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JUN 26, 2018

Alibaba Spurs New Retail in China: “Online Merge Offline” (OMO)

By Faizal Latiff

China presents an attractive yet challenging market for many business professionals. GLOBIS MBA students went to the country’s No. 1. business school, CEIBS, for a short exchange program. This is the last of three articles about what they learned.

In 2017, a new business trend called “New Retail” emerged in China, the brainchild of Alibaba founder Jack Ma. This is the digital transformation of the “old school” retail concept to a new model called OMO (Online Merge Offline). The rapid rise of smartphone users and frictionless mobile payment systems (such as Alipay), advancements in AI, and cheaper and better sensors have contributed to the rise of OMO.

Hema Supermarket was launched by Alibaba. It is expected to have more than 25 outlets in China in 2018. It is a cashless supermarket, and is changing the individual shopping experience, offering a huge selection of fresh food and seafood that shoppers can select and send to the kitchen to be cooked before the end of their trip. Shoppers can also order groceries online for delivery in under 30 minutes, and customers can use their smartphones to shop and pay for their groceries. In short, it is similar to having an integrated food court within Carrefour (or Walmart) that is powered by e-commerce.

Why is this important? 

This retail concept will revolutionize the way we shop and will have a huge impact on our shopping experiences, as it creates new value for shoppers. No longer do we need to buy our necessities in one shop and go to another food court or restaurant to enjoy a meal. Shoppers will have more time with family and friends.

What enabled this to happen in China?

Alibaba and Tencent played a major role in changing China to be the largest e-commerce market, further fuelling its level of technological innovation. Apart from this, the country’s population density also plays a part in ensuring that China leads the way in its digital innovation and corporate marketing strategies, such as multichannel and omnichannel

What will happen next?

I foresee that once the “New Retail” concept achieves stability, this business model will be exported and copied in mature markets in Asia such as Japan, South Korea, Singapore, Indonesia, and Malaysia, and potentially even to cities in Australia.

As MBA students—current and future business leaders, entrepreneurs, and intrapreneurs—we need to be observant in our day-to-day work, to have the foresight to spot trends in the market. We can then capitalize on the trends and gaps to remain competitive and stay ahead of the competition. In China, I was reminded of, and inspired by, this challenge.

Photo Copyright: ldprod