Alibaba Group has been expanding its offline footprint at a breathless pace in recent years, buying mall operator Intime Retail, acquiring stakes in supermarket chains Lianhua and Sanjiang, and launching its own Hema Supermarkets.
The retail giant has now unveiled an even more ambitious plan to transform 10,000 mom-and-pop convenience stores across China into a vast network of Tmall.com brick-and-mortar outlets, where consumers can shop, pick up packages, make orders online or even apply for and receive small loans. It’s the first step in Alibaba’s broader plan to turn as many as six million convenience stores into smart service centers equipped with Alibaba’s e-commerce infrastructure and capabilities in financial technology, logistics and travel services.
The ground-based campaign promises to disrupt traditional retail models in China, and likely worldwide, and dramatically expand Alibaba’s business by leveraging its already formidable online presence of 529 million monthly active users – all at a relatively low cost.
“These Tmall shops will be a supermarket, a post office, a travel agency, or even a community bank,” said Lin Xiaohai, vice president of Alibaba. “Behind every digitalized Tmall shop, there is synergy to be achieved (via Alibaba’s platform) on supply chain, branding, sales services, etc. (These stores) will not just be a retail end-point, rather a new starting point to observe user behavior.”
The Chinese e-commerce giant showcased its first offline Tmall shop, a 140-square-meter mom-and-pop shop in its home city of Hangzhou three days ago. The Weijun Grocery, owned by Wenzhou-born couple Huang Haidong and his wife, faced growing competition in the past eight years. Within a month, Alibaba helped complete a total make-over and installed a new IT infrastructure to make the store a new center where consumers can get everything Alibaba has to offer.
Aside from upgrading the shop’s outdoor space, interior and product display, the new shop carries a Tmall logo, while keeping the words Weijun in the name to symbolize a partnership, not a take-over. Inside the shop, every aisle has banners with the Tmall logo, and a special Tmall shelf is added to offer products that are only available on Tmall.com.
Interior of the Tmall Weijun Store
Store exterior, before (above) and after (bottom)
Alibaba also added cooked food, such as hot dogs, to the store’s product offering. Cooked food’s have higher profit margins, but most small mom-and-pop shops can’t manage the fresh food supply chain. Alibaba, with its strong logistics network, solved the issue.
A new IT system was installed to keep track of inventory and retail sales. Alibaba also introduced the shop owner to 1688.com, an Alibaba platform focusing on domestic B2B trades. Huang can enjoy free delivery with orders over RMB288 (US$44), thanks to Alibaba’s logistics platform Cainiao Network.
The mom-and-pop transformation plan offers multiple benefits to Alibaba, including giving it another massive data collection network. This new data will give the e-commerce giant another angle to study, analyze and better target its users.
“If a small shop attracts 1,000 customers a month, with six million shops, there will be 600 million in flow traffic. More importantly, these 600 customers are very likely to be children and the elderly, those who are not familiar with the Internet and e-commerce,” said Lin.
In China, there are more than six million convenience stores like Weijun Grocery. Most of them are mom-and-pop shops and 70% are in tier 3 to tier 6 cities. Eighty percent of the owners age 45 or over, and are Internet-illiterate. These shop owners work for more than 12 hours a day but only make very meager incomes, Alibaba said.