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 our New Retail in China series (formerly New Retail Briefing), 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
Tencent Invests in Japan’s Rakuten; Seeks E-Commerce Collaboration Chinese Internet technology firm Tencent confirmed its investment in Rakuten on March 12, 2021. Offering e-commerce solutions alongside its e-commerce site, Japan’s tech giant aims to raise $2.2 billion by issuing new shares. Alongside Tencent’s 3.6% stake, Japan Post and US retailer Walmart are set to purchase stakes in Rakuten of 8.3% and 0.9%, respectively—the transaction will complete by April 30. In light of the investment news, by March 15 shares of Rakuten had climbed by 24% on the Tokyo stock market—the highest increase seen by Rakuten for 18 years. As Tencent looks to expand its presence across the international e-commerce market, the company has stated that it seeks strategic cooperation in e-commerce with Rakuten spanning cashless payments to digital entertainment. Founded in 1997, Rakuten owns over 70 businesses, including Japan’s largest e-commerce site Rakuten Ichiba and popular video streaming service Rakuten TV. The company currently has 1.4 billion members worldwide. [caption id="attachment_125240" align="aligncenter" width="725"]
Rakuten Ichiba homepage Source: Rakuten [/caption] JD Property Raises $700 Million in Series A Funding Round On March 10, 2021, JD Property, JD.com’s dedicated subsidiary for infrastructure asset management and integrated property services, raised $700 million in Series A investment from Beijing-based private equity firm Hillhouse Capital and New York-based private equity firm Warburg Pincus. JD.com will remain the controlling shareholder of JD Property following the completion of the deal. Expanding on the company’s logistics and supply chain arm, JD Logistics, JD Property develops and manages industrial properties that are leased to JD Logistics and other third parties. The total real estate area managed by JD Property spans more than 10 million square meters (107.6 million square feet), according to data published by JD.com in June 2020. In its fourth quarter of 2020, JD Property launched its first logistics property development fund with ¥3 billion ($460 million) in assets under its management. Moreover, JD Property has been actively investing in overseas markets including Southeast Asia and Europe through cooperation with local partners. The company aims to build logistics and industrial infrastructure to serve Chinese companies expanding overseas, as well as local clients. [caption id="attachment_125241" align="aligncenter" width="725"]
JD.com’s Logistics Park Source: JD.com [/caption] Coresight Research insight: We expect China’s logistics real estate sector to witness rapid development, largely due to the growth of e-commerce during the Covid-19 pandemic. Investment in logistics real estate in China in 2020 increased by 77% year over year, according to real estate services firm Jones Lang LaSalle, reflecting the development of logistics as a core category in real estate investment. Pinduoduo Reiterates Commitment To Digitalizing Agricultural Products Supply Chain On March 17, 2021, Pinduoduo announced that its Board of Directors has appointed CEO Chen Lei to take up the position of Chairman, following the resignation of Founder Colin Huang. On appointment, the new Chairman reiterated the company’s commitment to digitalizing its agricultural products supply chain. In order to do so, the company will continue to invest in agriculture and food technology, aiming to build an agricultural logistics infrastructure platform to reduce waste and optimize the delivery of perishable food, thereby making groceries more affordable to customers. Pinduoduo is China’s largest agricultural platform, with the GMV of its agricultural orders reaching ¥270 billion ($41.4 billion) in 2020—double the ¥134 billion (US$20.5 billion) reported in 2019. In February 2020, the company was recognized by Chinese authorities for its contributions to alleviating rural poverty. As part of this commitment, Pinduoduo has trained more than 100,000 farmers in operating e-commerce businesses, as of June 2020. [caption id="attachment_125242" align="aligncenter" width="725"]
Some of Pinduoduo’s partner farmers. Source: Pinduoduo [/caption] Coresight Research insight: Compared to categories such as apparel and beauty, the online sales penetration of agricultural products is minimal. Nevertheless, as consumers in China are increasingly purchasing fresh food and groceries online amid the Covid-19 pandemic—as reflected in the spike in popularity of community group buying—retailers should look to leverage opportunities in online grocery. Major Chinese e-commerce companies are already making moves into the sector—for instance, in January JD.com launched community group-buying platform Jingxi Pinpin, which focuses on fresh produce sales. JD.com is also collaborating with agricultural product wholesale operator China Dili to invest in supply chains that cater for perishable food products. 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=844 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=845 table_view=regular]
Source: Company reports/Coresight Research
Appendix Figure 3. Tencent New Retail Investments and Acquisitions: Last 12 Months [wpdatatable id=846 table_view=regular]
Source: Company reports/Coresight Research
Appendix Figure 4. JD.com New Retail Investments and Acquisitions: Last 12 Months [wpdatatable id=847 table_view=regular]
Source: Company reports/Coresight Research