Jack Ma ahead of Bezos in ‘grocery store ambitions’

Bloomberg

Jack Ma is ahead of Jeff Bezos in one area: grocery stores.
For years, it looked to some like Ma’s Alibaba Group Holding Ltd. was simply following in the footsteps of Bezos’ Amazon.com Inc., the world’s largest e-commerce company. Just like Seattle-based Amazon, China’s online shopping giant started a cloud-computing business and created original entertainment content. But when Amazon’s $13.7 billion bid for Whole Foods Market Inc. sent shockwaves across the retail industry, Ma looked prescient.
Alibaba had been quietly incubating its Hema grocery store concept for two years. It rolled out three new locations last month, bringing the total to 13, the bulk in Shanghai and Beijing.
The sprawling, bright supermarkets combine online and offline shopping, where customers who have downloaded Hema’s
app scan barcodes on products and pay with their Alipay digital wallet. The live seafood section is one of the main attractions for Chinese consumers. Shoppers at Hema can pick out their own crab or lobster and have it cooked on the spot to eat in the store, or get it delivered to their home. The stores also double as warehouses for delivery in 30 minutes within a close radius.
On Alibaba’s quarterly earnings call, executives spenttime discussing the company’s offline retail strategy. “This is not a supermarket. This is not a food mall. This is a brand new model,” said CEO Daniel Zhang.

Amazon Window
Hema’s experiment with how people pick, pay, and get groceries delivered provides a window into what Bezos may be envisioning for Amazon’s integration with Whole Foods. The deal would give Amazon hundreds of physical stores that could act as warehouses for fast delivery. It’s an opportunity for Amazon to roll out its digital shopping experiments on a much larger stage.
For now, Amazon’s brick-and-mortar grocery ventures are still nascent. It has just one “Amazon Go” convenience store in Seattle—still an experiment—that lets employees pay with smartphones, without having to see a cashier or go to a checkout kiosk. It also has introduced pickup points so shoppers can drive by and retrieve their items shortly after ordering them online.
Hema has moved beyond its incubation stage. In its latest financial results, Alibaba reclassified Hema’s revenue from “innovation initiatives and others” to “China commerce retail” revenue. For Alibaba, Hema is just the tip of the iceberg. Ma is trying to upend the $4.5 trillion Chinese retail landscape, as he foresees “tremendous challenges” for online-only commerce companies amid China’s slowing economy.
Amazon, too, saw a threat to its online-only model, as retail giants like Wal-Mart Stores Inc. started encroaching on its turf. Bezos was forced to expand into physical retail, and not just groceries: he’s also opening brick-and-mortar bookstores, which the company uses in turn to highlight its gadgets.
In January, Alibaba led a $2.6 billion deal to take private Intime Retail Group that managed 29 department stores and 17 shopping malls across the country.
Both Alibaba and Amazon are seeking to leverage the data they have on millions of consumers to make shopping easier. In the Hema app, purchases and preferences are saved and consumers can see a personalised product page. Amazon will likely use its Prime membership to send personalised recommendations and digital coupons to consumers.