Alibaba on the assault of the physical market. The entry is triumphant, 10,000 Tmall-branded stores in China. (1) Digital conquers the physical by leveraging technology, capital and especially data.
Jack Ma’s operation expresses on a Chinese scale-Magnitude 1.4 billion consumers-the evolution of the global distribution model. Traces of which were seen, on a much smaller scale, in Amazon’s recent acquisition of Whole Foods.
The limitation of digital-which to date occupies less than 10 percent of global retail sales volume-is the unsustainability of the distribution model in the long run. Essentially because of the costs of packaging and delivery to the end customer. Indeed, the enormous resources of AliBaba and Amazon allow them to gain market share in the short term through dumping practices. But it is not enough.
In the medium to long term, it is imperative to achieve direct profitability of trading activity, which is now possible only through the transfer of costs to suppliers, who, moreover, are still given sustainable margins since they have to feed the system. As well as through the provision of logistics and technology services such as Amazon Web Services, AliBaba Distribution Platform, Amazon Logistics Services. In addition to improving business budgets, these services provide the most valuable resource. Big data, the lifeblood of the entire system.
Here then, AliBaba will open the 10,000 Tmall stores in the most strategic locations with high consumer density. While Whole Foods will provide exact data on the food spending habits of a share of the U.S. and U.K. population with high incomes. That is, current and potential Amazon Prime users.
Technology and data analysis will make it possible to consistently provide each store with the most popular products. Reducing delivery costs and increasing the efficiency of physical retail, which in itself retains the advantage of proximity and closeness to the end consumer.
This pattern of development does not yet concern Italy, but it should prompt appropriate reflections and perhaps even ring some alarm bells.
Fabio Ravera and Dario Dongo
Notes
(1) V. http://news.xinhuanet.com/english/2017-08/28/c_136562972.htm
Specialist in distribution models and Revenue Operations with over 25 years of projects in different industrial sectors and countries (12 years in the US). I work on Lean Organizations, Supply Chain Inefficiencies, Organizational and Financial Restructuring Projects, Digitization and GDPR
