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

JD.com’s 7Fresh launches Seven Fun Lifestyle Store in Beijing JD.com opened a new-format store, Seven Fun, in Beijing in December 2019. The 10,760-square-foot store is located in the business district and is specifically tailored to working professionals aged 26–45 years old. Seven Fun aims to become the “third space” for consumers—after their home and the office—combining dining, drinking and social elements. It offers more than 3,500 products, including fresh food, baked goods and groceries. The store features nine restaurants and three bars, providing mealtime solutions from breakfast to late-night snacks. The alcohol selection includes more than 300 types of sake and 1,000 craft beers. Seven Fun also hosts band performances, themed parties and personal or corporate events. JD.com stated that the concept store is a destination for networking and fun, rather than a place to make purchases. As with 7Fresh, Seven Fun allows consumers to place orders for in-store products through the 7Fresh app for delivery. JD.com has announced that it will open the second Seven Fun store in Beijing in the second quarter of 2020 and plans further expansion in first-tier cities, targeting working professionals with an annual income of over ¥100,000 ($14,000). [caption id="attachment_102527" align="aligncenter" width="700"] Source: JD.com Corporate Blog[/caption]   Coresight Research insight: The New Retail battle is set to intensify as e-commerce giants launch new store formats. Alibaba’s Freshippo supermarket (the pioneer of the concept) opened its seventh format, Freshippo Mall, in Shenzhen in November 2019. Earlier formats include Freshippo F2, Freshippo Mini, Pick’n Go and more. Its rival, JD.com’s 7Fresh, has been expanding at a slower pace. In addition to Seven Fun, the company opened the 7Fresh Life convenience shop in December 2019. Both Freshippo and 7Fresh are extending their offerings beyond grocery to satisfy the changing and fragmented needs of customers in different areas. Alibaba Launches Peer-to-Peer Dropshipping Option in its Taobao App Taoxiaopu is a newly added function that allows Taobao’s 693 million annual active users to sell products held and shipped by third-party brands through social media, under a peer-to-peer dropshipping model. Any Taobao users can register to become dropshippers with no fee. Once set up, sellers can select approximately 10,000 stock-keeping units sourced by Alibaba and share them to their personal contacts on Alipay, WeChat, Weibo and DingTalk (Alibaba’s enterprise communication app). Alibaba sources products directly from brands, including apparel, beauty, fast-moving consumer goods and health supplements. Brands are responsible for shipping and customer service. Sellers are able to earn commission once a transaction has been made through the link they share. Taobao began testing Taoxiaopu in April 2019 to a small group of users. It experienced a 300% increase in GMV month over month during the testing period, according to Head of Taoxiaopu, Yao Wei. Taoxiaopu intends to help sellers become entrepreneurs while lowering front-end operational costs for suppliers. It now has nearly 1 million sellers. Taoxiaopu’s social commerce concept is not new in the market. Beidian and Yunji are both membership-based social commerce platforms that reward members who invite new sign-ups and facilitate purchases. [caption id="attachment_102528" align="aligncenter" width="420"] Source: Taobao app[/caption]   Secondhand Products Marketplace Idle Fish Adds Location-Based Services Idle Fish is Alibaba’s consumer-to-consumer secondhand goods sales platform, which was developed in 2014. Its new location-based service feature allows users to filter product listings by seller location, which enables in-person transactions and thus saves shipping costs. Community engagement is a key component: Idle Fish already had 1.3 million interest-based communities where users can exchange tips. The new updates of the platform integrate more community features for users to engage with others more easily and frequently, as well as emphasis on social features—for example, livestreaming and other content from key opinion leaders are hosted on the home page. Coresight Research insight: China’s secondhand goods market reached ¥694 billion ($99 billion) in 2018 (latest), up 22.4% year over year, according to iiMedia Research. This could be an impact of Chinese consumers, especially the younger generations, embracing a more sustainable lifestyle. Idle Fish is China’s largest used-goods selling platform, with over 200 million registered users. The platform reached ¥100 billion ($14 billion) in GMV in fiscal year 2019. However, it is facing competition from Tencent-backed Zhuanzhuan, JD-based Aihuishou and classifieds platform 58.com. 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=51]

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=52]

Source: Company reports/Coresight Research

Figure 3. Tencent New Retail Investments and Acquisitions: Last 12 Months [wpdatatable id=53]

Source: Company reports/Coresight Research

Figure 4. JD.com New Retail Investments and Acquisitions: Last 12 Months [wpdatatable id=54]

Source: Company reports/Coresight Research