PAYMENTS: Alibaba's New Retail digitizes physical retail stores

Under our augmented commerce theme, we believe that mixed reality, AI and other digital enhancements will leave the browser and become anchored in the physical world through hardware and software pushed by companies like Apple and Amazon. Such a transition will be as transformative to retail commerce as the web and the browser were to e-commerce. The United States is showing glimmers of this through incremental symptoms. For example, Walmart and its competitors are implementing an IBM blockchain solution called Food Trust, which acts as a ledger for each food item across the entire supply chain, and cuts down identification time from 6 days to 2.2 seconds. Or look at DHL employing augmented reality headsets to help employees identify required packages in a warehouse.

1300b67e-544e-4b58-8dc5-822bc8fdccdd[1].jpg

But Chinese tech companies are many steps ahead. A great Axios article focused our attention on an Alibaba initiative called "New Retail". A mom and pop store can pay $6,000 for a digital renovation, and a $620 annual membership fee which locks the store into the Alibaba ecosystem. The digital tools include a heat sensor to track foot traffic, an AI-backed app and the Alipay payments system, and the entire Alibaba delivery and fulfillment infrastructure. The store becomes a physical endpoint for Alibaba's e-commerce platform. JD and Tencent are doing the same.

703c5f82-cc03-43b9-be9d-c436dc743ee2[1].png

A chain called RT-Mart updated 400 of its stores in this manner. Here are the bells and whistles: (1) one-hour arrival on e-commerce orders in a 3km radius to the physical store location, (2) orders through a branded app are fulfilled by inventory from local physical stores and carried by conveyor belts to packing/delivery areas, or all the way to a customer's home, (3) in-store physical e-commerce kiosks with payments using QR codes, and (4) red envelope coupons that are gifted within Alipay can be redeemed for physical goods. Will customers adopt these solutions? Well, 500 million already have the needed app on their phone and are trained in  digital payments behavior. Maybe China will save the American mall! And as we've been saying about Amazon, technology and finance are mere enabling features of the commerce happening in the system. 

346217b8-5f29-472c-8d6f-130e91e56026[1].png

Source: Alibaba (AxiosAlizila), WSJ (Walmart and Blockchain), UploadVR (AR for business)