New Retail Briefings

“New Retail” is a model for integrating online retail, offline retail and logistics across a single value chain powered by data and technology. The term was introduced by the Alibaba Group, although elements of the model are now being implemented by various firms in China and further afield. In this fortnightly series, we’ll review the latest trends in New Retail in China, with a focus on major digital platforms and multichannel retail companies. 

What’s New in New Retail?

JD.com Restructures Its Business to be More Customer-Focused On December 21, 2018, JD.com announced it would restructure its operations with JD Mall, the company's main revenue-generating unit. JD Mall will be divided into three business departments, including serving customers; business support services; and, infrastructure control and risk management.  JD.com said in its announcement that the new structure will enable it to better focus on customers. JD Mall’s restructuring also aims to diversify its management team and assuage investors that Liu Qiangdong, JD’s founder and CEO, is not the only person driving decision-making at the company.  Alibaba Announces a Restructuring Plan Prior to JD.com’s announcement, Alibaba also announced a restructuring, including:

• The cloud business unit will be renamed and upgraded to Alibaba Cloud Intelligent business unit. Alibaba’s CTO Zhang Jianfeng will oversee the new unit, replacing Simon Hu Xiaoming, to drive greater technology developments and smart internet investments for Alibaba.
• Alibaba’s Tmall is to be renamed the “Great Tmall.” There will be three business lines under this new business unit: the core Tmall business, Tmall supermarket business and Tmall’s exports/imports businesses (which aims to fulfill the company’s plan to help import $200 billion worth of goods into China over the next five years).
• The company will establish a New Retail Technology business unit to combine and consolidate technical strengths across Alibaba’s services from B2B, Taobao, Tmall and others. This business unit aims to provide unified technological support for New Retail.

The restructure is the first reorganization initiated by Alibaba’s CEO Daniel Zhang since he was named chairman-designate in September 2018. Daniel said the company will keep innovating to “make it easy to do business in the digital era and empower merchants.”  Alibaba Opens its First Physical Store in Malaysia Working with Alibaba, in December 2018 private Malaysian company Lumahgo and local lifestyle furniture retailer Lorenzo launched a physical store selling select Tmall items in Kuala Lumpur. The store focuses on customers who like to shop online but are not tech savvy, and also aims to provide a technology touch to traditional physical store shopping experiences through Alibaba’s technologies and big data service.  [caption id="attachment_63854" align="aligncenter" width="654"] Source: Company reports[/caption] Lumahgo Chief Executive Officer Fabian Kong said the new retail technology experience would help local furniture crafts gain global attention. Primary Industries Minister of Malaysia, Teresa Kok, said “the partnership between Lumahgo and Tmall will help drive exports.” Tmall Luxury Pavilion Gets “Maison” Upgrade Alibaba’s Tmall Luxury Pavilion recently upgraded its store format with a new maison style on its redesigned app. Maison is a designated tab on the homepage of the Luxury Pavilion distinguishing these brands from other labels. Focused on appealing to luxury shoppers, Tmall’s new invite-only Maison feature enables brands to customize digital editorial content and storefronts all within the Tmall app. [caption id="attachment_63855" align="aligncenter" width="658"] Source: Alizila[/caption] The Maison concept was designed so luxury brands could digitally embody their unique brand stories, heritage and innovations, as well as their in-store atmosphere and energy,” Tmall Luxury Pavilion General Manager Lili Chen said. Italian luxury fashion house Bottega Veneta recently launched its flagship store on the newly-enabled Maison concept, becoming the first to join the upgraded Tmall Luxury Pavilion. Tmall Luxury Pavilionalso hosts other international brands, such as Valentino, Burberry, Tod’s and Ermenegildo Zegna. Cainiao Partners with Russian Air-Freight Carrier Volga-Dnepr Alibaba’s logistics arm Cainiao signed a memorandum of understanding with Russian air-freight carrier Volga-Dnepr to strengthen its cross-border delivery services. Although a memorandum of understanding carries no legal weight, it did outline plans that (if agreed) would allow Cainiao to access Volga-Dnepr's network and fleet of 41 airplanes. Both companies plan to use their logistics assets in Asia, Europe and Russia to build an efficient shipping network. The news came a few months after Alibaba said it would form an e-commerce joint venture in Russia with internet company Mail.ru Group Ltd., mobile operator MegaFon and Russian Direct Investment Fund. [caption id="attachment_63856" align="aligncenter" width="660"] Source: Company reports/Coresight Research[/caption] Investments and Acquisitions in New Retail To expand their New Retail abilities, Alibaba, Tencent and JD.com have invested in logistics firms, online marketplaces, content creation companies and even brick-and-mortar stores. These are some of the highlights: [caption id="attachment_63857" align="aligncenter" width="666"] Source: Company reports/Coresight Research[/caption]   [caption id="attachment_63858" align="aligncenter" width="658"] Source: Company reports/Coresight Research[/caption]   [caption id="attachment_63859" align="aligncenter" width="666"] Source: Company reports/Coresight Research[/caption]