Located along Nanjing Road (West), one of the world’s busiest shopping destinations, the Roastery will be part of the soon to be built HKRI Taikoo Hui Project, Shanghai’s newest premium world-class retail, office, and hotel area.
Scheduled to open in late 2017, the new Starbucks Roastery and Tasting Room in Shanghai will be inspired by the first location that debuted in December 2014 in the company’s hometown of Seattle, Washington. The 2,700 square-meter (30,000 square-foot) Shanghai space will reflect a similar, immersive all sensory experience. This interactive, retail environment will allow customers in China to better understand the craft of roasting and brewing a range of Starbucks coffees including the rare, limited availability of Starbucks Reserve coffees from around the world.
“China represents the most important and exciting opportunity ahead of us. As our first international Roastery, we will take even bolder steps to make this Shanghai location our most stunning store, while making it completely unique and relevant to the Chinese customer,” said Howard Schultz, chairman and chief executive officer of Starbucks. “The Starbucks Roastery environment honors coffee innovation as a modern day Willy Wonka experience, where customers are only feet away from the theatre and artistry of our coffee craft. I am confident this will be one of the most highly-anticipated store openings in our international markets.”
China is, today, Starbucks largest international market with more than 2,100 stores across over 102 cities, including 55 Starbucks Reserve® stores. The new Roastery represents Starbucks 45-year relentless pursuit for coffee excellence and promises to bring to China an unparalleled experience that starts with the passionate Starbucks partners. Exclusively at the Roastery, customers will be able to watch freshly-roasted beans arrive, connect with Starbucks coffee specialists and master roasters, enjoy a unique beverage and food menu, as well as savor some of the most unique, small-lot coffees brewed multiple ways. Starbucks believes this revolutionary retail concept will make the new Roastery one of the city’s latest and most iconic must-visit lifestyle destinations and landmarks, for Shanghainese and visitors from China and around the world.
The Shanghai Jing’an Government has given Starbucks their full support to bring this first-of-its-kind coffee retail experience that combines coffee roasting, manufacturing, education and retail within a single facility in China. Following a meeting with Starbucks global leaders, Shanghai Jing’an Party Secretary, Mr. An Lusheng, and Shanghai Jing’an Mayor Mr. Lu Xiaodong reiterated: “The new Jing’an is focused on developing high-end commercial sectors, establish new developmental goals for a modern cosmopolitan city, and encourage new retail innovations within our district. The government fully supports this pioneering retail experience and initiative from Starbucks.”
The Starbucks Roastery will be part of the HKRI Taikoo Hui complex, developed jointly between HKR International Limited and Swire Properties Limited, who are fully committed to launch this pioneering project with sustainability and quality at its core. The revolutionary retail experience of the new Starbucks Roastery will be located within a standalone semi-circle building of the complex that faces the bustling Nanjing Road (West), known as China’s Number One Commercial Street, due to its deep history and rich cultural heritage, which is set to become the most anticipated business and lifestyle destination in Shanghai.
Apple has filed suit in China challenging Qualcomm’s fees for technology used in smartphones two years after Chinese regulators fined the chipmaker for its licensing practices.
Two lawsuits filed by the iPhone maker accuse Qualcomm of abusing its control over essential technology to charge excessive licensing fees, a Beijing court said on its microblog. It said Apple reports suffering 1 billion yuan ($145 million) in “economic losses” and asks for 2.5 million yuan ($360,000).
Most of Apple’s iPhones and other products are assembled in China by contractors.
Apple filed a similar complaint on Jan. 21 in U.S. federal court in San Diego, California, accusing Qualcomm of demanding royalties for innovations on iPhones that have nothing to do with Qualcomm’s technology. The U.S. lawsuit seeks $1 billion in damages.
The U.S. Federal Trade Commission also has filed a lawsuit accusing Qualcomm of imposing unfair licensing terms on manufacturers.
Qualcomm, headquartered in San Diego, said in a statement it had not seen Apple’s complaint to the Chinese court but defended its fees. The company said Apple rejected terms consistent with those accepted by more than 100 Chinese manufacturers.
Qualcomm agreed to change its licensing after Chinese regulators fined the company 6 billion yuan ($975 million) in 2015 on charges it abused its control over technology to charge excessive fees.
In a separate statement, Apple complained Qualcomm demands royalties for phone features that nothing to do with its technology.
“For many years Qualcomm has unfairly insisted on charging royalties for technologies they have nothing to do with,” said the Apple statement.
It also accused Qualcomm of withholding nearly $1 billion in payments due to Apple, headquartered in Cupertino, California, in retaliation for cooperating with investigations by regulators in the United States, Europe, South Korea and Taiwan.
Qualcomm said its fees were consistent with changes worked out with Chinese regulators.
“These filings by Apple’s Chinese subsidiary are just part of Apple’s efforts to find ways to pay less for Qualcomm’s technology,” said Don Rosenberg, executive vice president and general counsel of Qualcomm, in the statement.
South Korean regulators last month fined Qualcomm $853 million for violating antitrust laws, a decision Qualcomm is fighting.
E-commerce giant, Alibaba, posted a 54 per cent rise in third quarter revenue ending December 31, 2016, raised its outlook and announced it would step up investments to expand its cloud and digital ventures.
Alibaba reported a revenue of RMB53.2 million (US$7.67 million), an increase of 54 per cent year-over-year. Revenue from core commerce increased 45 per cent year-over-year to RMB 46.6 million (US$6.7 million). Revenue from cloud computing increased 115 per cent year-over-year to RMB1.7 million (US$254 million). Revenue from digital media and entertainment increased 273 per cent year-over-year to RMB4.1 million (US$585 million). Revenue from innovation initiatives and others increased 61 per cent year-over-year to RMB845 million (US$122 million).
“Our robust December quarter demonstrates the strength of the Chinese consumer and Alibaba’s ability to create value across our vast ecosystem,” said Daniel Zhang, Alibaba Group CEO.
“The 11.11 Shopping Festival featured Alibaba at its best, integrating commerce, entertainment and social engagement, all happening globally at record scale,” Zhang said. “We are driving the age of ‘New Retail,’ which leverages big data and innovation to provide a seamless online and offline experience for nearly half a billion mobile monthly active users. This retail transformation will make it even easier and more efficient for brands and retailers to engage with these consumers anywhere, anytime.”
Maggie Wu, Alibaba Group CFO, said with the three quarters of the year coming in ahead of their expectations, they have adjusted their 2017 fiscal year revenue growth outlook from 48 per cent to 53 per cent year-over-year.
“This quarter we generated US$4.9 billion in free cash flow on a non-GAAP basis1, enabling us to continue investing in growth areas globally, including cloud computing, digital media and entertainment and innovation initiatives, as well as core commerce,” Wu said.
Håkon Helgesen, retail analyst at Conlumino, said while Alibaba’s revenue numbers are flattered by the integration of the Lazada business, this was, nonetheless, another robust quarter for the online giant, and one that exceeded initial forecasts.
“All parts of the business pulled their weight, although the international division stormed ahead with stellar growth of 288 per cent over the prior year,” Helgesen said.
The 11.11 Global Shopping Festival, which is a giant day-long online sale, made a healthy contribution to growth: this year $17.8 billion of merchandise was sold over 24 hours.
“In our view, the event is a testament not only to Alibaba’s reach within China and, increasingly, the wider world – but also to its ability to create engaging experiences which excite and stimulate consumers,” Helgesen said. “In essence, the day was as much a social event – with online and virtual reality games – as it was an opportunity to sell product.”
Helgesen said part of Alibaba’s efforts to create a more holistic shopping experience involve going beyond one-dimensional e-commerce by tying their platforms to physical retail.
“We welcome this initiative and liken it to Amazon’s push into bricks and mortar,” he said. “However, like Amazon, Alibaba does not just want to play in the physical space – it wants to reinvent the shopping experience by using data and technology. So far, good progress has been made with an equity stake being taken in Sanjiang Shopping Club (a neighborhood grocery chain in China), and an offer to acquire a controlling stake in Intime Retail Group (which runs department stores and owns shopping centers in China).”
Away from the domestic business, Alibaba’s international side continues to do well.
“Here, Alibaba’s role as a facilitator for Western brands wanting to sell into China continues to be a major advantage and a significant source of growth,” he said. “In short, Alibaba provides a shortcut for retailers looking to expand and grow in China. The opportunities for Alibaba to expand its operations and platforms into foreign markets is also sizeable, although we maintain our view that over the next year the company will stick to countries where e-commerce is less developed. This will help it to maximize returns.”
“In summary, we retain our opinion that Alibaba is a solid, and highly disruptive, retailer.”
While Japanese retailer Seven & I, which owns the 7-Eleven brand, has seen sales sliding, it plans to triple its network of supermarkets and department stores in China.
The company aims to capitalise on the high growth in Sichuan province to grow its general merchandise store network there to 20 outlets by 2020.
Its local subsidiary will increase its Ito Yokado-branded stores to 10 in the region, while one Ito Yokado supermarket will open in southern Chengdu next year with plans to launch as many as 10 locations in the city by 2020, says Ito Yokado head of Chinese operations Tomohiro Saegusa.
Ito Yokado will also set up a company to sell Japanese products online, aiming for sales of ¥10 billion (US$85.7 million) by 2020. The company may use the free trade zone planned by Sichuan province.
Meanwhile, group total sales continued to slide for a second consecutive quarter for Seven & I, which owns the 7-Eleven brand. Its third-quarter sales fell by 1.4 per cent to ¥7909 billion. However, its operating profit improved by 5 per cent for the quarter ended November 30.
With more than 19,000 stores, 7-Eleven Japan has achieved continued growth. Total sales grew by 5.5 per cent to ¥3422 billion and operating profit reached ¥187.1 billion for its latest nine months, up 4 per cent year-on-year.
Seven & I says 7-Eleven’s product strategy has largely driven its success. The retailer captured expanding demand for ready-made take-home meals, spurred by a rise in dual-income and elderly households. Private-label products rake in more than ¥10 billion in sales a year, showing the benefits of scale.
The eyes of the travel retail industry are turning eastwards in 2017, with the planned opening of new arrivals duty free shops across many Chinese airports and border stores. m1nd-set has announced the results of recently-conducted research on the shopping behaviour of Chinese travellers. The findings provide a deeper understanding of travelling consumer preferences and behaviour of perhaps the world’s most sought-after shopper.
Peter Mohn, owner & CEO, m1nd-set: “We see that it will be increasingly vital for retailers to provide a different shopping experience to woo the Chinese travellers. This will mean brands and retailers will need to work closer than ever together on providing location-specific travel retail exclusives and an improved, more unique shopping experience in order to retain the Chinese travellers spend in the duty free shops outside China.”
The research was carried out among over 2,000 Chinese travellers in December 2016, and reveals what they say will influence them to purchase at the arrivals shops in China and why they would prefer to shop abroad. Convenience, quality and value for money are among the main reasons for suggesting they would rather shop on arrival back in China; language and ease of communication was another. A number of Chinese travellers still feel the products will be more affordable outside China, which is one of the main reasons for choosing to shop at the departure store on the return leg. Reassurance that the products will be authentic is another key motivator to purchase outside China.
When asking the Chinese travellers where they would prefer to shop when the various arrivals shops have opened later this year, almost half of them said they would still favour purchasing at the departure airport duty free shop on the return journey, while only a third would purchase on arrival in China. One in five travellers indicated they would favour the departure duty free shop on their outbound trip. The findings also show that business travellers express a stronger preference to purchase at departure shops on both their outbound and return trips, as well as on arrival at their destination, than other segments. Their inclination to purchase on arrival back in China, however, is lower than the average.
m1nd-set has announced the results of recently-conducted research on the shopping behaviour of Chinese travellers. The research was carried out among over 2,000 Chinese travellers in December 2016, and reveals what they say will influence them to purchase at the arrivals shops in China and why they would prefer to shop abroad.
“While brands stand to gain from the increased sales outlets and the ease for Chinese travellers to purchase in their home country on arrival, retailers outside China will be showing concern for the potential lost business if Chinese travellers shift their purchasing decisions to the arrivals shops back home,” comments Peter Mohn, owner & CEO, m1nd-set. “We see that it will be increasingly vital for retailers to provide a different shopping experience to woo the Chinese travellers. This will mean brands and retailers will need to work closer than ever together on providing location-specific travel retail exclusives and an improved, more unique shopping experience in order to retain the Chinese travellers spend in the duty free shops outside China.”
Hear more from Peter Mohn, owner & CEO, m1nd-set, at the 26th Airport Commercial & Retail Conference & Exhibition, hosted by Aéroport Nice Côte d’Azur and taking place on 3-5 April 2017 at the Hyatt Regency Nice Palais de la Méditerranée. Mohn is participating in the First Working Session “Is there a big problem in the airport retail space? Are conversion rates and yields performing far below expectations?” His defining presentation will provide a detailed analysis of the real financial performance of airport retail at a representative range of major and regional airports. With the average per passenger spend being €10.38, Mohn will consider the question of what
Chinese sportswear brand 361 Degrees announced its operational overview for the fourth quarter of 2016, and stated that the company’s main brand achieved an individual store sales increase of 7.5%; and its individual store sales of children’s clothing increased by 7.7% during the reporting period.
In the fourth quarter of 2016, 361 Degrees continued to cooperate with 31 exclusive distributors under a franchising business mode. During the reporting quarter, the group opened 184 new stores and closed 464 stores, and the total number of its stores reached 6,357. 361 Degrees said that it is an ideal scale to maintain its store number at about 6,500; meanwhile, they will continue to improve store efficiency.
Based on statistics from 3,543 sample stores, which kept uninterrupted operation for over 24 months, the company’s individual store sales of its main brand saw an increase of 7.5%; its average retail discount was 25%; and its channel inventory turnover ratio was 4.1 times.
In addition, during the fourth quarter of 2016, the company’s independently operated children’s clothing business added 103 new stores and closed 334 stores, reaching total sales sites of 2,000. The individual store sales of children’s clothing saw an increase of 7.7% and the channel inventory turnover ratio was 4.1 times.
On January 13, HEMA Fresh, a start-up O2O fresh produce retailer, launched its seventh store in Shanghai, one week after its sixth store was opened for business in the city. Emerged in early 2016 and quickly captured a lot of attention in China’s retail trade, HEMA is apparently speeding up its expansion.
It has indicated the intention to open another 5-10 new stores in Shanghai in 2017 and to penetrate all first-tier cities such as Beijing, Guangzhou, and Shenzhen etc. It would then gradually roll out to second- and third-tier cities. HEMA’s innovative business model is being closely watched by people in the industry.
HEMA’s newest store occupies a total floor space of 4,500 square meters. Besides reflecting HEMA’s special character and visual identity, the whole store’s layout was designed for the purpose of delivering unique shopping experience to patrons who would be ordering their goods online.
On the weekends, shoppers can bring their families to browse around the spacious isles and check out the wide varieties of high quality fresh fruits, vegetables, meat, and seafood.
At designated sections, they can also enjoy cooked food prepared with the fresh produce sold in the store. During the week, however, shoppers can purchase HEMA’s fresh produce via their mobile APP whenever they have 10 minutes to spare.
The purchased items would be picked from the store front and consolidated and packed at the depot at the back. Deliveries to homes within a 5-kilometer circumference would be completed within 29 minutes.
Online purchase has now accounted for 50% of HEMA’s total sales.
Another key feature of HEMA Fresh is that its shoppers are all subscribers of Alipay which is the only mode of payment accepted for any purchase at HEMA’s stores or via mobile APP. It is the first O2O retailer of its kind.
It is said that 80-90% of all HEMA’s patrons are among those aged between 25-40, with higher education levels, higher income, and who enjoy high quality of life. Repeat purchase rate among this group of upmarket shoppers is around 50%, indicating that HEMA enjoys good customer loyalty.
HEMA’s innovation is not confined to its sales approach. Most of the 3,000 types of products it carries are food products. According to HEMA’s management, sales of imported fruits account for more than 60% of HEMA’s total fresh fruit sales. Many of the fresh fruits are shipped to China directly from the growing regions in consumer packing, significantly enhancing the protection of product quality.
As for vegetables, HEMA offers different choices including organic vegetables, vegetables that are also supplied fo Hong Kong (generally with higher quality), and those produced in Shanghai’s rural areas. HEMA is planning to introduce imported vegetables in future, to give its patrons even wider varieties to choose from.
Alibaba has reported that its third quarter revenue increased 54% to $7.76bn, compared to $5.3bn for the same period last year.
The Chinese e-commerce giant credited the revenue growth to its commerce retail business in China followed up by Alibaba Cloud and also the integration of its newly acquired businesses, especially Youku Tudou and Lazada.
Alibaba stated that the robust revenue growth in its Chinese commerce retail business was due to its persisting efforts to improve the social commerce platform by delivering better user experience driven by data technology.
Alibaba Group CEO Daniel Zhang said: “Our robust December quarter demonstrates the strength of the Chinese consumer and Alibaba’s ability to create value across our vast ecosystem.
“The 11.11 Shopping Festival featured Alibaba at its best, integrating commerce, entertainment and social engagement, all happening globally at record scale. We are driving the age of ‘New Retail,’ which leverages big data and innovation to provide a seamless online and offline experience for nearly half a billion mobile monthly active users.
“This retail transformation will make it even easier and more efficient for brands and retailers to engage with these consumers anywhere, anytime.”
The commerce retail business contributed revenue of RMB40.8bn ($5.9bn), an increase of 77% in comparison to what it earned in the same quarter in 2015.
From outside China, the retail business for Alibaba brought the group revenue of RMB2.4bn ($353m), surging at 288% in comparison to what was registered in Q4 2015.
The group’s cloud computing business brought revenue of RMB1.8bn ($254m), an increase by 115% compared to Q4 2015.
On the digital media and entertainment front, Alibaba made revenue of RMB4bn ($585m), surging by 273% to its corresponding revenue in the same quarter of 2015.
Following the results it has delivered for Q4 2016, Alibaba is expecting its revenue for fiscal year 2017 to increase 53% year-over-year.
The total FMCG spending sees a slowdown in nearly everywhere across the globe in 2016 and significantly reached a 5-year low in China. However, China’s beauty market is booming and has been growing strongly and consistently on a double-digit rate for years, according to “Decoding beauty market for China” report released by Kantar Worldpanel.
Premiumization, regime sophistication, omni-channels, mobile interaction and young consumers are the key growth drivers of Beauty market. Consumers are also buying across all price tiers, with premium items increasing the share of basket and contributing to 82% of total market growth.
In the same way, in terms of regimen sophistication, the average number of cosmetic items purchased per buyer have increased continuously from 2012 to 2016. In that sense, facial masks have advanced from the 6th most important skin-caring regimen to the 4th in 4 years.
Consumers are leading the changes in cosmetics channels in China. On average, Chinese consumers shop at 2.5 channels with 6.4 trips a year for cosmetics purchases, 23% of them are omni-channel users buying from at least 3 types of trade. Their average spending, RMB 1,314 a year and 15-29 year-old age group is key contributor, accounting for 58% of these omni shoppers.
“These Omni shoppers are young and category heavy buyers. They choose different products in different channels as each channel has different expertise that meets different needs and purposes”, said Marcy Kou, CEO of Kantar Worldpanel Asia. ”For example, they shop online to try something new while going to cosmetics stores to try on makeups”.
Girls in their 20s play an important role for personal care sales, because in a 14.3% of total population, they contribute 38% of makeup sales value. They also have a clear profile showing that they use a variety of niche categories, like to try new products, are good at mix-and-match brands, purchase premium sectors, use omni-channel users and embrace e-commerce.
Finally, in spite of China’s beauty market experiencing a strong growth, it’s still far to reach Korea, an advanced market that serves as a good reference fort the beauty industry in the region. Now some of the trends in Korea are the situational care for micro moments, multi-function products are growing from 8% to 17% from 2011 to 2015, and formats and benefits keep diversifying. It is expected that the China beauty market picks up those trends as well.
“Considering what is happening in China and in Korea, we believe that situational care leads the way to the future of beauty market, meaning that consumers will change their beauty routine according to the needs, events, mood and emotions at the moment”, said Marcy Kou, CEO of Kantar Worldpanel Asia. “Today, brands may still be able to get ahead by winning consumer’s loyalty, but in the future, only those who are able to breathe with consumers through highs and lows in life will win”.
The total value of mobile payment transactions in China is expected to grow at an average annual growth rate of 142% over the next three years to reach 13,776.5 trillion yuan ($2,011.17 trillion) by 2020, according to Research and Markets.
According to a new report by the research firm, mobile banking accounted for 83.1% of the value of mobile payment transactions in 2015, but this is expected to decline slightly to 80.4% in 2020.
Among the banks, China Construction Bank had a 23.1% market share, followed by Industrial and Commercial Bank of China (20.0%) and Agricultural Bank of China (13.9%).
Faced with fresh challenges from payment service providers, the banks are expected to strengthen competitiveness by introducing differentiated services and products, such as jointly-issued cards or support for large payments.
Third-party mobile payment transaction values have been estimated at 21.96 trillion in 2015, with the market rapidly growing. Alibaba’s Alipay and Tencent’s Tenpay have captured 90% of the market.
Market competition further intensified in 2016 as handset vendors and traditional enterprises stepped up their presence in the payment market.
Research and Markets expects 2D QR code payment technology to continue to lead the market. More secure and advanced technologies such as near field communication (NFC), hosted card emulation (HCE), token authorization and biometric authentication will meanwhile mature more gradually.
Never mind smartphones – Chinese tech giant Xiaomi is now eyeing anything and everything as it broadens its investment portfolio.
With the mobile handset market increasingly crowded globally, and offering diminishing returns, a new Xiaomi expansion strategy has been created: moving into new markets which offer growth potential.
Co-founder Liu De has told Wired magazine he plans to extend the company’s business model of investing in companies and giving them access to its designers, marketing might and supply chain, to branch into other industries and different products. Xiaomi usually buys a 10 to 20 per cent stake in such companies, insisting on the rights to brand and market products made by these businesses.
“We’re using our entire platform to lift these companies to the next level,” De told Wired.
Four of the companies Xiaomi has invested in have already achieved market capitalisation greater than US$1 billion and the portfolio of companies have now collectively sold more than 50 million connected devices.
The star product is the Mi Air Purifier, one of the most popular models in China.
Xiaomi believes its investment approach will turn it into a so-called “Everything Company.”
“It’s a unique model that I haven’t seen before and that I think is only viable for a company that comes from China,” Hugo Barra, the company’s outgoing global VP, said.
Jordan Brand and Nike came together to open up a humongous store dedicated to basketball. China will now hold a 6,550-square-foot store located in Beijing’s EC Mall. The store will feature some of Nike basketball and Jordan brand’s latest basketball products with opportunities for personalized store experiences with NIKEiD. The space will also feature trailing zones for custom products which is called Nike+Basketball trial zone.
“Our new Nike and Jordan Basketball Experience Store demonstrates Nike’s commitment to the sport and culture of basketball in China, and how we’re continuing to lead the future of sport retail,” said Dennis van Oossanen, Nike’s VP of direct to consumer efforts in Greater China.
The store will also include huge appearances from athletes, in-store events and much more. Check out the gallery below of the 6,550-square-foot store.
US burger restaurant brand Wahlburgers is set to expand to Asia in 2017 through a joint venture with Cachet Hospitality Group (CHG), a Hong Kong-based international hospitality branding and management company.
The first three restaurants are slated to open in Hangzhou, Wuhan, and Shanghai in China.
Founded by chef Paul Wahlberg and celebrity brothers Mark and Donnie in Hingham, Massachusetts, Wahlburgers offers fresh burgers, housemade condiments, crispy haddock, seared chicken and vegetarian options. Other signature items include Mom’s Sloppy Joe, thin crispy onion rings, tater tots and thick creamy frappes and floats.
Under the joint venture agreement with CHG, the restaurant will open 100 restaurants in China and the surrounding region over the next five years.
CHG has signed major agreements with developers who have committed to including Wahlburgers restaurants in their projects. World Packaging Center, an existing CHG developer, agreed to sign the first restaurant in Hangzhou while Shanghai-based naked Hub has agreed to open 20 Wahlburgers in their office building complexes throughout Shanghai and Hong Kong.
Thailand’s Big Ho Corporation will also open 20 Wahlburgers in its franchise location of Big C Supercenter stores throughout northern Thailand.
“This is an excellent time to enter the Asia market, especially China, where dramatic growth in US-style destination malls with increasing space committed to restaurants as mall owners see both traffic and income rise dramatically,” said CHG CEO Alexander Mirza in a media statement.
A third partner, the Arjomand Group, a holding company with businesses based in the Middle East and Africa regions, includes diverse industries such as real estate and manufacturing, is an investor in CHG and will add financial expertise and strength to the expansion plans.
“We’re excited about this wonderful opportunity to grow in Asia,” said Wahlburgers CEO Rick Vanzura. “Having a savvy, financially strong partner is essential and we have a great partner in the Cachet Hospitality Group, which will bring an unprecedented level of service and strength to the Wahlburgers brand.
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.
Amazon unveiled its checkout-free grocery store last month
But it is also rewriting the rules on the well-rehearsed “click and collect” model and corralling big data to loop back to retailers, allowing them to manage their inventory more efficiently.
“Alibaba and Amazon have the same two goals. Two billion customers and a reinvention of the retail model and experience,” says Michael Zakkour of Tompkins International.
“Much in the same way department stores, chain stores, malls, Big Boxes and ecommerce have reinvented retail in the past, Alibaba is using technology, big data and imagination to connect offline and online so that there is only a unichannel retail experience.”
Mr Zhang talks about collapsing the traditional vertical system that sees manufacturers pass goods to a handful of large distributors, who in turn pass them on to smaller ones, who sell to retailers before the goods finally reach the consumer.
Before, he says, a consumer could order a drink and have it delivered to their home. “Now you can order it and it’s delivered to your next stop.” That means inventory can no longer be managed by distributors, who lack the full picture, but requires the whole chain to be digitised and shops to become mini fulfilment centres.
This is where Alibaba takes integration a step further — or rather, a step back, into what founder Jack Ma has called “new manufacturing”, where data can be used to tell the makers in advance what consumers want to buy.
Manufacturers are also waking up to a flatter system and seeking ways to move closer to shoppers. Unilever, the Anglo-Dutch consumer goods manufacturer, last July paid $1bn for Dollar Shave, which sells razors and grooming products direct to consumers using home delivery.
This month Coty, maker of perfumes and lipsticks, bought a majority stake in Younique, an online cosmetics retailer. And the crossover between internet and manufacturers can also be spotted in personnel shifts: US toymaker Mattel tapped Google executive Margaret Georgiadis as its next chief executive.
Some question whether predictive data are enough to dictate fashion trends. “They’re not going to be on the back streets of South Korea looking at styles or pieces of fabric,” says one player.
Others point to conflicts. Alibaba prides itself on being a platform rather than an asset-heavy ecommerce player such as Amazon, yet the Intime acquisition will see it integrate a bricks-and-mortar business into its asset-light ecosystem.
Alicia Yap, analyst at Citigroup, is “cautious” about the future integration and about how Alibaba “would manage the potential conflicts between Intime vs other merchants and brands on its platform”, she writes in a research note.
Others note that China’s online/offline models differ from the west, where platforms are mainly owned by the retailer or brand. Instead, China ecommerce is dominated by third party platforms, be it Alibaba’s Tmall or JD.com.
“If customers are buying through a third party you are never going to get the same level of data granularity on the customer as if it was yours. That’s what all the big [multinational corporations] are beginning to grapple with,” says Mr Birtwhistle.
“So linking data between on and offline is difficult. Solving that problem is the multi-billion-dollar question. No one has really got an answer to that yet.”
Chinese fashion brand Urban Revivo has opened its first international store, at Singapore’s Raffles City Shopping Centre.
Launched in 2006, Urban Revivo specialises in contemporary clothing and accessories for both men and women. It has 150 stores across about 60 cities in China, including Beijing, Chengdu, Guangzhou and Shanghai.
While the brand refreshes its stores with up to 12,000 new styles every year, all its designs are available in only 12 pieces per store, reports Her World Plus, which features this video tour of the new store:
