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From the outlet logic and market segments, the ecological strategies and the whole line of the two giants of Ali and Tencent are counted.
In 2017, the term "new retail" was introduced as a revolutionary concept in the retail industry. That year marked a turning point where offline retail began to recover, and the internet started to deeply integrate with traditional retail. Unmanned retail and smart shelves captured significant attention from investors, signaling a shift towards more tech-driven retail models.
By analyzing market trends, we explore the strategic approaches of two major players—Alibaba and Tencent—from both their outlet logic and market segmentation perspectives. This analysis aims to uncover how these giants are reshaping the retail landscape through their ecosystem strategies and comprehensive business lines.
Here’s a breakdown of the key insights:
**The Three Pillars of New Retail**
At the Yunqi Conference in October 2016, Jack Ma emphasized that the era of pure e-commerce was ending. He introduced “new retail,†a model combining online and offline experiences with modern logistics. The goal is to create a data-driven, consumer-centric retail system that offers real-time, efficient, and cost-effective resource allocation, deep customer insights, and an immersive shopping experience supported by AI, robotics, and VR technologies.
**New Consumerism Redefines the Market**
After the introduction of the new retail concept, it quickly became a buzzword. According to IT Orange, over 300 investment cases were recorded in 2017, with nearly 10 billion yuan invested in the retail sector. Analysts predict that China's new retail transaction volume reached 38.94 billion yuan in 2017 and could hit 1.8 trillion yuan by 2022, growing at a compound annual rate of 115.27%.
**Three Key Drivers of New Retail**
1. **Decline of Online Traffic Dividends**: As online traffic growth slowed, customer acquisition costs rose sharply. Meanwhile, offline retail saw relatively stable costs, prompting a re-evaluation of physical stores. Digital transformation and cloud services are now being used to bridge the gap between online and offline retail.
2. **Technological Innovation**: Mobile payments, big data, and virtual reality have expanded offline retail scenarios, enabling consumers to shop anytime, anywhere. These innovations are also expected to improve customer management, enhance user experience, and streamline logistics, ultimately reducing costs and increasing efficiency.
3. **Rising Consumer Demand**: With higher disposable incomes and a shift in consumption habits, especially among the 80s and 90s generations, there is a growing demand for quality products and services. This has led to increased interest in health, wellness, and luxury goods, marking a new phase in personal consumption.
**The Eight Forces Driving New Retail**
Both Alibaba and Tencent have built extensive ecosystems covering almost all aspects of the digital world, including e-commerce, finance, entertainment, and more. Their strategies reflect different approaches: Alibaba focuses on centralization and platform empowerment, while Tencent emphasizes decentralization and collaboration with third-party partners.
**Alibaba's Core Strategy**
Alibaba started as an e-commerce giant, with its core business accounting for 85% of total revenue. Over the years, it has expanded into areas like cloud computing, digital media, and financial services. Its new retail strategy involves integrating offline businesses, investing in physical stores, and leveraging technology to build a seamless omnichannel experience.
**Tencent's Supporting Role**
Unlike Alibaba, Tencent's business model is more diversified, with online gaming and social networks forming the backbone of its revenue. While not directly entering the retail space, Tencent supports key players like JD.com and Yonghui through strategic investments, helping them leverage its vast user base and technological capabilities.
**The Future of New Retail**
With the dominance of internet giants, the future of retail will likely be shaped by their ability to innovate and integrate data, technology, and customer experience. Offline retailers will play a supportive role, adapting to the changing landscape by embracing digital tools and forming partnerships with tech companies.
As the retail industry continues to evolve, the competition between Alibaba and Tencent will intensify, driving further innovation and reshaping the market in ways we’ve only begun to see.