Alibaba is one of e-commerce’s greatest success stories. In the latest Precision Report, retail expert Simon Heath looks at Alibaba and a crucial lesson all retailers can learn from the internet giant.
I was at the Internet Retail Conference last month. This was an excellent event with many retailers talking openly about their challenges of getting the balance right between online e-commerce and bricks-and-mortar stores.
Although “omni-channel” has been the buzzword for a while now, it is not without difficulties. It can be much harder for established high street stores to compete with digital natives whose core business is — and always has been — e-commerce fulfillment. For one thing, high street brands have high overheards and are already heavily invested in stores and property. Furthermore, their customers still expect to be able to still go in and browse before committing to a purchase. Many of us prefer the chance to inspect a product even if we choose to make the actual purchase online.
We are seeing seismic shifts in the retail landscape. Some retailers have responded with store closures, taking more of their business online. At the same time, e-commerce giants like Amazon and Alibaba have been investing in bricks-and-mortar.
Alibaba has achieved behemoth status in a relatively short space of time. What’s more, the online retailer has no plans of slowing down according to its MD for the UK and Nordics, David Lloyd. The company’s sales are staggering — achieving a 40 percent share of the global e-commerce market. To put that in perspective, that’s more than the US and UK combined.
Through its various marketplaces, Alibaba facilitates B2B, B2C and C2C sales. It owns no products or stock itself. Instead it provides access to the Chinese market for brands looking to expand. It also offers Chinese retailers the chance to sell around the world.
Alibaba’s success is partly down to demographics. For one thing, China’s population gives Alibaba access to a huge domestic market. The e-commerce giant has 800 million online users in China alone. However, this has to be weighed against the fact that around 600 million people in China are not connected to the internet.
To service rural customers, Alibaba has set up local service centers to support e-commerce and provide delivery services. Furthermore, Alibaba has opened 65 stores — know as Hema — in the last year.
Hema blurs the line between online and offline shopping. Using the Hema mobile app, customers can scan barcodes for information on products, and even recipes. The app allows Alibaba to track what a customer has purchased. The Hema stores also act as distribution centers. As a result, the company can offer users the option to re-order the same products for home delivery. Anyone living within 3 kilometers of their local Hema store receives their purchases within half an hour.
Alibaba also provides rural stores with an automated ordering service to replenish the store within 24-48 hours for all stock. It also helps them by providing information on trends, best-selling and fastest moving products, seasonal items and what is selling well locally that they might not stock.
Alibaba is, of course, a very different beast to your traditional bricks-and-mortar retailer — or even most online retailers. But there is one key lesson all retailers can take from Alibaba’s success — don’t rest on your laurels.
Alibaba has the reach and the deep pockets to invest in new areas of business and technology. Examples include the online payments service Alipay; Aliwangwang, an instant messaging tool to facilitate communication between buyers and sellers; and the use of big data to help advertisers select the best channels and to reach customers effectively.
Successful online selling depends on an age-old problem — logistics. Because of this, Alibaba is also striving to improve delivery. In 2013, Alibaba, along with eight other companies, launched the Cainiao Smart Logistics Network. This allows the company to use different logistic providers depending on the order. Customers can also choose the service level, and opt for the fastest, cheapest or best service and so forth. The goal is to eventually deliver all domestic purchases in China within 24 hours. Perhaps even more ambitiously, Alibaba plans to reduce global delivery time to just 72 hours.
Whether you are an e-commerce marketplace, a venerable department store, or a popular high street chain, delivery is a critical part of the customer experience. The online retail market is growing by 20 percent every year. At the same time, customer demands for fastest, cheaper and more convenient delivery are becoming louder.
Retailers need to a delivery strategy that will allow them to meet customer demands for quick, convenient and low-cost delivery. At the same time, they must tackle the challenges of cross-border shipping, manage reverse logistics, ensure each and every transaction is compliant — and protect margins.
Some bricks-and-mortar retailers may thrive without offering their products online. Primark certainly bucks the trend. But for most the genie is out of the bottle — and it’s not going back.
Simon Heath, Sales Manager EMEA with Precision Software, is a retail supply chain and logistics specialist. He spent his early career in manufacturing and operations with the global Mars Snacks foods and Petcare Group. More recently, Simon has helped large organisations to improve their performance by adoption of SaaS cloud and ecommerce technology solutions.
Precision Software, a division of QAD Inc., provides industry-leading global trade management, transportation execution and multi carrier shipping software solutions from a single, integrated platform. Preeminent industry leaders in every region of the world rely on Precision’s global support centers to leverage thousands of carriers and manage millions of shipping transactions every day. Our open architecture easily integrates with Enterprise Resource Planning, Warehouse Management Systems and legacy solutions. An ISO-certified company, Precision Software assists companies to minimize shipping costs, optimize first mile and last mile deliveries, automate free trade agreement compliance, avoid customs delays and mitigate the risks associated with dynamic trading environments to maximize their competitive advantage. Precision Software’s customers span multiple industries including banking and finance, life sciences, high technology, retail, industrial, automotive, higher education and public sector as well as logistics providers. For more information about Precision Software, visit www.precisionsoftware.com.