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Alibaba Group has announced plans to invest in Huitongda Network Co, an ecommerce retailer that specialises in distribution to rural areas.

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Alibaba Group has spent $9.5bn, acquiring the remaining shares in Ele.me, a food delivery platform in China.

Focusing on last mile delivery

Ele.me, which means ‘hungry yet?’ enables people to order food online and have their orders delivered in around 30 minutes by its delivery service, Fengniao Delivery. The service, which operates across China, has a fleet of 3 million delivery people on motorbikes to deliver medicine, flowers and supermarket groceries, as well takeaway food.

Mutual benefits for New Retail

Daniel Zhang, CEO of Alibaba Group, said, " Under the leadership of its founder and management team, Ele.me has achieved leading market share in China's online food delivery and local services sector. Our shared belief that New Retail will create more value for customers and merchants has brought us together. Looking forward, Ele.me can leverage Alibaba's infrastructure in commerce and find new synergies with Alibaba's diverse businesses to add further momentum to the New Retail initiative."

Investing in logistics for the future

The new acquisition for Alibaba marks another step towards the future of retail – where shoppers visit stores but can place their orders online for home delivery, so they don’t have to carry the products home themselves.

It also follows Alibaba’s increasing investment into its logistics operations: last year, it increased its investment in its logistics affiliate, Cainiao, and stated that it intended to invest $15bn in logistics over the next five years.

Hema Fresh has introduced 24-delivery services in its 25 stores in Beijing and Shanghai.

Available for most products

Users of the Hema app who live within a 3 kilometre radius of a store can now get the same 30 minutes delivery service between 10 p.m. and 7 a.m. as well.

The new offering includes most items in the store, except for some fresh produce. Delivery time for cooked meals, which are a big draw for Hema, will be extended to 1 a.m.

Targeting midnight shoppers

According to Alibaba, over 80m users of its Taobao and Tmall ecommerce sites visit between midnight and 4 a.m., most of whom are women over 30.

We found that New Retail doesn’t only merge online with offline, but also connects day and night. There are definitely consumer demands that are specific to night time.” Hema CEO Hou Yi said.

Alibaba CEO Daniel Zhang says Hema draws on data and smart logistics technology to seamlessly integrate online and offline systems.

“Hema’s goal is to broaden the new retail model by working with retail partners like Sanjiang Shopping Club and Xingli Department Store,” says Hema CEO Hou Yi. “As our model becomes more established, it can be shared with other traditional retailers to help them transform in the digital age.”

The trend for online retailers to establish a “real world” store network continues to gather pace in 2018. Alistair Balderson, IGD's Head of Supply Chain Insight, looks at some recent developments.


Last week the two major Chinese online retailers were in the news. Alibaba announced the expansion of their Hema supermarket chain with 30 new stores to be opened in Beijing during 2018. And JD.com opened their 7Fresh branded store also in Beijing last week, with a range of exciting tech-enabled features.


This follows on from what must have been the biggest global retail story in 2017, Amazon’s acquisition of Whole Foods Market. This was a clear statement that Amazon sees a physical store presence as vital for serious growth in grocery and packaged goods.


Both Alibaba and JD.com are at the forefront of developing new retail features, such as payment by facial recognition, smart shopping carts and personalised services which combine the online and offline offerings. You can find out more in our Retail Analysis service.


What are the supply chain implications of these developments?


Amazon and their Chinese competitors are all creating and rolling out advanced supply chain technology: for example JD.com demonstrated automated warehousing and drone delivery during 2017. So you can guarantee that these store networks are not just about selling.


In my view, a crucial aspect of developing these physical stores is to widen their network of convenient local delivery points. These might be used as customer collection points (one of the first things Amazon did at Whole Foods was to install Amazon Lockers) or as consolidation hubs for home delivery.


This reinforces the idea that for online retail in grocery, the “click and collect” model is likely to become dominant, assuming that it can be made sufficiently convenient for the customer. It avoids some of the negatives of home delivery such as urban congestion, low levels of vehicle fill and failed deliveries.


What about retailers with existing store networks?


Most retailers have a store network already, so their focus is on how to use this space most effectively. It is obviously primarily used for selling, but also to pick and deliver online orders often creating inefficiencies and getting in customers’ way. We have already seen developments such as more shared use of stores (i.e. separating off space as units to let out, or incorporating foodservice offerings), improved click-and-collect facilities, and parcel collection points (eg Asda and Walmart’s recent “parcel vending towers”).


In the future, retailers will need to use their store estate wisely, balancing the selling space with “working” warehouse space. Many stores currently see their warehouse space as low priority: “the back of the shop”, to be minimised. But it could used for a range of different purposes and maybe expanded: a local consolidation centre, partial picking of customer orders, and subletting to third parties as is seen in the main store.


This evolving approach to store space will mean that stores cannot be measured on sales per square metre alone – it will need creative thinking and a different approach to retail metrics.


 


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19/02/2018
Alibaba Group is the world's largest online marketplace. In this two-slide snapshot, we've included an essential summary of supply chain priorities, latest network developments and other key statistics for the retailer.

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