Brick and mortar is still important for retail
Online trade in retailing is growing fast, but in retailing brick and mortar stores are by no means outdated.
US based Target has plans to open more than 130 small-format stores by 2019 and has also set a goal for remodeling 1.000 of its 1.800 stores by 2020. – Over half of Target’s digital sales growth is enabled by its stores, says CEO Brian Cornell to CNBC.
That includes shoppers ringing up purchases online before picking them up in person, or shoppers browsing Target's aisles before buying something from Target.com.
Dollar Tree believes in brick and mortar
Dollar Tree, the biggest U.S. dollar-store chain operator, on 21 Nobvember reported third-quarter comparable store sales and profit that beat Wall Street estimates, helped by higher customer traffic and spending at its stores. At comparable stores, sales increased on yearly basis with 3.3 percent, above the 2.4 percent rise expected by analysts. www.reuters.com
While other grocery retailers like Wal-Mart Stores and Kroger have been cutting prices to compete with the likes of Amazon, Dollar Tree has been relying more on its smaller store sizes and smaller product assortments to draw in customers.
The Associated Press reports that Dollar General, Dollar Tree’s head on competitor, announced during an investor meeting 21.11 that it will open 900 new stores and relocate or remodel 875 other stores during the next 12 months!
As for 2017, the company says it will open about 1,000 additional locations. Dollar General’s determined expansion plan is also a sign that the company is continuing to respond to added competition from the year-old merger of the Family Dollar and Dollar Tree companies.
Alibaba goes offline with stake in China's top grocer
The Chinese business tycoon Jack Ma, owner of Alibaba, plans to invest $2.87 billion in a major stake in China's top hypermarket operator; Sun Art Retail Group. The move is part of the e-commerce giant's push into the offline retail market, according to Reuters. www.reuters.com
As part of an alliance with Auchan Retail and Ruentex Group, Alibaba will buy the stake from Ruentex while Auchan Retail would boost its stake, the three companies said in a joint statement. The alliance targets big opportunities in China's $500 billion food retail sector. 80 to 90 percent of the market is still in brick and mortar stores.
"Physical stores serve an indispensable role during the consumer journey, and should be enhanced through data-driven technology and personalized services in the digital economy," Alibaba Chief Executive Officer Daniel Zhang says in the statement.
The deal would give French retailer Groupe Auchan, China's Alibaba Group and Taiwanese conglomerate Ruentex 36.18 percent, 36.16 percent and 4.67 percent stakes respectively in Sun Art.
Alibaba already has big investments in brick and mortar stores
Alibaba has invested upwards of $9.3 billion in brick-and-mortar stores since 2015. It has launched many un-staffed concept shops in the past year, including grocery and coffee stores.
The $ 500 billion company is taking more risks to secure offline, rural and overseas buyers as China's urban e-commerce market shows signs of saturating.
"They're getting into a territory that's not their core strength, for example securing a property, the licences to sell certain products, paying tax, more labour and so on," says Bain & Company analyst Weiwen Han in a statement.
"On one hand they really need to do it, but on the other hand they are facing a lot of challenges that they have never experienced before."
Sun Art is China's grocery store leader with about 8.2 percent of the market, according to data from Kantar Worldpanel. It operates about 450 hypermarkets across China under the RT-Mart and Auchan banners.
It also operates unmanned stores under the Auchan Minute brand. Sun Art has been slow to go online, with its platform, Feiniu, lagging bigger players like China Resources and Wal-Mart Stores, according to CNBC.