CHINAMacroReporter

'E-commerce' is rapidly evolving into 'New Retail.' Jack Ma, Alibaba

Ed Tse, founder of the Gao Feng consultancy and the leading expert on Chinese innovation, introduced me to New Retail in a recent conversation. You will find his explanation of New Retail below, along with a couple of videos showing New Retail in action - as amazing today as Minority Report seemed years ago. Perhaps even more amazing is the China business strategy, the 'Third Way,' that made things like New Retail possible. Ed explains the Third Way in Part Two of our discussion that I will be posting soon. Chinese do do things their own way, as the Third Way again demonstrates. For now, have a look at the future today. And, stay tuned for Part Two for Ed's explanation of the Third Way that made New Retail possible.
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CHINADebate

March 6, 2018
'E-commerce' is rapidly evolving into 'New Retail.' Jack Ma, Alibaba

I am not a sci-fi fan, but I did see Minority Report in 2002. I don't remember anything about the movie, except the scene where Tom Cruise is walking down a shopping mall hallway and ads pop up, one after another, each tailored to Tom's preferences. Fast forward 15 years (just 15 years) and Alibaba's New Retail is getting us closer to that experience.

1. 'E-commerce' is rapidly evolving into 'New Retail.' Jack Ma, Alibaba

'Ed Tse, founder of the Gao Feng consultancy, says, 'Recently, Alibaba has gotten significantly into New Retail. In his October 2016 letter to Alibaba shareholders, Jack Ma wrote':

  • 'Commerce as we know it is changing in front of our eyes.'
  • 'E-commerce' is rapidly evolving into 'New Retail.'
  • 'The boundary between offline and online commerce disappears as we focus on fulfilling the personalized needs of each customer.'

Ed explains, 'New Retail combines of online retail and offline retail.'

  • 'This is also known in China as "O.M.O." or "Online Merging with Offline" - merging through technology - sensor technology, online payment, artificial intelligence, and so on - to make the customer experience very much hassle-free.'
  • 'This is an entirely new ecosystem for retail.'
  • 'And, besides its own stores, Alibaba is now working with a large number of offline retailers so that they can build their own New Retail ecosystems.'

Amzaon led the way. 'China needs a pioneer. What the Chinese are very good at is picking up a concept and applying it in China in a much more intensive and much faster manner.'

  • 'In this case, the pioneer was Amazon Go, and the outcome is Alibaba's New Retail.'

'With Alibaba, ecommerce is still the core. But, through ecommerce, it also built the basic infrastructure and the basic capabilities relying on big data. On connectivity. On its ability to create an ubiquitous user space.'

  • 'Alibaba's Taobao, the online commerce platform, for example, has something like 500 million daily active users. Ubiquitous database, user space.'
  • 'To do something like New Retail, you have to have that kind of ubiquitous user space. You have to know each of the users, individually.'
  • 'Alibaba will know you, "Malcolm Riddell," individually. Even though it has an ubiquitous database with information about hundreds of millions of users on that database, Alibaba knows you individually.'
  • 'And, using that information Alibaba can personalize your New Retail shopping experience.'

Ed describes how the Alibaba's New Retail might work as an ecosystem.

  • 'You register on the app, or if are a user of Alibaba's Taobao you don't need to register.'
  • 'If you a user of Taobao, Alibaba already knows your preferences, what kind of products that you like.'
  • 'When you go to a store, you are identified right away through facial recognition or body recognition.'
  • 'You go in and robots will automatically take you to where your favorite products are. You go to your aisle, you look at a product. You may make some choices. You scan the QR code.'
  • 'The app will know or automatically what kind of product you want to buy or don't want to buy.'
  • 'Then, you press a button, check out, and just walk out.'
  • 'The merchandise will be delivered by smart logistics to your home within "X" number of hours.'

2. New Retail, a 'third way' ecosystem among ecosytems 

New Retail is one of a multitude of ecosystems that are part of China's 'Third Way' of doing strategy.

  • In Part Two of our conversation, Ed Tse, founder of the Gao Feng consultancy will explain more about the Third Way. 
  • For now, here's a brief explanation. 

Ed notes, 'Lots of people ask me, "It seems that all of a sudden there are so many Chinese companies that have become so big, so valuable, so quickly. How did they do it?" I answer...'

  • 'The very best Chinese companies, or the fastest growing Chinese companies are those who adopt the "third way" of thinking about strategy.'
  • 'Using "third way" strategy, they make multiple jumps from business to another business to another business, and so on - as the chart below shows.'

'In the process, they fill in the gaps in capability through creating ecosystems - a network of collaborators - who can help them.'

  • 'You put all of a company's ecosystems together, and they become one mega-ecosystem.'
  • 'That mega-ecosystem is the major contributor to the high valuation of these kind of companies.'

3. Watch New Retail in action

Alibaba has a website, Alizila: News from Alibaba.

Here are two pretty amazing short videos from the site that show the New Retail experience for customers.

Have a look.

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