Across all retail sectors, the question, “will e-commerce replace bricks and mortar?” has morphed into one of how both online and offline retailers will adopt O2O technology to stay competitive. As traditional stores adapt to keep up with online competition, e-commerce companies around the world are increasing their brick-and-mortar investments. A comparison of efforts by e-tail behemoths Amazon and Alibaba indicates China is much further on its way than the United States to becoming the world’s first truly omnichannel market.
Alibaba’s announcement last week of a new partnership with retail conglomerate Bailian was one of several recent initiatives by the Chinese e-tailer to expand its O2O reach. The deal will give Alibaba the opportunity to develop omnichannel strategies at the group’s 4,700 stores across China. It follows Alibaba’s January 2017 bid to up its stake in department store chain Intime to become the controlling shareholder, as well as a $4.6 billion investment in electronics retailer Suning in 2015.
Meanwhile, Amazon has also made some highly publicized moves in brick-and-mortar retail in the United States, but its offline footprint remains small. It currently has three bookstores and one Amazon Go convenience store, while its “click and collect” program is still in development and its 36 pop-up locations represent more of an experimental phase rather than long-term investment.
It’s clear that both companies are betting on a future with a combination of offline retail and online e-tail, but Alibaba’s partnerships have positioned it to expand its already wide reach much further in the brick-and-mortar world. As Amazon begins to experiment with QR code-scanning mobile payments at its Amazon Go location, mobile payments via Alipay are now commonplace at stores across China and quickly spreading globally to cater to Chinese tourists.
Alibaba is already touting the fact that it works with over 1 million offline stores to create an O2O experience. Its 2016 Singles’ Day promotions allowed it to show off its “New Retail” concept of a future in which online and offline sales are fully integrated, and featured an AR mobile game that drove foot traffic to locations owned by Suning, Intime, KFC, and Starbucks, as well as malls in Beijing and Shenzhen and Shanghai Disney Resort. The New Retail concept includes payments, targeted mobile in-store promotions, in-store pickups of items ordered online, and collaboration on consumer data.
Rivals in China such as JD.com are also highly active with O2O. JD.com has opened 1,700 physical appliance stores and recently announced plans to have 10,000 brick-and-mortar stores open by the end of this year.
Amazon is moving ahead with omnichannel developments more quickly in several other countries than in the United States—its Indian arm has been making more substantial offline partnerships, while in the UK it works with British supermarket chain Morrison’s to allow Prime members to order online.
While Amazon’s new projects improve and accelerate the offline transaction experience, L2 predicts that the U.S. company is still three years away from jumping all in on omnichannel as Alibaba races ahead. In addition, while Alibaba is forging partnerships with store chains, malls, and department stores across China, Amazon’s relations with these businesses in the United States has been more competitive. Amazon has emerged as a clear U.S. winner with over a 1,900% increase in market value over the past decade while a host of U.S. retailers including Macy’s, Nordstrom, Sears, and Best Buy have experienced double-digit declines. Across the world, brick-and-mortar locations are still likely to struggle to compete with e-commerce, but retailers that utilize omnichannel to double down on their in-store customer service will have a greater opportunity for growth.
By _ Liz Flora
From _ l2inc