Like many revolutions, the one in retail appears to have come full circle: Alibaba, having spearheaded online shopping in China, is buying physical stores.
Alibaba’s $2.6bn plan to take leading domestic department store Intime private underlines the dilemma being faced by the hoards of disrupters: how to blur the lines between online and offline shopping, and create a model that keeps the fun and feel of shopping, while letting retailers and brands collate the big data that enable them to sell more goods, more quickly and more profitably.
“Today we cannot just separate online and offline,” Daniel Zhang, Alibaba chief executive, told a panel at Davos last week. Even when people are shopping in malls, he pointed out, they are on their phones — literally on and offline simultaneously.
Alibaba, which already boasts investments in offline players such as retailer Suning and white goods manufacturer Haier, is not the only ecommerce name going back to bricks and mortar. Last month, Amazon launched its checkout-free Amazon Go store. Other crossover innovations are springing up. Panasonic is shopping its “intelligent baskets”, which will price items as they are placed inside.
“To say that bricks and mortar is dead is wrong,” says Tom Birtwhistle, senior manager in PwC’s digital strategy division in Hong Kong. “It just needs to evolve, into smaller-format stores, for example, and embrace in-store digital technology.”
It is a lesson start-ups are also learning. Luke Grana, who set up his eponymous Grana clothing company in 2014, was forced into a U-turn on his original ecommerce-only plan — introducing pop-up “fitting rooms”.
“We realised we needed offline presence to increase brand awareness and push people online,” he says. “And lots of people want to try before they buy to get the fit right.”
Customers can try on clothes in-store but still order online via iPads — “there are no cashier tills” — and have their purchases delivered. These partially offline purchases now account for 10 per cent of sales.
It is a sentiment echoed by Alain Bejjani, chief executive of mall, retail and leisure operator Majid Al Futtaim Holding, who talks about stores as showrooms. “It’s not just products and price,” he told the Davos panel. “It’s about the seamlessness of the journey, and total integration between online and offline.”
Alibaba, which represents more than one-tenth of China’s total retail sales and about 75 per cent of those made online, according to HSBC, takes that literally. Its apps enable shoppers to navigate China’s sprawling malls, some of which span more than 1m sq ft, and find where their cars are parked when they emerge hours later.
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