E-commerce platform supermarket battle heats up, retail industry competition intensifies
South China becomes a hotly contested region
The supermarket battle between Alibaba and JD.com is heating up. On August 31, JD Supermarket announced that it would continue to increase investment in brands, consumers, imported goods and the supply chain, striving to become the absolute No. 1 in China's supermarket sector, both online and offline, in less than 3 years.
Previously, after JD.com announced at the end of June that it would acquire Yihaodian to push into the supermarket business, Tmall quickly responded, announcing in early July that it would invest "double 2 billion" in its supermarket business to defeat JD.com and secure the No. 1 goal in both offline and online supermarkets within three years. In early August, Yihaodian announced a 1 billion yuan investment over 3 months, declaring war on Tmall Supermarket.
The two giants raced to stake their claims last year
Research by IGD, an international research and training organization for the food and consumer goods industry, shows that China's online supermarket market is expected to reach an overall scale of about 180 billion US dollars by 2020, exceeding 1.2 trillion yuan. But compared with subcategories such as 3C, home appliances and clothing, the e-commerce penetration rate of supermarkets is less than 3%. Previously, because the threshold was too high, the gross margin per order was low, and fulfillment costs were hefty, the giants had never engaged in white-hot competition in this category.
Feng Yi, president of JD Mall's Consumer Goods Business Unit, told a Guangzhou Daily reporter that JD Supermarket would fully open JD.com's big data, logistics and marketing capabilities to brand owners, and together with strategic partners such as Yihaodian, Walmart and Yonghui, build an integrated online-and-offline fast-moving consumer goods retail ecosystem.
Since last year, the two e-commerce giants Alibaba and JD.com have been pushing into supermarket layout: in May 2015, JD.com made a strategic investment in Tiandiguoyuan. Three months later, JD.com invested 4.31 billion yuan in Yonghui Superstores, the leading fresh food supermarket in China. Alibaba made a strategic investment in Yiguo.com in June of that year. At about the same time, Alibaba also took a controlling stake in the O2O fresh food experience store Hema Fresh.
In April 2016, JD Group merged with the crowdsourced logistics platform Dada, with JD.com holding 47% of the new Dada and becoming the single largest shareholder. Around July 2016, Alibaba made strategic investments in the instant crowdsourced logistics platform Dianwoda and the supermarket O2O platform Shandian Gou.
In June 2016, JD.com and Walmart formed a deep partnership, with Walmart taking a 5% stake in JD.com, and JD.com bringing the main assets of Yihaodian under its wing.
E-commerce analyst Li Dongcheng believes that compared with past confrontations, this battle for online supermarkets is not only both sides drawing their swords in a vertical business, but also has major strategic significance for the two groups.
Alibaba Group CEO Daniel Zhang positioned Tmall Supermarket as the fourth consumer platform after Taobao, Tmall and Juhuasuan, saying bluntly that it "has important strategic significance for Alibaba Group."
JD.com also regards online supermarkets as an important layout for the future. Liu Qiangdong believes that the supermarket category has the characteristic of high purchase frequency, and the female users it brings will be able to improve JD.com's operational shortcoming of failing to let consumers "browse" through product combinations.
Consumers may benefit
South China is the new market contested in the supermarket battle between the two sides.
A comparison by a Guangzhou Daily reporter found that both sides' supermarket logistics and warehousing and operational efficiency have improved greatly. After Yihaodian opened a warehouse in South China in mid-last year, Tmall Supermarket's South China smart warehouse officially began operation and opened in August this year, with picking volume exceeding 1 million items per day. And the 200,000 sq m area of phase 3 of Yihaodian's South China operations center is double the 100,000 sq m of Tmall Supermarket's South China warehouse.
For consumers, shopping in a supermarket requires many goods, fast purchase speed, good experience and service, and savings on price. When giants fight, the overall standard of online supermarkets will rise, and consumers are the biggest winners in this battle.