Mr. Wehner, Daniel Zhang announced Alibaba’s “new retail” strategy in October of last year. What are the challenges the company is gearing up to meet?
The new retail strategy is focused on integrating online and offline retail, logistics, and data across a single value chain. In doing so, Alibaba addresses the weak brick-and-mortar retail sector in China. Right now, many shopping centers lose customers and sales due to online retail. Many domestic brands in China only have an online presence. Yet to achieve growth, the brands must expand offline – especially in urban areas.
In this new world, there is no longer a distinction between online and offline retail, and the way consumers think and engage across all channels dictates how retailers run their businesses. Retailers attract customers with personalized contents. Plus they develop skills across marketing, innovation, and logistics to adapt to the ever-changing customer needs – Alibaba calls this strategy “new retail”.
What are the current changes in the Chinese market?
The Chinese consumer market is in the midst of a transformation that offers companies big prospects. This is due to the following changes: the rise of the upper middle class to become the driving force behind consumption, a new generation of consumption-oriented, sophisticated shoppers and the increasing importance of e-commerce.
Research conducted by the Boston Consulting Group and AliResearch
, Alibaba’s research arm, shows that 81 percent of consumption growth by 2020 will stem from households with an annual income of more than 24,000 US dollars. What’s more, consumers under the age of 35 will account for 65 percent of this growth. E-commerce will emerge as one of the most important retail channels that makes up 42 percent of total consumption growth, with up to 90 percent as a result of mobile e-commerce.