---
title: "Can Alibaba Really Save Lianhua?"
description: "Recently, Alibaba's entry into Lianhua via Yiguo Fresh has drawn widespread industry attention. There is a general expectation that Alibaba's new retail can bring important transformation opportunities for physical retailers like Lianhua. From Alibaba's investment in Suning, to its acquisitions of Intime and Sanjiang, to its strategic cooperation with Bailian earlier this year, Alibaba has been expanding cooperation with offline retailers. From Jack Ma's proposal of the new retail concept before Double 11 in 2016, to the Taobao Maker Festival at the end of 2016, where senior Alibaba executives led by Daniel Zhang interpreted Alibaba's new retail strategy, Alibaba has been continuously researching and exploring new retail."
author: "鲍跃忠"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2017-06-04"
language: "en"
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---

# Can Alibaba Really Save Lianhua?

> Recently, Alibaba's entry into Lianhua via Yiguo Fresh has drawn widespread industry attention. There is a general expectation that Alibaba's new retail can bring important transformation opportunities for physical retailers like Lianhua. From Alibaba's investment in Suning, to its acquisitions of Intime and Sanjiang, to its strategic cooperation with Bailian earlier this year, Alibaba has been expanding cooperation with offline retailers. From Jack Ma's proposal of the new retail concept before Double 11 in 2016, to the Taobao Maker Festival at the end of 2016, where senior Alibaba executives led by Daniel Zhang interpreted Alibaba's new retail strategy, Alibaba has been continuously researching and exploring new retail.

Recently, Alibaba's entry into Lianhua via Yiguo Fresh has drawn widespread industry attention. There is a general expectation that Alibaba's new retail can bring important transformation opportunities for physical retailers like Lianhua.
From Alibaba's investment in Suning, to its acquisitions of Intime and Sanjiang, to its strategic cooperation with Bailian earlier this year, Alibaba has been expanding cooperation with offline retailers.
From Jack Ma's proposal of the new retail concept before Double 11 in 2016, to the Taobao Maker Festival at the end of 2016, where senior Alibaba executives led by Daniel Zhang interpreted Alibaba's new retail strategy, to the release of the new retail research report by the Alibaba Research Institute this year, and up to the actions following the strategic cooperation with Bailian, Alibaba has been continuously researching and exploring new retail.
Overall analysis of the current practical problems facing the retail industry, the practical problems faced by physical retailers like Lianhua, the common problems in the FMCG industry, and Alibaba's current understanding and positioning of new retail, suggests that following Alibaba's new retail path may not rescue physical retailers from their difficulties.
Retail requires systematic reconstruction
Currently, the problems in the retail industry are widespread, affecting all formats, globally, and even impacting previously excellent companies in the industry.
Problems are occurring in department stores, hypermarkets, supermarkets, convenience stores, and various specialty stores; from the U.S. retail industry to European retailers and Japanese and Korean retailers, they all face similar industry problems. Declining customer traffic, falling performance, rising costs, and management failures are common problems facing the industry.
**There are many reasons for the global retail industry problems:**
There are both macroeconomic issues caused by the global economic downturn and differences between countries. For example, in the U.S., even as the economy has largely emerged from the shadow of the 2008 financial crisis, the overall retail industry has experienced more severe store closures and bankruptcies than during the financial crisis. Professor Chen Liping from Capital University of Economics and Business, who is familiar with the Japanese retail industry, has recently analyzed the impact of aging on Japan's retail industry.
More people attribute retail problems to the impact of e-commerce. However, it is difficult to equate e-commerce, which currently accounts for only one-eighth of total retail sales of consumer goods, with the 30-50% loss of customer traffic in department stores and hypermarkets. Moreover, more and more offline companies are actively embracing the internet and practicing new internet-based retail models.
There are also more people thinking about the impact of the internet on society, consumption concepts, and consumer behavior. Internet tools are influencing society, and internet thinking is changing society. The increasingly internet-based Chinese society and world society are undergoing profound changes.
Some are also considering whether the decades-old chain retail model needs adjustment, and whether the environmental assumptions under which the chain retail model exists are disappearing.
Overall, industry-wide problems are unlikely to be simple and one-dimensional; they are inevitably complex and multi-dimensional.
Based on the above analysis, from an industry-wide perspective, the retail industry needs systematic and comprehensive change and reconstruction.
**What must be considered is:**
> Does the previous retail model adapt to the current social environment? How should the retail model be played in an environment where information asymmetry is lost?
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> The internet is changing society, the new generation, life concepts, and consumption concepts. Do previous retail concepts and models meet the changed consumer demands?
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> Haier has built a new enterprise organization under the internet environment through years of effort. Does it provide valuable inspiration for the organizational reform of chain retail enterprises?
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> Are changes in consumption and the development of the internet opportunities or challenges for retail enterprises?
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> In an environment where the retail environment and consumer demands have changed, can data-driven and technology-driven approaches completely solve the current problems in retail?
Overall analysis: **In the current retail environment, retail needs reconstruction, specifically the reconstruction of retail business logic and retail models, the reconstruction of enterprise organizations under the chain model, and retail technology innovation based on model reconstruction.**
Lianhua's problems are more internal
Lianhua once had historical glory. In those days, Lianhua was a benchmark for many domestic chain retail enterprises.
Lianhua is just a typical representative of current physical retailers. Including Watsons, 7-Eleven, Walmart, and other previously excellent industry companies, they all face the same problems.
In fact, from the enterprise perspective, it is more necessary to analyze the causes of problems from within the enterprise itself. External environmental issues need to be studied and paid attention to in order to adapt to environmental changes. More importantly, it is necessary to stand from the enterprise's own perspective and study clearly why such problems occur. Enterprises must adapt to environmental changes in a timely manner and reform their management mechanisms according to environmental changes. Enterprises must seek survival and development. Enterprises cannot change the environment, but once the environment changes significantly, if enterprises cannot promptly perceive the changes and organize internal reforms to adapt to external changes, it becomes very dangerous.
From this analysis, the main root cause of any enterprise's problems lies within the enterprise itself, mainly due to management issues.
**In the current environment, enterprises especially need to examine internal problems from the following aspects:**
> The enterprise's insight into external changes
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> The enterprise's adaptability
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> The enterprise's innovation capability
**In the current environment, combined with the actual situation of chain retail enterprises, it is particularly necessary for chain retail enterprises to think deeply about:**
> Is the previous retail concept centered on products and enterprises suitable for the current market environment?
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> What is the fundamental reason for customer loss?
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> Can products still create the previous distinctive features? Can product features and existing marketing models still strongly attract customers?
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> Why did they fall behind in the rapid development of e-commerce? Did they miss the first wave of internet e-commerce development opportunities?
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> In the face of current severe problems, is the enterprise's overall operational capability improving or declining?
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> Does the enterprise organization still have the vitality it had more than a decade ago?
Of course, in recent years, there have been excellent enterprises in the industry continuously innovating and practicing, such as Yonghui, Hema model, Lecheng Supermarket, Leyu Enterprise, etc. But overall observation of the industry shows that the industry is aging, concepts are lagging, enterprise efficiency is decreasing, and the overall industry situation is regressing, or at best, stagnating.
**In fact, any enterprise's problems should first be found internally, which can be summarized as:**
> The enterprise's strategic issues;
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> The enterprise's cultural issues;
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> The enterprise's model issues;
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> The enterprise's organizational issues;
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> The entrepreneur's issues.
In fact, overall, under significant changes in the retail environment, retail stores that have not changed much in over a decade, product models and marketing models that have not changed much, and chain retail management models that have basically not changed are themselves a big problem.
Therefore, **the current industry problems are more from internal enterprise issues, from problems in enterprise concepts, culture, and strategy, and from problems in business models, marketing models, organizational models, and management models.**
From Alibaba's current understanding of offline retail, it is difficult for it to become the savior of retail enterprises
Different genes: Overall, online and offline enterprises are basically communicating on the same issues on two different channels, each talking about their own. In particular, online enterprises have created some unique retail "language" when talking about retail.
Overall, online retail tends to be technology-driven and data-driven. There is relatively little research on retail business logic, category technology, and retail technology.
Currently, online personnel mostly lack in-depth understanding of offline retail enterprises, and many understandings are superficial.
Alibaba's understanding of offline retail has limitations: Analyzing the new retail research report of the Alibaba Research Institute and Alibaba's descriptions of new retail in the future environment, the overall feeling is that Alibaba's understanding of offline retail enterprises has limitations.
For example, the Alibaba Research Institute pointed out in its new retail research report that China's retail model, represented by the real estate model, has a large gap compared with the hypermarket chain model in Europe and the United States and the convenience store chain model in Japan.
It is indeed unclear how the real estate model became the representative of China's retail model. It is also unclear, given that many of the world's large-scale chain retail enterprises, including Walmart, Carrefour, 7-Eleven, FamilyMart, and other well-known companies, have mostly entered China and opened stores, where China's retail still lags behind Europe, the United States, and Japan. Including the fact that some foreign retail enterprises have had unfavorable development in China and cannot compete with domestic chain enterprises, how much distance remains between domestic enterprises and foreign retail enterprises?
Including recent descriptions of new retail by Alibaba's senior executives, which still emphasize data-driven approaches. It feels like their understanding is still limited to a certain scope.
Based on the above analysis, it seems that Alibaba's entry into Lianhua may not produce effective actions.
In fact, before Alibaba, Yonghui had entered Lianhua and sent a capable team to try to reform Lianhua according to the Yonghui model, but ultimately ended in failure.
**Bao Yuezhong Column:**
Special contributing writer for New Distribution
Senior Economist
Expert of the Ministry of Commerce's "Ten Thousand Villages and Thousand Towns Market Project"
Famous FMCG retail expert
Bao Yuezhong New FMCG, New Retail Innovation Practice Studio
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