Alibaba’s Next Big Move In Retail: Partnership With Bailian Group

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With a vision of the “future of retail,” where the line between online and offline retail will blur and both models will eventually converge, Alibaba (NYSE:BABA) is working towards establishing itself as a strong player in this changing landscape. The company is entering into strategic partnerships with several brick-and-mortar retailers to explore retail opportunities. Alibaba’s most recent partnership is with the Bailian Group, a large retail conglomerate in China which has nearly 5,000 outlets spread across 200 cities in the country. Notably, this is a rare private-public alliance aimed toward creating a new retail experience. Through this partnership, the Bailian Group will use Alibaba’s big data capabilities to improve logistics and payment options. Both companies will also work towards integration of offline stores with an online ecosystem leading to a superior customer experience.

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Building Blocks For The “Future Of Retail”

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While Alibaba disrupted the traditional retail industry in China, the company is now realizing that a pure e-commerce model will not be sufficient for sustained long-term growth. An offline presence is helpful as it allows consumers to visit stores to shop for certain products which they prefer to see and touch in person before buying. Groceries are one example for this model, and players such as Amazon are experimenting with small stores with high-end technology to make the shopping experience more convenient for customers. On the other hand, large stores such as Wal-Mart are bringing technology into their stores to make the shopping process (scan and pay) and the checkout process (Wal-Mart Pay) as efficient as possible. Alibaba is trying to do something similar in China – but through a different model. Instead of establishing its own offline stores on a large scale, the company is partnering with large retailers in the country and providing them with the necessary technology to make their processes more efficient. This will allow Alibaba to study offline consumer behavior through data collected from these automated processes, to work on an eventual integration of its online platform with these offline stores. We believe these strategic partnerships are building blocks for the future of retail, where Alibaba envisions an integrated offline and online environment.

Alibaba already has a strong logistics platform (Cainiao) and an established payments network (Alipay). Through its partnership with Bailian, the company will make Alipay available at Bailian stores and both companies will work to co-develop logistics rules to enhance services to their customers and merchants. We believe this model will enable Alibaba to optimize its “pillars” of retail and upgrade traditional retailers to be part of the “new retail”. Through strategic partnerships with several such traditional retailers, the company is well-poised to capture the next wave of growth in retail in the country.

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