s the Philippines geared up for the hosting of the 2017 ASEAN Summit, the numbers came in for 11/11—Alibaba’s Singles Day sale, its largest one-day sale and the largest sale in the online world. Alibaba reported a record one-day revenue of USD 25.3 B (168.2 B yuan), 40% over last year’s record USD 17.8 billion. Alibaba’s 2016 sales easily dwarfed the US 2016 combined Black Friday through Cyber Monday sales of USD 12.8 billion. In SouthEast Asia, Lazada recorded USD 123 million on Singles day, an increase of 191% over last year.
Online Revolution
Bloomberg reports that about 90% of transactions in the one-day sale were conducted over mobile. In total, Alibaba processed 1.48 billion transactions over the 48-hour period, with company processors handling about 256,000 transactions per second at peak.
This is, of course, a mere drop in the bucket of China’s USD 4 trillion retail sector and creating the online store is a very small part of this ongoing revolution in the retail sector. On the customer-facing side, the increase in individuals with access to the internet and the increased usage of mobile phones with data capability has increased the potential reach of online commerce. In China, especially, where the messaging application Wechat has expanded to payment applications and is so ubiquitous that it is accepted at McDonald’s stores and stores peddling souvenirs and designer product lookalikes, it is unsurprising that online sales are growing at double digits.
The real challenge of electronic commerce, as most of us already know by now, still relies on management of the brick and mortar fulfilment—warehousing, trucking, and delivery—essentially, basic logistics.
It is this harnessing of offline resources including traditional retailers that continues to be essential to the growth of Lazada and its mother company, Alibaba. In China, small retailers, many in prime city locations, function as storage and delivery nodes for Alibaba’s fulfilment network. About a 10th of China’s 6 million convenience stores are connected to the internet using an app Alibaba calls Ling Shou Tong (“connect retail”). The system allows these small stores to receive goods directly from Alibaba warehouses, eliminating middle men and theoretically improving their margins. Additionally, Alibaba provides stores with suggestions on what to purchase and how to display merchandise.
Retail Revolution
In the USA, while over 90% of retail sales continue to be offline, footfall is declining by 15% annually according to an online report by retailtouchpoints.com. The same report explains that 50% of customers visit physical stores (showrooming) before purchasing at online stores while 2/3 of customers visit online stores (webrooming) before purchasing at physical stores. While this sounds like a good thing for physical stores, it is important to note that 77% of customers research purchases before actually going to a physical store and 2/3 check out prices on a mobile phone at some point prior to actually making a physical purchase.
The ecommerce infographic by Whisbi includes a few interesting tidbits on US retail. Digital interactions influence 36 cents of every dollar spent at a physical store. 22% of customers spend more at a physical store if digital channels are involved in the process. The web will account for or influence 59% of all retail sales by 2018. You read that right: 2018!
Here’s the real story: Omnichannel customers shop more often and spend more than other customer types and 84% of customers want better integration of online and offline channels. The new name of the game in retail is not about choosing channels, it is about creating a seamless experience across multiple channels.
Business Revolution
Alibaba’s grand retail experiment extends far beyond e-commerce. Alibaba has invested billions buying into department stores, grocers and shopping malls. While Amazon, the American e-retail behemoth, acquired Whole Foods Market, Alibaba operates its Intime department stores and Hema supermarkets.
The Hema model, which Alibaba is trying to retail, is particularly fascinating, a retail experiment that combines supermarket, restaurant and fulfillment center in a single location. In the location we visited in Shanghai, we watched as Hema staff put together what we assumed were mobile orders into shopping bags which were whisked up through an overhead conveyor system towards what we presumed were pick-up points. All of this activity was happening in an environment where you could sit down to enjoy a snack or lunch, or even shop for fresh produce and turn it over for cooking into a fresh meal.
The retail centers are only one part of the Alibaba offline system. It also owns a delivery business (Cainiao Smart Logistics) and oversees shipping partners across over 600 cities.
Alibaba’s quest to convert retail through technology includes converting 100,000 retail outlets with a system that allows customers to track availability of stocks across multiple locations and providing the option for home delivery. Levi’s and L’Oreal are already participating.
The real revolution, though, is quieter but potentially more important. What these platforms, Amazon, Alibaba, and Lazada have created is a potent tool for anyone who seeks to bring their products to market. These platforms allow anyone to address geographically scattered market niches without having to worry about warehousing or delivery.
As the leaders of the ASEAN look towards a future of engagement and partnership, the business of bringing products to consumers has become more and more about a retail ecosystem that spans multiple channels and creates the potential for seamless platforms for both customers and merchants. The future is seamless.
For more information on AIM’s new programs, please go to www.aim.edu. Readers can email Maya at integrations_manila@yahoo.com. Or visit her site at http://integrations.tumblr.com. For academic publications, Maya uses her full name, Maria Elena Baltazar Herrera.