podcastnewsletterAbout

'E-commerce' is rapidly evolving into 'New Retail.' Jack Ma, Alibaba

March 6, 2018
Edward Tse
Gao Feng

Ed Tse, founder of the Gao Feng consultancy and the leading expert on Chinese innovation, introduced me to New Retail in a recent conversation. You will find his explanation of New Retail below, along with a couple of videos showing New Retail in action - as amazing today as Minority Report seemed years ago. Perhaps even more amazing is the China business strategy, the 'Third Way,' that made things like New Retail possible. Ed explains the Third Way in Part Two of our discussion that I will be posting soon. Chinese do do things their own way, as the Third Way again demonstrates. For now, have a look at the future today. And, stay tuned for Part Two for Ed's explanation of the Third Way that made New Retail possible.

I am not a sci-fi fan, but I did see Minority Report in 2002. I don't remember anything about the movie, except the scene where Tom Cruise is walking down a shopping mall hallway and ads pop up, one after another, each tailored to Tom's preferences. Fast forward 15 years (just 15 years) and Alibaba's New Retail is getting us closer to that experience.

1. 'E-commerce' is rapidly evolving into 'New Retail.' Jack Ma, Alibaba

‍ 'Minority Report' - 2002 sci-fi...

'Ed Tse, founder of the Gao Feng consultancy, says, 'Recently, Alibaba has gotten significantly into New Retail. In his October 2016 letter to Alibaba shareholders, Jack Ma wrote':

  • 'Commerce as we know it is changing in front of our eyes.'
  • 'E-commerce' is rapidly evolving into 'New Retail.'
  • 'The boundary between offline and online commerce disappears as we focus on fulfilling the personalized needs of each customer.'

Ed explains, 'New Retail combines of online retail and offline retail.'

  • 'This is also known in China as "O.M.O." or "Online Merging with Offline" - merging through technology - sensor technology, online payment, artificial intelligence, and so on - to make the customer experience very much hassle-free.'
  • 'This is an entirely new ecosystem for retail.'
  • 'And, besides its own stores, Alibaba is now working with a large number of offline retailers so that they can build their own New Retail ecosystems.'

Amzaon led the way. 'China needs a pioneer. What the Chinese are very good at is picking up a concept and applying it in China in a much more intensive and much faster manner.'

  • 'In this case, the pioneer was Amazon Go, and the outcome is Alibaba's New Retail.'

'With Alibaba, ecommerce is still the core. But, through ecommerce, it also built the basic infrastructure and the basic capabilities relying on big data. On connectivity. On its ability to create an ubiquitous user space.'

  • 'Alibaba's Taobao, the online commerce platform, for example, has something like 500 million daily active users. Ubiquitous database, user space.'
  • 'To do something like New Retail, you have to have that kind of ubiquitous user space. You have to know each of the users, individually.'
  • 'Alibaba will know you, "Malcolm Riddell," individually. Even though it has an ubiquitous database with information about hundreds of millions of users on that database, Alibaba knows you individually.'
  • 'And, using that information Alibaba can personalize your New Retail shopping experience.'

Ed describes how the Alibaba's New Retail might work as an ecosystem.

  • 'You register on the app, or if are a user of Alibaba's Taobao you don't need to register.'
  • 'If you a user of Taobao, Alibaba already knows your preferences, what kind of products that you like.'
  • 'When you go to a store, you are identified right away through facial recognition or body recognition.'
  • 'You go in and robots will automatically take you to where your favorite products are. You go to your aisle, you look at a product. You may make some choices. You scan the QR code.'
  • 'The app will know or automatically what kind of product you want to buy or don't want to buy.'
  • 'Then, you press a button, check out, and just walk out.'
  • 'The merchandise will be delivered by smart logistics to your home within "X" number of hours.'

2. New Retail, a 'third way' ecosystem among ecosytems 

New Retail is one of a multitude of ecosystems that are part of China's 'Third Way' of doing strategy.

  • In Part Two of our conversation, Ed Tse, founder of the Gao Feng consultancy will explain more about the Third Way. 
  • For now, here's a brief explanation. 

Ed notes, 'Lots of people ask me, "It seems that all of a sudden there are so many Chinese companies that have become so big, so valuable, so quickly. How did they do it?" I answer...'

  • 'The very best Chinese companies, or the fastest growing Chinese companies are those who adopt the "third way" of thinking about strategy.'
  • 'Using "third way" strategy, they make multiple jumps from business to another business to another business, and so on - as the chart below shows.'

'In the process, they fill in the gaps in capability through creating ecosystems - a network of collaborators - who can help them.'

  • 'You put all of a company's ecosystems together, and they become one mega-ecosystem.'
  • 'That mega-ecosystem is the major contributor to the high valuation of these kind of companies.'

3. Watch New Retail in action

Alibaba has a website, Alizila: News from Alibaba.

Here are two pretty amazing short videos from the site that show the New Retail experience for customers.

Have a look.

'Take a Tour of a Hema Supermarket and Experience "New Retail"'(3:03 mins)
'The "New Retail" Inside Alibaba: How New Retail Is Changing Everything' (5:28)
Edward Tse

Edward Tse

Chairman & CEO
Gao Feng
Gao Feng

Gao Feng

We commit to putting our clients’ interests first and foremost. We are objective and view our client engagements as long-term relationships rather than one-off projects. We not only help our clients “formulate” the solutions but also assist in implementation, often hand-in-hand. We believe in teaming and working together to add value and contribute to problem solving for our clients, from the most junior to the most senior.

Our senior team is made up of seasoned consultants previously at leading management consulting firms and/or ex-top essays-buy.com executives at large corporations. We believe this combination of management theory and operational experience would deliver the most benefit to our clients.

Channels

AsiaStrat
Granite Peak Advisory
Track Research
Trivium China
Gao Feng
Real Estate Foresight
China Beige Book

All Analyses by

Gao Feng

Behind the U.S.-China trade dispute: 'The West's China gamble has failed.'

Behind the U.S.-China trade dispute:  'The West's China gamble has failed.'

What's the root cause of the current friction between the U.S. and China? The West's disappointment that China did follow the western model but its own, argues Ed Tse, CEO of Gao Feng Advisory Company (a member of the China Analyst Network).

Ed's solution: look to the similarities between China and the West, especially in the tech sector, and be alert to China's evolution toward better IPR,  market access, and other contentious issues, not just the remaining shortcomings. 

Below is a video of my discussion with Ed and excerpts from both the interview and his South China Morning Post op-ed, 'Chinese innovation with US characteristics? Maybe China and the West aren’t that far apart, in business at least.'

Ed presents insights that differ greatly from the China Echo Chamber in the U.S. Let me know what you think.

'E-commerce' is rapidly evolving into 'New Retail.' Jack Ma, Alibaba

'E-commerce' is rapidly  evolving into 'New Retail.'  Jack Ma, Alibaba

Ed Tse, founder of the Gao Feng consultancy and the leading expert on Chinese innovation, introduced me to New Retail in a recent conversation. You will find his explanation of New Retail below, along with a couple of videos showing New Retail in action - as amazing today as Minority Report seemed years ago. Perhaps even more amazing is the China business strategy, the 'Third Way,' that made things like New Retail possible. Ed explains the Third Way in Part Two of our discussion that I will be posting soon. Chinese do do things their own way, as the Third Way again demonstrates. For now, have a look at the future today. And, stay tuned for Part Two for Ed's explanation of the Third Way that made New Retail possible.

C-to-C Internet Commerce- From Taobao Shops to Taobao Villages

Edward Tse
Edward Tse
2/15/17
C-to-C Internet Commerce- From Taobao Shops to Taobao Villages

One is some of the local government-owned SOEs are the sources for overcapacity. The reason is because the local government also wants to ensure there's some degree of employment locally, and perhaps some source of taxation. The Chinese government is now going to need to start the so-called supply-side economics to try to consolidate overcapacity in a number of sectors. It's going to impinge on the interests of many of these local SOEs as well as the local governments who own them.

How SOEs & Local Governments Create Overcapacity

Edward Tse
Edward Tse
2/15/17
How SOEs & Local Governments Create Overcapacity

One is some of the local government-owned SOEs are the sources for overcapacity. The reason is because the local government also wants to ensure there's some degree of employment locally, and perhaps some source of taxation. The Chinese government is now going to need to start the so-called supply-side economics to try to consolidate overcapacity in a number of sectors. It's going to impinge on the interests of many of these local SOEs as well as the local governments who own them.

Why SOE Reform is So Tough

Edward Tse
Edward Tse
2/15/17
Why SOE Reform is So Tough

'...SOEs need to reform, because on one hand, many of them have achieved a lot for China. On the other hand, they've actually created quite a lot of harm, in particular in the areas of overcapacity but also in the areas of corruption we've talked about.'

How Alibaba, Xiaomi, & Tencent are Changing the Rules of Business

Edward Tse
Edward Tse
10/18/16
How Alibaba, Xiaomi, & Tencent are Changing the Rules of Business

The real force in Chinese economy is increasingly private companies, not SOEs. / Leading private Chinese companies are innovative and ambitious

The extraordinary power of China's corporate 'mega ecosystems'

The extraordinary power of China's corporate 'mega ecosystems'

Besides Alibaba and Tencent, companies like Ping An Insurance Group, Baidu and JD.com are building out mega ecosystems with incredible speed and intensity. Even some traditional manufacturers are moving in this direction. Zhejiang Geely Holding Group has gone from producing entry-level cars to selling premium models with the help of foreign acquisitions and has been the first Chinese carmaker to move into on-demand mobility services. It has also been experimenting with connected intelligent vehicles, shared ownership programs and flying cars, together assembling a sprawling transportation services ecosystem.

The father of business consulting in China knows why eBay failed there

The father of business consulting in China knows why eBay failed there

In the early 1990s, when China was still struggling to shrug off the straightjacket of its planned economy, the man appointed to lead the first business consulting firm allowed in the nation was immediately confronted with the scope of the challenge ahead.

Is china prematurely declaring victory in its reforms?

Edward Tse
Edward Tse
8/30/17
Is china prematurely declaring victory in its reforms?

At the heart of China's economic take-off during the last four decades is a fragile equilibrium between economic reforms and one­ party rule. The communist party has demonstrated pragmatism and adaptability - but just at a time when China seeks to fully enter the knowledge economy and participate in global markets, it has put the brake on further reforms.

'Inside China’s quest to become the global leader in AI'

Edward Tse
Edward Tse
10/19/17
'Inside China’s quest to become the global leader in AI'

'The RMB did not like the trade data at all, and it weakened immediately - over 1% today.' 'Overnight, the world has moved a little bit away from its U.S.-centric obsession about equity volatility in the United States and around the world to what's going on in China,' says Bob Savage, CEO of TRACK and member of the soon-to-be-launched China Analyst Network.

Edward Tse

Edward Tse

Chairman & CEO
Gao Feng
Gao Feng

Gao Feng

We commit to putting our clients’ interests first and foremost. We are objective and view our client engagements as long-term relationships rather than one-off projects. We not only help our clients “formulate” the solutions but also assist in implementation, often hand-in-hand. We believe in teaming and working together to add value and contribute to problem solving for our clients, from the most junior to the most senior.

Our senior team is made up of seasoned consultants previously at leading management consulting firms and/or ex-top essays-buy.com executives at large corporations. We believe this combination of management theory and operational experience would deliver the most benefit to our clients.

Channels

AsiaStrat
Granite Peak Advisory
Track Research
Trivium China
Gao Feng
Real Estate Foresight
China Beige Book
tp = window.tp || []; tp.push(["https://id.tinypass.com/id/api/v1/identity/login/social/callback", true ]); tp.push(["setTags", ["Macro"]]);