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This in-depth guide to China explores the key trends in grocery retail and the growth strategies of the leading retailers in the country.

We review Alibaba's current performance, its growth forecasts for the next five years, plus progress against key strategic objectives.

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Alibaba Group announced financial results for the quarter ended 31st March 2019.

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Alibaba and Bailian Group are planning to open 500 Ego convenience stores in China this year.

New Retail convenience stores

The first store, which has opened in Shanghai, operates around 500 sq m and has six key areas: coffee, bakery, foodservice, fresh, grocery retail and leisure/dining.

About two-thirds of the store area is dedicated to fresh or foodservice, including coffee, bakery and hot meals. It features three self-checkout machines in addition to Alipay checkout and Bailian wallet.

With the store almost five times larger than a typical Japanese CVS, it is able provide a greater range of products and services and meet different shopper missions. The store will also double up as a ‘fulfilment centre’ for distributing products to even smaller stores that Alibaba and Bailian plans to launch.

Two Ego formats

Media reports suggest that Alibaba and Bailian have leased space between 20 to 30 stores in Shanghai for the Ego banner. They also planning to launch two formats: larger central outlets operating between 300 and 500 s qm, and smaller stores of about 100 sq m.

Alibaba and Bailian’s strategic agreement

Alibaba and Bailian signed a strategic cooperation in February 2017 and committed to working together on using big data and new technologies to develop New Retail concept stores. It also aimed to maximise Alibaba’s deep understanding of customers and Bailian’s bricks-and-mortar experience.

The Japan External Trade Organisation is offering small to medium-sized domestic retailers free access to global ecommerce platforms to help them sell products in 18 markets abroad.

Supporting smaller retailers grow online

The initiative is expected to increase trade for local businesses, maximising the global popularity of Japanese products around the world. Twenty four ecommerce operators, including Rakuten, Alibaba, JD.com, Red (Xiaohongshu), Lazada (in Singapore) and Ocado have signed up to take part in the program starting this summer. Some of these platforms are expected to setup a dedicated section to sell Japanese products under the program later this year.

Driving Japanese exports

For some smaller businesses, the program could offer their first export opportunity. The initiative eliminates the fee that would normally be required for sellers to list their products on third-party marketplaces. Following successful application, sellers will be asked to provide items chosen by the platform operator, who will negotiate and complete purchases.

 

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As an important move to capitalise on China’s massive tourism market and offer Chinese travellers a holistic travel experience, Alibaba is launching a new shopping platform called Fliggy Buy.

An innovative new service

The service allows Chinese travellers to choose from a range of products, including cosmetics, suitcases, bags and alcohol, prior to their international travel. They can then select a pick-up store, input their personal information and make the payment. After arriving at the destination, shoppers can pick up the goods at their leisure.

Information about the products and reviews are in Chinese. Shoppers have the opportunity to understand product features and compare prices across different channels before making the purchase.

In recent years, the focus of Chinese tourists are shifting away from shopping to local experience. The new service allows them more time to explore and experience the destination.

Why it is an important initiative

With US$115bn spent on international trips in 2017, 140mn oversea trips took last year and average spend up by +9% year-on-year in 2018, the new service offers brands and retailers an opportunity to capitalise on this massive market.

At current initial stage, duty-free and tax-free stores are the focus. Alibaba has plans to recruit more overseas merchants to including high-end luxury brands, household electronics retailers, pharmacy and cosmetics stores to enrich product offering.

As shoppers become more selective, targeted marketing becomes more important. Just as Roman Zhu, head of Fliggy Buy, commented:” The launch of Fliggy Buy represents our latest move to work with merchants targeting the vast number of tourists from China to develop innovative solutions and offer them targeted customer traffic. Our aim is also to embrace the potential of digital technology and provide a holistic travel experience encompassing food, accommodation, transportation, sightseeing, shopping and entertainment.”

 

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Alibaba has outlined two initiatives to bring US$200bn worth of international products into China over the next five years.

Offering new opportunities for suppliers from around the world

One of Alibaba's core missions is to make it easy to do business anywhere. In China, it looks to help different businesses enter the market and trade successfully. One route to market for suppliers is Tmall Global, a cross-border online platform. Alibaba has announced two solutions offered by Tmall Global to support international brands maximise opportunities for strong demand for quality products: Centralised Import Procurement (CIP) and Tmall Overseas Fulfilment (TOF).

Access to nearly 700m users on Alibaba platforms

The CIP program uses six centres Alibaba has set up across the world, sourcing imported goods for all the online and offline stores within Alibaba's economy, including Freshippo, Tmall and Intime Department Store. The program provides international brands access to a strong user base.

TOF allows brands to place a small order of products at one of the TOF centres to be sold on Tmall Global. This gives businesses to test, learn and optimise their assortment before investing further in China. TOF centres are currently available in Japan, South Korea and the U.S. Key to supporting fulfilment is Alibaba’s smart logistics network Cainiao, which will continue to expand its warehouses in China. It aims to triple its total size to 3m sq m in three years.

Wrapping customers and brands into the economy

Alibaba has a deep understanding of its shoppers. Its wide economy means that customers can access grocery, lifestyle and other amenities through different subsidiaries. Brands and suppliers working with just one division e.g. Tmall Global, have the option to integrate further by getting involved elsewhere in the economy. Alibaba's economy is also flexible, allowing different parts of the business to bolt onto the retailer's other channels. Tmall Global for example, can help brands drive awareness by tapping into Taobao Livestream.

Want to know more?

Subscribers can read more on Alibaba's Strategic Outlook here.

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