Thank Alibaba for Revamping Your Omnichannel Strategy
Prepare for a tidal wave of online-to-offline sales thanks to the rapidly growing influence of Alibaba, the China-based internet retailer. Although the online-to-offline shopping segment today accounts for just 1.2 percent of e-commerce transactions in North America, retailers should anticipate this segment to heat up as the Chinese e-commerce giant goes public with a fresh infusion of cash.
For those who haven't heard of the company, Alibaba is the largest web retailer in Asia, accounting for a whopping 80 percent of all e-commerce in China alone. Sometime this summer it will stage an initial public offering in the United States that's rumored to be the largest of its kind in history — even eclipsing Facebook's mega-IPO of 2012. Last year, Alibaba's annual revenues were one-tenth of Amazon.com's, but its net profit was 10 times that of the American web retailer. That makes Alibaba 100 times more profitable than Amazon. The company's ability to figure out how to enter new markets and create new revenue streams — all while maintaining phenomenal profit levels — is unparalleled in the world of e-commerce.
This summer would be a good time for retailers in North America to re-evaluate their upstream and back-end capabilities to support more flexible fulfillment options for their customers. If Alibaba decides to enter the North American market with a splash this summer, here are the top four reasons why retailers should think about revamping their omnichannel strategies:
1. Alibaba will be flush with cash. The company is raising a huge amount of money ($15 billion) through its impending IPO and will be focusing on making its online-to-offline strategy a winning force in the North American market.
2. Online-to-offline is Alibaba's next big thing. It recently acquired a 26 percent stake in Intime Retail, a Chinese department store. The two entities will form a joint venture focused on developing online-to-offline businesses in shopping malls, department stores and supermarkets in China. It's not unreasonable to expect Alibaba to perfect the "reverse showrooming" model in China before introducing it to a North American audience.
3. Amazon will strike back big time. Regardless of the "ifs and whens" of Alibaba's foray into North America, expect Amazon, the 800-pound gorilla of e-commerce, to up its game on flexible delivery and omnichannel retailing. Retailers should be proactive and get ahead by using their brick-and-mortar stores to offer customers better delivery and pick-up options, like the ingenious yet simple grocery pick-up points that Shop & Stop has been deploying in the Northeast.
4. Bicycles might be more effective than drones. While Amazon threatens to crowd our skies with unmanned drones, Chinese retailers like Jingdong and Alibaba's Taobao have been offering same-day and next-day delivery through the efficient use of multiple transportation modes (e.g., public transport and bicycles) for different stages in the same trip. Simplicity is the key. North American retailers will do well to focus on the so-called back of the house — i.e., the basic capabilities of merchandising, single view of inventory and flexible fulfillment.
Get ready for some exciting developments in retailing this summer. Alibaba's IPO is a signal to retailers to get serious about the online-to-offline strategy. Retailers that invest in back-office capabilities and offer simple yet innovative options to customers will be tomorrow's big winners.
Girish Pai is AVP, client services for retail, CPG and logistics at Infosys, a provider of business consulting, IT, software engineering and outsourcing services.
- Companies:
- Amazon.com