With the recent news that Amazon has bought leading grocery retailer Whole Foods, the competition between Alibaba, the Chinese ecommerce giant and Amazon has started to heat up.
This week has seen Alibaba launch three new Hema supermarket stores in China as it continues with its aim to expand its offline and online retail strategy. From within these new outlets, customers can ship, dine and order groceries for delivery from their mobile phones and use Alipay to make payments. Looking very much like normal neighbourhood supermarkets, Alibaba revealed that every item has barcodes that can be scanned to reveal product and price information.
In a prepared statement, the Chief Executive Officer of the Alibaba Group, Daniel Zhang said: “We believe the future of New Retail will be a harmonious integration of online and offline, and Hema is a prime example of this evolution that’s taking place.”
The focus on a harmonious integration of online and offline seems to be a wise strategy according to many ecommerce experts, including Bruno Lannes, Shanghai-based partner at Bain.
“It’s going to very hard for those pure e-commerce players to grow (margins), and for those offline players, it’s going to be very hard to survive and make money. The answer is to combine in an integrated supply chain.”
Alibaba Vs Amazon
Alibaba seems to be winning the war against Amazon in terms of integrating online and offline. As Amazon have only recently acquired Whole Foods, China’s Alibaba and JD.com have invested heavily in offline retail in recent years to complement and strengthen their online offerings. Along with their social media and payment platforms to help entice shoppers, Alibaba and JD.com have helped China to become the world’s largest online grocery market, far, far ahead of the United States of America. With an early lead, alongside cheap labour and densely populated urban areas, could be key in retaining this position over their American rivals.
“China is already the largest online grocery market in terms of value in the world so it’s really advanced in terms of scale,” said Nick Miles, London-based head of Asia Pacific for food and grocery industry research body IGD.
Amazon has already trialled bricks and mortar stores, selling books however, rather than groceries. But its acquisition of Whole Foods looks set to change that. The $13.7 billion deal is not expected to be completed until later in 2017 could see significant job losses as many people expect that it will use its Amazon Go technology to do away with the need for cashiers and make it a more integrated online and offline retail experience. Whether this will be the springboard that Amazon needs to compete with Alibaba in this sector remains to be seen.