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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.

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Alibaba plans to open 2,000 branches of its Hema Fresh supermarket in China over the next three to five years.

From 22 to 2,000

By the end of 2017, Hema would be operating 22 stores in Beijing, Guiyang, Hangzhou, Shanghai and Shenzhen. In December, it opened its second store in Ningbo and will open another outlet in Suzhou by the end of the year.

The aggressive expansion plan shows Alibaba's commitment to its 'New Retail' concept, which brings online and offline grocery shopping together.

Targeting more retail partners

According to Hema, about half of sales at Hema stores take place online. The company claims that customers within a 3km radius of a store can have their shopping delivered within 30 minutes.

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.”

Chinese online retail giant, Alibaba, is to invest RMB100bn (US$15.2bn) in its logistics network over the next five years.

24-hour order fulfilment

Alibaba intends to use the investment to strengthen its global logistics network, enabling it to fulfil orders in China within 24 hours and globally within 72 hours. The retailer will increase R&D investment in logistics data technology, developing smart warehousing, smart delivery and global logistics infrastructure, all of which are paramount to achieving its fulfilment goals.

Additional $807m investment in Cainiao Smart Logistics

It has also spent RMB5.3bn (US$807m) to increase its stake in its logistics affiliate, Cainiao Smart Logistics, to a majority stake of 51%. Cainiao currently handles over 10bn packages a year for the retailer. Through these investments, Alibaba aims to improve the overall logistics experience for consumers and Alibaba’s merchants, as well as improving efficiencies and lowering logistics costs.

The most efficient logistics network

Daniel Zhang, CEO of Alibaba Group, commented: "Our goal with this investment is to provide comprehensive, first-class experience for consumers globally. Our commitment to Cainiao and additional investment in logistics demonstrate Alibaba's commitment to building the most efficient logistics network in China and around the world.”

Ecommerce giant Alibaba has opened another three Hema Fresh stores, advancing its ‘new retail’ strategy, which aims to reinvent retail.

What’s Hema Fresh?

Hema Fresh was founded by Hou Yi, a former executive at JD Logistics, the logistics arm of Alibaba’s rival JD.com. The first Hema Fresh store was opened in Shanghai in January 2016. Alibaba bought into the company soon afterwards. It currently operates thirteen outlets in Shanghai, Beijing and Ningbo.

The online to offline business model

The Hema stores double as fulfilment centre for its Hema app. When shoppers place their orders online, they can have their purchases delivered within 30 minutes if they live within a 3km radius. Staff run around the stores with mobile devices to pick up products from the shelves and put them into shopping bags with digital tags. They then put them up on the hangers, which lift the bags to the ceiling and onto the overhead conveyor belts. According to Hou Yi, the conversion rate on the app for its first store is around 35%.

All price tags in the stores are digital. Shoppers can scan QR codes on the tags for product information. It also enables the retailer to change prices online and offline simultaneously. Hema Fresh stores are also cashless. All shoppers need to download the Hema Fresh app, and pay through Alibaba’s Alipay. This enables the retailer to gather shoppers’ data both online and offline.

Hema Fresh stores are a hybrid of online, offline retail and food service, and an example of how ecommerce is transforming the grocery shopping experience. We expect to see more Hema stores opening at a faster pace, and other retailers follow suit to exploit the opportunity in the ‘new retail’ space.

Get in-depth online and omnichannel retail insight from the world's leading experts, including executives from Alibaba, at our Online & Digital Summit 2017.

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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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