"New retail" is Alibaba Group Holding's key buzzword right now. Though probably the least creative business term ever, the company's idea of combining online and physical retail into a seamless, data-driven consumer experience is exciting. It is already starting to give rise to new business models, from transformed supermarkets and cashierless convenience stores to automated package pickup centers and perhaps even delivery by drone.
Internally, Alibaba uses the term "uni-commerce" to describe these initiatives, according to Chief Marketing Officer Chris Tung. The apparent notion is to have consumers interact with brands, merchants and retailers under a single unified consumer identity in both physical and online locations.
New retail, or uni-commerce, is only half the strategy. Alibaba's other big initiative is "uni-marketing." This effort, launched in mid-2017, brings together all of Alibaba's data about a consumer from its e-commerce, social media, entertainment and other services. This data is the intelligence for merchants and brands to shape their presence and services in the new retail world in real time. Uni-marketing, in effect, is the secret engine of new retail.
Alibaba's moves into physical retail have frequently been compared with Amazon.com's recent acquisition of upmarket grocery chain Whole Foods. In November, Alibaba reached a deal to invest $2.9 billion for a 36% stake in hypermarket chain Sun Art Retail Group. Alibaba's own Hema supermarkets have fresh lobsters that you can order on your phone and pick up or have delivered in 30 minutes.
New retail however is more about users and data than supermarkets. Alibaba is ultimately a platform that connects merchants and brands with consumers, using data and various digital tools. It also connects content creators, advertisers and offline merchants using the Alipay payment service.
You can think of new retail as the process of bringing users, data and assets from the physical world into the online one. Suddenly, Alibaba is getting a huge number of new users on its platform along with detailed data on their offline purchases. Alipay has known only the amounts, location and timing of such purchases, not what was bought. The newly expanded data set will immediately be useful for Alibaba's uni-marketing.
But new retail is much more than this. It is also bringing together a lot of mostly intangible assets. When physical stores go digital by adopting Alibaba's tools for sourcing, merchandising, order processing and payment, they will move onto its platform and begin using various services in the Alibaba ecosystem. They will begin connecting and doing transactions with Alibaba's 450 million customers, using Alipay for payments, connecting with affiliated advertising agencies, buying cloud storage and so on.
Once this happens, there will be an explosion of new connectivity between consumers, merchants and brands, both online and offline. This will enable merchants to address a myriad of new demands, such as a consumer wanting to order dinner on her phone and pick it up at the Hema store near her house. Or watching a movie on her phone and ordering some candy with a few taps of the screen, with delivery via a local convenience store in under 30 minutes.
For consumers, new retail is quite simple: it is going to give them whatever they want, whenever they want and however they want it, whether in the physical world or online.
It's like when Apple's Steve Jobs said you no longer had to buy a whole CD to get the song you wanted and no longer had to go to the store to get it; you could buy one song for less than a dollar in two seconds on your computer at any time.
For consumer brands and especially offline merchants, the view is very different. New retail and especially uni-marketing represent a confusing and challenging new world.
On the positive side, uni-marketing will give them a comprehensive view of current and potential customers: what they watch, where they go, what they chat about, what websites they browse and so on. They will be able to personalize and curate product offerings in real time. This wide view will extend increasingly into the physical world as offline sales data is integrated.
On the negative side, everything will be changing for some businesses. The old winning formula of "location, location, location" plus marketing is going away. The consumer journey is no longer about walking down the street or into the closest mall; the path now includes the home, the smartphone and soon, the smart car. This is going to be difficult and confusing.
It also raises the question of who the consumers belong to. If someone walks into a Zara store and makes a purchase, Zara has the data and the customer. But if the shopper started out on Alibaba's Tmall site and ordered from their phone and then picked up the order at their local Zara, who owns the customer and their sales data? What impact will that have on the brands? The answers are unclear but if you are in retail in China, it would be best to turn your paranoia up to 11.
As for Alibaba and rival JD.com, the view is spectacular. Their fantastic existence is about to get even better. They are going to have a quantum increase in the volume of users, data and transactions on their platforms. And they are going to capture some of the most valuable intangible assets of physical retail without fully owning the expensive physical assets that used to go with them. It is looking like a smart strategy.
Jeffrey Towson is a professor of investment at Peking University's Guanghua School of Management, a private equity investor, and the co-author of "The One Hour China Book."