As Amazon.com Inc. looks to swallow United States grocery chain Whole Foods, China’s tech giants are already digesting hefty bricks-and-mortar deals, taking the lead in the battle to transform supermarket shopping with big data and better supply chains.
China’s Alibaba Group Holding and JD.com Inc. have invested heavily in offline retail – bricks-and-mortar stores – in recent years to complement their online offerings.
With their ready-made payment and social media platforms to lure shoppers, Alibaba and JD.com have helped China become the world’s largest online grocery market, far ahead of the United States.
This early lead, cemented by densely populated urban areas and cheap labour, could be key as retailers and tech firms race to boost margins on low-cost consumer goods by reinventing supply chains with big data analytics.
Sales made online are set to more than double to around 6.6 per cent of China’s broader grocery market by 2020, compared to around 1.4 per cent for US sales by then.
Both US and Chinese e-commerce firms are grappling with the challenge of increasing their margins on fast moving consumer goods (FMCG).
Alibaba plans to use its trove of consumer data to provide a suite of connected services back to brands whose goods they sell.
Services will include inventory management, smart manufacturing and logistics, aiming to slash waste and margins across the entire supply chain, according to the company’s so-called ‘new retail’ strategy.
Likewise, JD.com uses data from a partnership with China’s hugely popular messaging app WeChat to build data profiles for a range of brands including baby products, cosmetics and soft drinks.
Alibaba has invested over $9.3 billion in offline retail stores since 2015, including supermarket chain Sanjiang and Suning Commerce Group Co Ltd, one of China’s biggest offline retailers. In May it took an 18 per cent stake in Lianhua Supermarket, part of retailer Bailian Group.
JD.com bought Wal-Mart Stores Inc’s Chinese online platform Yihaodian for about $1.5 billion in shares in 2016.
US firms are now looking to play catch up – key as bricks-and-mortar stores are hit by a slowdown and online players battle with tight profit margins and high delivery costs.
Amazon launched a $13.7 billion bid for grocery chain Whole Foods Market Inc. last week, marking its intention to take on Wal-Mart.