Competition in the internet era has entered the second half, an indisputable fact. Since October 2016, when Jack Ma proposed the 'Five New' strategy—New Retail, New Finance, New Manufacturing, New Technology, and New Energy—at the Yunqi Conference, 'New Retail' has become the focal battle of this second half. Alibaba was the first to present its 'Retail Link + Tmall Xiaodian' product and service solution. The reason Alibaba took the lead in implementing the New Retail strategy is obvious: among the 'Five New,' only 'New Retail' can quickly seize offline traffic entrances and ultimately control offline traffic. Once the offline traffic entrance is successfully captured, the remaining 'New Finance, New Manufacturing, New Technology, and New Energy' will naturally follow and be resolved. In less than a year since 'New Retail' was proposed, new business formats such as unmanned retail, unmanned shelves, various chain convenience stores, and vending machines have sprung up like mushrooms. Liu Qiangdong also loudly proposed JD's million convenience store plan, adopting a 'rural包围city' approach, initially establishing over 10,000 JD convenience stores. Yan Limin, former head of Juhuasuan, also entered the fray with his unmanned shelf 'Guoxiaomei' and soon announced a merger with Tomato Convenience to accelerate market share capture. Xing Bianli, Bianli Feng, Bingo Box, F5 Future Store, and EasyGo successively completed substantial financing rounds; established chain retail giants like Lawson, Quanshi, and Yonghui also joined the battle through open franchising or partnerships with technology partners; even beverage brand Wahaha, unwilling to be left out, collaborated with Shenlan Technology to develop and launch the unmanned retail brand TakeGo. With heroes rising together, a hundred flowers blooming, smoke filling the air, and bustling excitement—does this scene feel familiar? The 'Hundred Regiments War' of group buying, the 'ride-hailing war,' and the current 'shared bike battle' can all serve as templates or precedents for the 'New Retail battle.' And in each of these internet battles, the 'final' has always been between Alibaba and Tencent: Meituan vs. Dianping, Didi vs. Kuaidi, Mobike vs. ofo, without exception. In China, especially on the internet or related battlefields, no matter how many heroes compete and a hundred flowers bloom, it gradually becomes a game among Baidu, Alibaba, Tencent, and JD—the so-called BATJ (Baidu, Alibaba, Tencent, JD) struggle. And ultimately, it becomes an AT struggle. This New Retail battle was initiated by Alibaba, and although many opponents of varying sizes quickly appeared, they are not Alibaba's targets. Because Alibaba's only opponent is Tencent. Why do we say this? Let's first look at a set of data:
- In today's highly developed internet era, online consumption in China still lags behind offline retail consumption by an absolute margin of 15% to 85%.
- In the payment sector closely related to consumption, although it remains a battle between Alibaba's Alipay and Tencent's WeChat Pay, Alipay lags far behind WeChat Pay in key metrics such as usage frequency and payment order volume.
- On the traditional internet battlefield, Tencent, relying on WeChat and QQ, firmly controls online traffic. In this regard, Alibaba, despite having Taobao and Tmall, remains powerless.
- For the saturated online traffic market, the broader offline traffic entrance is the 'must-contest high ground' of the internet's second half, which is also the fundamental reason shared bikes are so favored by capital markets. Alibaba's so-called New Retail strategy, and the subsequent 'Retail Link + Tmall Xiaodian' model, aims to control offline traffic entrances through control of offline retail terminals, thereby enabling Alipay to counter WeChat Pay and secure Alibaba's leading advantage or winning key in the second half of the internet era against Tencent. This also makes it easy to understand why Alibaba's Retail Link, which is more suited to executing 'disintermediation,' chose to retain distributors and agents in the first phase, instead focusing on seizing terminal small stores and community convenience stores. This is because in Alibaba's eyes, the market share from offline distribution held by traditional distributors is far less valuable than the massive offline traffic controlled by terminal small stores: with this offline traffic, Alipay can counter WeChat Pay; with this offline traffic, Alibaba can continue its traffic-first strategy; with this offline traffic, Alibaba can shake off Tencent in the second half of the internet battle; with this offline traffic, not only traditional distributors and agents, but even brand owners and manufacturers will ultimately become the 'Three Links and One Express' (a pun on express delivery companies) controlled by Taobao and Tmall. In the internet world, there is a saying: 'The closer to users, the farther from competition.' This is a principle well understood by Alibaba, which advocates traffic first. However, even so, while vigorously promoting and deploying Tmall Xiaodian, Alibaba has also heavily invested in building Retail Link, a B2B service platform. Compared to competitors focusing on terminal formats like unmanned retail, vending machines, and chain convenience stores, the shrewd Alibaba is well aware that the success of the New Retail battle depends superficially on the number of retail terminals, but the core lies in the competition of supply chain services and systems. At the supply chain service level, Retail Link relies on Cainiao's integrated warehousing and distribution service providers from different systems, such as Best, Kejie, and Xinyi, to form its physical warehouse system; by integrating and utilizing the city warehouses and forward warehouses of brand owners, distributors, and agents, it forms its virtual warehouse system. These two types of warehouses—physical and virtual—combined with Cainiao's integrated same-city distribution resources, constitute Retail Link's supply chain service system for terminal small stores. At the supply chain system level, Retail Link, based on the integration of Cainiao's Sky Network, Tmall supply chain middle platform, Tmall supply center, and brand owners' own systems, plus the indirect acquisitions of retail-specific systems like Changyi and Fuji Rongtong, has built a supply chain management system from brand owners, distributors to terminal stores. With this warehousing and distribution service and management system based on the entire supply chain process, along with Retail Link's controversial city partners, and the mandatory ordering APP and terminal POS system installed in each Tmall Xiaodian, it is possible to achieve Alipay's full-process penetration and reach in every link of the retail supply chain, from brand owner distribution to distributor stocking, to terminal stores and individual consumers. Although the retail scenarios to which Retail Link's service-plus-system can apply are relatively limited, precisely because of this Retail Link + Tmall Xiaodian system support, it is only a matter of time before Alipay reverses its current disadvantage against WeChat Pay. Compared to Retail Link + Tmall Xiaodian's semi-platform, semi-self-operated model, JD's New Path and JD convenience stores' fully self-operated model, constrained by heavy asset operations and very closed management systems, can cover very few retail scenarios, and their chances of success are not optimistic. This also explains why, before Alibaba even announced its New Retail strategy, JD was already eagerly laying out its New Path project and dared to publicly propose a 'disintermediation' strategy, directly declaring war on distributors at all levels of the traditional retail industry. Facing the increasingly intense battle between JD Mall and Tmall/Taobao, online traffic has long been divided between the two sides, leaving offline as the only new way out. JD's highly valued JD Finance, as well as its JD Wallet and JD Baitiao businesses, also urgently need massive offline traffic to break through against Alipay and WeChat Pay. Facing the already-started second half of the internet and the in-full-swing 'New Retail battle,' as of now, there is still no sign of Tencent entering the game. It seems the Penguin baby is still immersed in the world of Honor of Kings. However, for this super giant that has dominated the internet for twenty years and still stands tall, facing such a massive offline traffic entrance and such direct strategic moves from competitors, how could it remain indifferent? All we need to do is wait and see. After all, this New Retail drama has just begun. The best show is always saved for last! The 3rd (CFIC) China FMCG + Internet Conference will be held in Chongqing in November 2017. The conference will closely focus on the theme 'New Forces, New Ecology,' inviting 1,000+ distributors, 500+ brand owners, 200+ B2B platform founders, and 100+ investment and financing institutions to jointly explore a new chapter of cross-border integration! -END-