Nitheesh NH
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. This month, we have seen post-pandemic recovery initiatives from leading e-commerce platforms and from Chinese governments. One e-commerce platform launched measures to facilitate international trade and support American small and medium-sized businesses (SMEs) operating in China. Urban and rural areas alike will see an upgrade to logistics, last-mile delivery and e-commerce infrastructure.What’s New in New Retail
Alibaba.com Provides Support for US Businesses On June 2, 2020, international B2B marketplace Alibaba.com revealed three new measures to help SMEs in the US. An initiative known as Alibaba.com Payment Terms will enable businesses to pay for products up to 60 days after shipment. This scheme will help merchants to preserve cash and stock up on products for resale, as they will be able to pay for inventory costs over a longer payment window. Alibaba.com also upgraded its infrastructure to incorporate a built-in freight service, Alibaba.com Freight, that will digitalize and simplify cross-border logistics for ocean and air shipments. With the new system, merchants can compare, book, manage and track ocean and air freight in real time online. The company also plans to roll out online trade shows for specific categories, including supplements and nutrition, food and beverages, agriculture, and beauty and personal care. These trade shows will showcase products from US-based manufacturers and wholesalers, helping them to connect with global buyers via livestreaming. Buyers can interact and ask questions to the sellers, schedule one-to-one sessions and place orders through the platform. [caption id="attachment_112181" align="aligncenter" width="700"]
Trade show page on Alibaba.comSource: Alibaba.com[/caption] JD.com Looks To Lower-Tier Cities across China for Further Growth Post Pandemic On June 8, 2020, JD Logistics (JD.com’s logistics arm) announced plans to upgrade its logistics network to offer 24-hour delivery services to customers in Tier 4 to Tier 6 cities—which comprise a rapidly-growing consumer base for Chinese e-commerce. As part of the upgrade, JD Logistics is linking its 12 highly automated logistics parks to its 13 local warehouses to form an integrated network. The company said that these local warehouses are currently seeing up to 90% of orders come from Tier 4 to Tier 6 cities. The logistics parks, known as “Asia No.1,” are located in provincial capitals including Changchun, Shenyang and Taiyuan. They feature automated sorting machines and a smart warehousing software system, which uses algorithms to perform scheduling, coordination and optimization. The integrated network of logistics parks and warehouses will enable a higher number of marketplace merchants to store merchandise, and ensures a high speed of picking, packing and last-mile delivery to the consumer. Furthermore, JD Logistics is well positioned to take advantage of financial incentives from the government when it further develops beyond lower-tier cities and into rural areas. On June 1, China’s Ministry of Finance, Ministry of Commerce and State Council Office of Poverty Alleviation and Development announced that there will be a 2020 financial commitment to advance e-commerce in rural areas, facilitating agricultural products to access urban markets and industrial products to flow to rural consumers. Logistics, training and services that facilitate the flow of agricultural and industrial products will be prioritized for receiving funding. [caption id="attachment_112182" align="aligncenter" width="700"]
Automatic sorting machineSource: JD.com[/caption] Coresight Research insight: New Retail is a key component of China’s post-pandemic economic recovery, and China’s leading New Retail operators are well positioned to turn the economic doldrums into long-term business opportunities. JD.com is looking at ways to better serve lower-tier markets as a major opportunity. Online retail sales of physical goods in lower-tier markets will account for an estimated 45% of total online retail sales in China, worth some ¥8.1 trillion (around $1.25 trillion), in 2025, according to Xingye Research. This would represent a CAGR of 18.3% from 2018 to 2025. These estimates were made before the pandemic, but it could be that, following the crisis, lower-tier markets will act as an even more important engine for an economy that has slowed. Appendix: New Retail Developments New Retail developments in China are listed in Figure 1. Figure 1. New Retail Developments in China: Last 12 Months [wpdatatable id=281]
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. Figure 2. Alibaba New Retail Investments and Acquisitions: Last 12 Months [wpdatatable id=282]Source: Company reports/Coresight Research
Figure 3. Tencent New Retail Investments and Acquisitions: Last 12 Months [wpdatatable id=283]Source: Company reports/Coresight Research
Figure 4. JD.com New Retail Investments and Acquisitions: Last 12 Months [wpdatatable id=284]Source: Company reports/Coresight Research