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AMAZON MUST TAKE NOTES FROM ALIBABA IF IT WANTS TO SAVE WHOLE FOODS

2017-09-02 18:49:34

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AMAZON MUST TAKE NOTES FROM ALIBABA IF IT WANTS TO SAVE WHOLE FOODS

 

The e-commerce giants are both experimenting with novel retail prototypes that combine online shopping with the bricks-and-mortar experience.

 

Alibaba Group Holding Ltd.  (BABA) is often referred to as the Amazon.com (AMZN) of China.

 

But when it comes to the grocery business, Amazon should be called the Alibaba of the U.S. because it's playing catch up. 

 

On Wednesday, Amazon inched closer to taking over Whole Foods Market Inc.'s  (WFM) 470 stores when the $13.7 billion deal was approved by Whole Foods shareholders and the Federal Trade Commission (FTC).

 

While Amazon has grand plans to update Whole Foods' stores with technology, improved logistics, and a food delivery network, Alibaba has already been there and done that. The Chinese e-commerce giant has been updating the food shopping experience in China with its Hema grocery stores for the past two years. 

"The Amazon-Whole Foods deal is a total validation of our strategy," Alibaba Head of External Affairs Brion Tingler told TheStreet when the deal was first announced in mid-June. Both players are learning that when you hit a certain level of success in online sales, the next step is to help offline players better utilize their strengths, he said. 

 

Alibaba has coined a specific term for transforming physical stores to combine the best of offline shopping and online shopping: New Retail. Alibaba wants to update stores to give customers the option to order any item they see to their doorstep while still at the store. In other words, you could buy lunch at noon at a store, while also ordering seafood to arrive at your house at 6 p.m.

 

Revamping brick-and-mortar stores instead of just focusing on e-commerce is important because e-commerce is only about 15% of China's total $5 trillion retail market, Alibaba vice chairman Joe Tsai said in the company's latest earnings call. The other 85% is still brick-and-mortar shopping. "The traditional way of thinking about retail vs. e-commerce is that they work against each other, where e-commerce is cannibalizing retail," he told TheStreet. "But it doesn't have to be that way." 

 

Alibaba has a solid presence in the China supermarket scene, with a 32% stake in Sanjang Shopping Club Ltd. and an 18% stake in the Lianhua Supermarket chain. Alibaba is now running multiple brick-and-mortar China-based supermarkets that utilize two-thirds of their space for traditional retail needs and one-third of their space as an omnichannel fulfillment operation, Tsai said. The stores are doing 15,000 orders online per day. "That's really made the retail space more efficient, or increasing the sales-per-square-food of this retail space," Tsai claimed.

 

Tigress Financial Partners CIO Ivan Feinseth said he believes Amazon will do exactly the same thing with Whole Foods that Alibaba has done with supermarkets in China. "It makes a lot of sense," he said. "Amazon is all about clicks and bricks," he added in reference to Amazon's expanding presence into the brick-and-mortar scene. 

 

Alibaba vice chair Joe Tsai says 'New Retail' can make stores much more efficient.