Australian retailers bracing for the onslaught of Amazon Prime need only look north to discover tactics to overcome digital disruption in the retail sector.
Retailers and shopping centre owners across Australia are gearing up to deal with Amazon’s entrance into the local market, which finally occurred in early December after months of anticipation.
The entrance of the US-based e-commerce giant drew howls of protest from a wide range of Australian retailers, prompting Australian Competition and Consumer Commission boss Rod Sims to tell delegates at a recent economic conference that complaints would be ignored, because Amazon Australia will be “good for consumers”.
Amazon’s Australian launch coincides with the largest retail development boom in Western Australian history, with more than $5 billion being spent by Perth’s largest shopping centre owners to upgrade malls around the city.
A common factor in the redevelopments is a focus on experiences and entertainment, highlighted by new food and beverage precincts being created to provide shoppers with something they cannot get online.
The trend of development away from simply providing retailers space to showcase their wares and providing something extra for shoppers has long been prevalent in China, where retail landlords have had to rethink their strategies in the wake of the country’s e-commerce phenomenon.
China’s e-commerce market is easily the largest in the world, with the country’s biggest online shopping day, Alibaba Group’s 11.11 Global Shopping Festival, or ‘Singles’ Day’, resulting in more than $US25 billion ($32.9 billion) worth of transactions on November 11.
By contrast, American shoppers spent $US5 billion ($6.59) in 24 hours on Black Friday 2017, the largest online shopping event in western markets.
The total value of mobile payments in China in 2016 was $US790 billion ($1.04 trillion), 11 times that of the United States, according to research by the McKinsey Global Institute.
Against that backdrop, Chinese retailers, as well as global brands, are increasingly embracing online platforms to complement bricks and mortar stores, across all sectors of retail.
Fashion retailers Burberry and Zara have landed on Alibaba Group’s Tmall in recent years, while other brands, including US department store giant Macy’s, operate Tmall stores despite not having a physical presence in China, according to research by commercial real estate group Savills.
Retail landlords in China were also increasingly welcoming retailers that could bring fresh elements to their properties, Savills research director James Macdonald said.
“Fashion and accessory tenants, historically the largest occupiers and main revenue generators in a mall, are losing store space to other tenants, particularly food and beverage and leisure tenants,” Mr Macdonald said.
“Technology has helped, rather than hindered, sales figures from these emerging tenant groups.
“F&B retailers have improved their takeout business through convenient online ordering and delivery services, while leisure and entertainment operators have used mobile ticket purchasing apps to increase sales.
“Large space entertainment venues have also used online platforms to attract a younger demographic to their sports club, dance studios and handicraft classes.”
Alibaba has demonstrated that e-commerce can work hand-in-hand with bricks and mortar retail, most clearly evident through its Hema Xiansheng supermarket brand.
At Alibaba’s Hema supermarkets, the company’s Alipay mobile payment system is the only payment method available in the stores, creating a seamless blend of the online and offline shopping experience and removing the need for checkout staff.
Shoppers can also order online from Hema supermarkets, instead of visiting one of the 13 outlets which have opened since 2015.
In September, Alibaba announced partnerships with Sanjiang Shopping Club and Xingli Department Store to launch new stores in Hangzhou and Guiyuang.
Alibaba’s also has its Tao Café, a cashier-less café in Hangzhou, while rival e-commerce giant JD.com announced in August it would develop its own unmanned convenience stores.
Suning Commerce Group, a Fortune Global 500 company, is another that has embraced unmanned or automated stores.
Suning opened cashier-less stores in Shanghai and Nanjing this year, while it announced early last month it would open three more outlets in Beijing, Chongqing and Xuzhou.
To enter the stores, customers must link their bank details with a Suning Finance app, while they gain entrance to the store by being scanned by facial recognition software.
To check out, shoppers walk through a payment pathway with their goods, with the system automatically recognising their purchases with RFID technology, reducing the checkout process to less than 15 seconds.
The advantage of integrating a bricks and mortar store with mobile payment systems is that groups like Alibaba and JD.com can enhance the user experience through logging purchases and identifying consumers’ preferences.
In July, while touring one of the Hema supermarkets, Alibaba Group chief executive Daniel Zhang said the company’s goal was not to gain more market share of the 15 per cent of total Chinese retail that e-commerce makes up, but rather to digitally transform the remaining 85 per cent of the market.
“We believe the future of new retail will be a harmonious integration of online and offline, and Hema is a prime example of this evolution that’s taking place,” Mr Zhang said.
“Hema is a showcase of the new business opportunities that emerge from online-offline integration.”