DIpil Das
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 coined by Alibaba Group, although many other companies in China and elsewhere are implementing various elements of the model. In this monthly series, we review the latest trends in New Retail, with a focus on major digital platforms and multichannel retail companies in China.
What’s New in New Retail
Alibaba Upgrades Its Taobao App To Build Proprietary Content Ecosystem
On November 30, Alibaba announced plans to upgrade its Taobao app, reporting that the new version would soon be live—we note that it is currently in its testing phase. The upgrade involves two main changes, the launch of a content community feature named “Guangguang” and the rebranding of its micro-blogging site.
Guangguang, which literally means “shopping around,” will upgrade Alibaba’s existing “Buyer Show” feature—where consumers, influencers and merchants could showcase products sold or bought on Taobao. Now focused specifically on users, buyers and influencers can share their purchases and shopping experiences, while merchant-related content will shift to the rebranded Weitao site, as discussed below. Consumers can access Guangguang via Taobao’s app homepage.
Guangguang will also include features similar to those offered by social commerce platform Little Red Book, enabling consumers to browse pictures and short videos with product reviews published by key opinion leaders. This move shows Alibaba’s ambition to expand its content ecosystem through its upgraded buyer-focused feature.
Alibaba will rebrand its micro-blogging site Weitao, which sits within the Taobao app, as Subscription—with a focus on providing a platform for merchants to showcase their stores and products. Previously, Weitao also focused on content creation, such as inviting buyers to showcase what they bought but after the upgrade Subscription will focus on merchants, including new product launches and merchant-run livestreams.
Coresight Research insight: In recent years, social media platforms such as Douyin, Kuaishou, and Little Red Book have benefited from rich content that draws traffic in their forays into e-commerce business. China’s social commerce market is estimated to grow by 129% from $149.0 billion in 2019 to $341.6 billion in 2022, according to financial firm Tianfeng Securities. This estimate was made before Covid-19. Social commerce will make up an estimated 15.5% of total e-commerce sales in China in 2022.
Alibaba is seeking to leverage the opportunities surrounding content-driven marketing on social media platforms by creating its own content ecosystem within Taobao. The launch of Guangguang creates a space for users to post engaging content, enabling Alibaba to facilitate user growth and retention to its Taobao app. This renewed focus on content creation is also likely to attract brands with successful content management strategies, such as beauty brand Perfect Diary, which has attracted significant traffic on Little Red Book.
Alibaba Invests in Community Group-Buying Platform “Nice Tuan”
On November 30, community group-buying platform Nice Tuan announced the completion of a $196 million series C3 funding round, which was jointly led by Alibaba and Hong Kong-based investment firm Jeneration Capital. This is Nice Tuan’s fourth funding round in 2020 alone, and the fourth time that Alibaba has invested in Nice Tuan since 2018.
Founded in 2018 and headquartered in Beijing, Nice Tuan provides fresh food to community customers through its WeChat mini program. Nice Tuan’s community group-buying model involves recruiting a group leader from a residential community, who then creates a WeChat group and posts product links. Residents receive discounts for placing their orders together.
Nice Tuan’s service now provides next-day delivery across more than 200 cities and 20 provinces, covering approximately 20 million urban families in more than 200,000 residential communities in China. Nice Tuan plans to use the funds raised to continue to help small- and medium-sized fresh produce merchants and brands to expand their sales channels.
This year has marked a spark in community group-buying offerings among many internet giants in China, including ride-hailing platform Didi Chuxing and food delivery platform Meituan. On its 2020 Investor Day, held on September 28–30, Alibaba announced that its grocery chain Freshippo will adopt a community group-buying model.
[caption id="attachment_121006" align="aligncenter" width="700"]
Nice Tuan’s WeChat mini-program pages
Source: Nice Tuan’s WeChat account [/caption] Coresight Research insight: Due to the outbreak of Covid-19, the community group-buying market has developed rapidly in China. The market is expected to reach ¥102 billion ($16 billion) in China in 2022, representing a CAGR of 44% between 2019 and 2022, according to research firm iiMedia. This estimate was made after the pandemic. We expect community group buying to continue to gain traction, as the model offers value incentives to consumers and removes the need for shoppers to visit brick-and-mortar stores as deliveries are made to a designated local collection point. JD.com To Open Three Seven Fresh Life Stores in December JD.com will open three Seven Fresh Life stores in Guangzhou in the period December 18–25. These stores will be open 24 hours a day and provide residents with products including fresh groceries, personal care products, pre-prepared meals, store cupboard items, and wine and beverages. As of December 4, all Seven Fresh Life stores can receive online orders and provide doorstep delivery within time frames as short as 30 minutes. The Seven Fresh Life store comes under the 7Fresh umbrella, which also operates lifestyle space Seven Fun—a combination of dining, drinking and social elements. Launched in January 2018, 7Fresh is JD.com’s key omnichannel retail initiative: The chain aims to provide consumers with seamless experiences by offering a variety of store formats. [caption id="attachment_121007" align="aligncenter" width="700"]
One of the new Seven Fresh Life stores preparing to open in Guangzhou
Source: JD.com [/caption] Coresight Research insight: E-commerce platforms continue to expand their physical footprints, especially in grocery and fresh food categories in China. This is also reflected outside of the region in Amazon’s launch of five grocery stores under the banner “Amazon Fresh” in the US in 2020. We expect to see continued investments from e-commerce platforms in physical stores to supplement their online business in the future. Appendix: New Retail Developments New Retail developments in China are listed in Appendix Figure 1.
Appendix Figure 1. New Retail Developments in China: Last 12 Months [wpdatatable id=648 table_view=regular]
Source: Company reports/Coresight Research Investments and Acquisitions in New Retail To expand New Retail abilities, Alibaba, Tencent and JD.com have invested in logistics firms, online marketplaces, content-creation companies, and even brick-and-mortar stores. See selected transactions in the following tables.
Appendix Figure 2. Alibaba New Retail Investments and Acquisitions: Last 12 Months [wpdatatable id=649 table_view=regular]
Source: Company reports/Coresight Research
Appendix Figure 3. Tencent New Retail Investments and Acquisitions: Last 12 Months [wpdatatable id=650 table_view=regular]
Source: Company reports/Coresight Research
Appendix Figure 4. JD.com New Retail Investments and Acquisitions: Last 12 Months [wpdatatable id=651 table_view=regular]
Source: Company reports/Coresight Research
Nice Tuan’s WeChat mini-program pages Source: Nice Tuan’s WeChat account [/caption] Coresight Research insight: Due to the outbreak of Covid-19, the community group-buying market has developed rapidly in China. The market is expected to reach ¥102 billion ($16 billion) in China in 2022, representing a CAGR of 44% between 2019 and 2022, according to research firm iiMedia. This estimate was made after the pandemic. We expect community group buying to continue to gain traction, as the model offers value incentives to consumers and removes the need for shoppers to visit brick-and-mortar stores as deliveries are made to a designated local collection point. JD.com To Open Three Seven Fresh Life Stores in December JD.com will open three Seven Fresh Life stores in Guangzhou in the period December 18–25. These stores will be open 24 hours a day and provide residents with products including fresh groceries, personal care products, pre-prepared meals, store cupboard items, and wine and beverages. As of December 4, all Seven Fresh Life stores can receive online orders and provide doorstep delivery within time frames as short as 30 minutes. The Seven Fresh Life store comes under the 7Fresh umbrella, which also operates lifestyle space Seven Fun—a combination of dining, drinking and social elements. Launched in January 2018, 7Fresh is JD.com’s key omnichannel retail initiative: The chain aims to provide consumers with seamless experiences by offering a variety of store formats. [caption id="attachment_121007" align="aligncenter" width="700"]
One of the new Seven Fresh Life stores preparing to open in Guangzhou Source: JD.com [/caption] Coresight Research insight: E-commerce platforms continue to expand their physical footprints, especially in grocery and fresh food categories in China. This is also reflected outside of the region in Amazon’s launch of five grocery stores under the banner “Amazon Fresh” in the US in 2020. We expect to see continued investments from e-commerce platforms in physical stores to supplement their online business in the future. Appendix: New Retail Developments New Retail developments in China are listed in Appendix Figure 1.
Appendix Figure 1. New Retail Developments in China: Last 12 Months [wpdatatable id=648 table_view=regular]
Source: Company reports/Coresight Research Investments and Acquisitions in New Retail To expand New Retail abilities, Alibaba, Tencent and JD.com have invested in logistics firms, online marketplaces, content-creation companies, and even brick-and-mortar stores. See selected transactions in the following tables.
Appendix Figure 2. Alibaba New Retail Investments and Acquisitions: Last 12 Months [wpdatatable id=649 table_view=regular]
Source: Company reports/Coresight Research
Appendix Figure 3. Tencent New Retail Investments and Acquisitions: Last 12 Months [wpdatatable id=650 table_view=regular]
Source: Company reports/Coresight Research
Appendix Figure 4. JD.com New Retail Investments and Acquisitions: Last 12 Months [wpdatatable id=651 table_view=regular]
Source: Company reports/Coresight Research