A new breed of retailer, embodied by Amazon and – more recently - Alibaba, could be presenting an existential threat to the existence of traditional retailers.
It seems like every day we hear about another big retailer with financial problems. Toys R Us filed for bankruptcy last year and is selling off its stores. Moody’s said that 26 other US retailers are in danger credit-risk wise. In the UK House of Fraser, Debenhams and New Look are all struggling and considering large-scale closures of stores or space.
For established retailers the bar of customer expectations is continually being lifted by Amazon and other digital-first retailers. If you talk with any retailer about what they consider as a threat to their business it is not long before they mention Amazon.
Retailers benchmark themselves against Amazon and even copy its business model. Gartner’s Bob Hetu said that: “Amazon represents a goldmine of ideas that can be shamelessly emulated.”
Yet, at the same time, he warned: “You will not out-Amazon Amazon.”
While e-commerce might be blamed, it only accounts for 13% of retail sales in the US - there is more to it than that.
The Guardian noted, there has been a seismic shift in the way we spend our time and money: “Social media, leisure, travel, eating out, eating in – using takeaways and delivery services – and technology are all taking time and cash that would once have gone straight to shops.”
Amazon is not the only goliath in the battle for market share; there is another danger lurking. And that is “New Retail” as powered by Alibaba– and in turn data and technology. Jack Ma, the founder of Alibaba, defined new retail back in 2016: “Pure e-commerce will be reduced to a traditional business and replaced by the concept of new retail – the integration of online, offline, logistics and data across a single value-chain.”
Alibaba makes even the likes of Amazon look small in comparison. On Chinese Singles Day holiday last November, Alibaba generated US$25.3 billion of revenue in a single 24-hour period – making total US Black Friday sales of $5Bn look insignificant.
As well as online shopping Alibaba has physical stores under the brand name Hema - a fresh food focused supermarket, experiment with Tao Café – not dissimilar to Amazon Go.
Alibaba, and other new retail players such as JD.com, use data and technology in order to truly understand their customers and respond to their needs in real-time with automated operations.
The key question is, will the Chinese venture into mature retail markets in Europe, North America or Australasia? Could this be a threat over and above the Amazon one? It is something worth considering.