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Alibaba follows Amazon into physical shop investments

Chinese e-commerce giant Alibaba is following in the footsteps of its US equivalent Amazon and buying physical retail outlets.24 Jan 2017

Alibabi is investing $2.6 billion to gain the controlling share in Chinese department store and mall operator Intime Retail, chief executive Daniel Zhang told international leaders at the World Economic Forum annual meeting in Davos, Switzerland.  The company already holds a 28% share in the retail company.

The move will "help pave the way for the digital transformation of old-school retailing", Zhang said.

Retailers worldwide need to adapt by accelerating the integration of bricks-and-mortar with e-commerce to create new shopping experiences, he said.

"Today, we always say we cannot separate online and offline," Zhang said. While consumers still love to go to the mall, they use their smartphones while there, "so it’s about making the experience better" by finding innovative ways to combine physical shopping with mobile technologies, he said.

One potential solution is navigation. Chinese malls are very large, Zhang said, and customers often get lost, or lose their cars. Technology can be used to give a better experience, he said.

"The biggest risk we have today for our sustainability is disruption, disruptive technology and disruptive business model," Zhang said.

A few years ago, Alibaba was taken by surprise at the speed of smartphones and mobile internet adoption in China, he said.

"We invested a lot to construct our leading mobile commerce app," Zhang said. "Today we are very proud to say we are the largest mobile commerce company in the world. But if you look back, the process was very tough. If we could not change fast, then we would be killed by this new technology."

"If we don’t want to be killed by new technology, then we should kill ourselves using new technology," he said.