize” the retail trade industry. Tencent, China’s largest Internet company by revenue, JD.com, the second biggest e-commerce platform in China, and Baidu, the largest Chinese language search engine, have all be- come dynamic players on this new front. In 2017 alone, Alibaba and Tencent invested at least 100 billion yuan ($15.9 billion) in brick- and-mortar businesses.

The big players are shifting to offline businesses because of the bottleneck that is currently building up in the virtual domain, ac- cording to industry observers. “According to available data, the number of online consumers active on a daily basis was around 500 mil- lion in 2017. The market is saturated, and it is no longer easy to maintain growth. We must, therefore, turn our attention to offline,” said Wang Youwei, an associate professor at Fudan University in Shanghai.

Among the new initiatives, Hema, Alibaba’s only offline brand, has been a big success so far. Its fi rst outlet opened in Shanghai in January 2016, and encompasses three functions supermarket, restaurant and vegetable store. According to Hou Yi, Hema’s CEO, all Hema outlets have turned a profi t after six months in business, even though they offer low prices. “Our low prices are due to the fact that we buy directly from the producers, which eliminates intermediaries,” Hou said. This procurement method also guarantees the freshness of the supplies, which benefi ts both consumers and farmers.

Emerging opportunities

New Retail was high on the agenda of lawmak- ers at the 13th National People’s Congress (NPC) and political advisors at the 13th National Committee of the Chinese People’s Political Consultative Conference during their annual sessions in Beijing in March. Li Jun, an NPC deputy from a village in Sichuan Province in southwest China, visited a Hema store in Beijing. He was very interested in how New Retail could grant city dwellers access to better agricultural products at a lower price.

Indeed, New Retail goes hand in hand with agricultural industrialization. With its field-to- shelf direct supply chain, it enables operational standardization, brand building and traceability of commodity origin.

“This innovative mode offers new oppor- tunities to agricultural businesses and villages,” said Li, who hopes that New Retail can engage with more farmers in a new way to vitalize the countryside.

According to a report from the Labor and Human Resources Department of Renmin University of China in Beijing, Alibaba created 36.81 million jobs in 2017, an increase of 6 mil- lion compared to 2015. Such growth is due in large part to New Retail, according to experts. In addition, brick-and-mortar stores opened by Internet companies have also contributed to job creation. For example, to date Hema has opened 40 outlets in 10 cities across China, which has also given rise to a demand for more professionals in training, sales, logistics and data analysis. According to Premier Li Keqiang’s Report on the Work of the Government to this year’s NPC session, China will seek to develop new types of jobs by leveraging Internet Plus. To this end, New Retail has the potential to play a major role.

As early as November 2016, the Chinese Government published a document on offl ine business innovation that mentioned the emer- gence of New Retail. Later, in September 2017, the Ministry of Commerce conducted a survey on New Retail and recommended Hema’s in- novative practices in this area.

“When a new business format emerges, the government can play an important supportive role. As New Retail advances, it must not miss out on the government’s guidance and sup- port,” said Zhang Jian, a researcher at the China Electronic Commerce Association.