Our guest this week is Tony Shan, Head of Tmall Global, Americas, for the Alibaba Group. We learn a bit about the scale, scope and evolution of the world's third largest retailer, before going deeper on the innovative Freshippo grocery concept. We touch on essential elements of providing a more harmonized shopping experience that is at the heart of "New Retail" before getting Tony's perspective on what is key to driving and prioritizing innovation. We also unpack the definition and importance of "fresh" and its interplay with convenience, price and sustainability.
The streams are crossing somewhere along the Vegas Strip, as this week's episode features our news segment recorded at the National Association of Convenience Stores event, while our interview was conducted live at GroceryShop.
Our guest this week is Tony Shan, Head of Tmall Global, Americas, for the Alibaba Group. We learn a bit about the scale, scope and evolution of the world's third largest retailer, before going deeper on the innovative Freshippo grocery concept. We touch on essential elements of providing a more harmonized shopping experience that is at the heart of "New Retail" before getting Tony's perspective on what is key to driving and prioritizing innovation. We also unpack the definition and importance of "fresh" and its interplay with convenience, price and sustainability.
But first we share our top take-aways from the week that was in retail, starting with the contrast of a strong US job market report with the third straight quarter of GDP declines. Then we take on earnings reports from Bed, Bath & Beyond (yuck), Nike (huh?) and Costco (wow!). Peloton continues to take the D out of DTC as they announce a wholesale partnership with Dick's Sporting Goods.
Instead of a trip to the Wobbly Unicorn Corner we lift up some pretty nice capital raises from DNVB darlings Caraway, Monos, and Everlane. It also turns out that physical retail is still not dead, as store openings continue to outpace closures. And fresh on the heels of our interview with Sam's Club SVP Tim Simmons we learn about the brand's planned new innovation center.
About Tony
https://www.linkedin.com/in/shantony/
Tony Shan joined Alibaba Group in 2017 and now serves as the Head of the Americas region for Alibaba Group’s cross-border B2C platforms, Tmall Global & Kaola. He leads a team of category experts in North America working with brands, retailers and SMEs to sell into the growing Chinese market. Prior to his work with ecommerce in China, Tony was the Merchandising and Marketing Lead for the apparel & footwear business at an Amazon subsidiary that operated U.S. ecommerce sites such as Diapers.com and Soap.com. He also gained global retail expertise working at luxury fashion brand, Coach, in global merchandising and planning. He is currently based in Alibaba’s New York office in Manhattan.
About Us
Steve Dennis is an advisor, keynote speaker and author on strategic growth and business innovation. You can learn more about Steve on his website. The expanded and revised edition of his bestselling book Remarkable Retail: How To Win & Keep Customers in the Age of Disruption is now available at Amazon or just about anywhere else books are sold. Steve regularly shares his insights in his role as a Forbes senior contributor and on Twitter and LinkedIn. You can also check out his speaker "sizzle" reel here.
Michael LeBlanc is the Founder & President of M.E. LeBlanc & Company Inc and a Senior Advisor to Retail Council of Canada as part of his advisory and consulting practice. He brings 25+ years of brand/retail/marketing & eCommerce leadership experience, and has been on the front lines of retail industry change for his entire career. Michael is the producer and host of a network of leading podcasts including Canada’s top retail industry podcast, The Voice of Retail, plus Global E-Commerce Tech Talks , The Food Professor with Dr. Sylvain Charlebois and now in its second season, Conversations with CommerceNext! You can learn more about Michael here or on LinkedIn.
Be sure and check out Michael's latest venture for fun and influencer riches - Last Request Barbecue, his YouTube BBQ cooking channel!
Michael LeBlanc 00:05
Welcome to the Remarkable Retail podcast Season 5 Episode 13. Presented by MarketDial. I'm Michael LeBlanc.
Steve Dennis 00:12
And I'm Steve Dennis.
Michael LeBlanc 00:13
Well, Steve, you're a Ghostbusters fan.
Steve Dennis 00:16
Oh, absolutely.
Michael LeBlanc 00:17
We are crossing the streams here today because we are live, in person again. You know how great I feel about being in person with you. (Plays song, "Happy Together")
Steve Dennis 00:26
Oh God, that's, that's beautiful.
Michael LeBlanc 00:33
Happy Together, Steve, (crossover talk),
Steve Dennis 00:34
I'm getting a little verklempt.
Michael LeBlanc 00:37
So yeah, it literally we went years without seeing each other in person. Now we've seen each other twice in a row. Last week we we're at Groceryshop in Vegas.
Steve Dennis 00:43
Was that last week? I've been on flights to 7 other countries, (crossover talk), since then.
Michael LeBlanc 00:46
Yeah, you've been on a worldwide tour, (crossover talk). I have as well. I went to Vancouver, then New York City, then back here. We are at the NACS Conference, Big Show. What do you think?
Steve Dennis 00:56
It is big. So, NACS stands for National Association of Convenience Stores. There's a lot of convenience type items here, most of which are salt, or sugar based,
Michael LeBlanc 01:08
So far,
Steve Dennis 01:10
So, I needed the name of a good cardiologist and a diabetes doctor. But,
Michael LeBlanc 01:13
But lots of yummy beverages. And then we got two great interviews coming up for future episodes with all kinds of interesting people. Right now, I'm enjoying the new KitKat birthday cake flavor just launched. And so, Listen, this is a tremendous show. I have a very special guest on this episode. This is what I mean by crossing the street. It was actually recorded live in person at the Last Vegas (inaudible) Groceryshop. We sat down with Tony Shan. He's the Head of Tmall Global for the Americas for Alibaba.
Steve Dennis 01:39
Yeah, it was a super interesting conversation. I think Alibaba is a fascinating company. Now I think we've referenced it a number of times. All the so-called "New Retail" initiatives are over in China. So, we get into that a bit. As well as, in particular, what Tony's working on.
Michael LeBlanc 01:57
Well, it's a great discussion, because as you were saying, I, I get Tmall and I get Alibaba. But I wasn't sure the connection between food,
Steve Dennis 02:06
Yeah.
Michael LeBlanc 02:07
At a grocery show. So, he unpacks that for us. It's a great interview that's coming up right after the news. All right, let's get, let's get to the news of the week. Let's start with some macroeconomic stuff. Let's start with job claims GDP, goods versus services. What do you read of the tea leaves?
Steve Dennis 02:17
Oh well, you know, it's interesting. So, inflation still looks to be challenging in the US in a bunch of other markets. The UK, I think, you know, is really going through a lot of stuff.
Michael LeBlanc 02:25
Yeah, yeah.
Steve Dennis 02:27
But we got weekly jobless claims numbers in the US, and they were quite low. And I think there was some expectation. Now that, I think there was some expectation that with interest rates going up several companies announcing layoffs, that we might start to see the jobless claims tick up. But that's not happening yet. So, it suggests that the labor market continues to be incredibly strong.
Michael LeBlanc 02:53
Yeah.
Steve Dennis 02:54
Which is good in a lot of respects, but maybe not so good for inflation starting to, to tick down. The other thing was, we got the third straight quarter in the US of GDP being down, though only slightly. But what I thought was interesting was just the mix that, that goods were down, I forget the exact number but considerably, whereas services were up, and it really just sort of speaks to the way the economy is shifting with services being strong and, and the sale of actual goods, decelerating pretty significantly.
Michael LeBlanc 03:25
Well, let's talk about how it's all panning out for a couple of retailers from earnings. What, let's start with, start with Bed Bath and Beyond.
Steve Dennis 03:31
Do you have, do you have the, the sound of a crashing car on that, that board of yours? Yeah, they reported their earnings. And I don't think anybody was surprised, to, to see that they were not good. In fact, they were quite awful, comps down 26%. They had their loss widened. So, certainly not moving in the right direction in terms of profitability. About $300 million of cash went out the door. So, yeah, things are pretty challenging there. And I mean, I wish I could be more optimistic about what they can do there. But you know, once the momentum starts going the other way and they have to start, you know, closing stores, cutting expenses. It just doesn't give them a lot of room to move.
Michael LeBlanc 04:17
I g-, I guess if there's any, you know, perspective, it is a trailing indicator. I mean, we are talking about results that happened in the past which maybe you know, maybe they break, break free and they can set (crossover talk) some momentum into the, into the holidays, right? I don't know.
Steve Dennis 04:30
They, they, claim they're going to break even in the second half of the year.
Michael LeBlanc 04:33
Okay.
Steve Dennis 04:34
So, we shall see, I'll take the under on that.
Michael LeBlanc 04:35
All right. Now we also heard, got earnings from Nike and Costco are different stories, I think.
Steve Dennis 04:41
Yeah, so Nike, actually Nikes top line was pretty good. They, they still are having struggles in China, like a lot of, of folks are, which is a big market for them. But their sales on a currency adjusted basis, were up like 10% I think overall, and that was like 14% North America, something like that. So, a pretty strong performance. But two pieces of bad news, their earnings were down. And that's really the first time I think for them that, you know, post-COVID sort of seeing or since the, the depths of COVID seen a decrease. But the big thing that got attention and sent the stock down a lot was that their inventory levels were up 44%, year-over-year.
Michael LeBlanc 05:22
Wow, wow.
Steve Dennis 05:23
65% in North America.
Michael LeBlanc 05:25
Wow.
Steve Dennis 05:26
You know, again, we've, we've talked about this. And, you know, this is like, a 12th big retail brand that has reported this real disconnect between inventory levels, and sales levels. They chalked it up to supply chain issues where stuff that was supposed to come in,
Michael LeBlanc 05:40
Sure.
Steve Dennis 05:42
Came in late, like two quarters worth. And then stuff that was supposed to come in later. came in early.
Michael LeBlanc 05:48
They do make this stuff though.
Steve Dennis 05:50
They do contract for it.
Michael LeBlanc 00:52
Yeah.
Steve Dennis 00:53
So, it continues just to be you know, every time you sort of feel like well, maybe we're largely beyond the supply chain issues, you get a story like this,
Michael LeBlanc 06:00
I think they've gone too far down the DTC path versus wholesale. I mean, now they don't, they don't really have wholesalers to phone up and say, hey, I got, I got an offer for you to move some new product.
Steve Dennis 06:10
Well, I mean, that is one of the risks of shifting towards DTC and their, their direct business was, was up I think around 14%, something like that, whereas the wholesale business was, was flat or down a little bit. So, I mean, that mix shift continues. I don't know that I would have concluded that necessarily, but it's definitely a different, a different dynamic. And they're taking on way more risk when,
Michael LeBlanc 06:39
Yeah,
Steve Dennis 06:40
When they're going to work through their own, their own channels. Now Costco was, continues to be a real success story, their comps were up like 13-14%. Profits up and I think, you know, it's a combination of it's just a really great business model. But as consumers are looking for more value, they obviously have a strong value play.
Michael LeBlanc 06:53
Yeah, they turned, they turned to Costco and I'm sure they're still getting some benefit from food consumption being at home versus in food service. (Crossover talk), and they are sampling,
Steve Dennis 07:00
So, getting that and you know, they are sampling again, and you know, (crossover talk), I'm always there for the free samples but for a while you could not get those damn samples.
Michael LeBlanc 07:08
You know, I had to, I had to actually eat before I went to Costco because usually, you know, I just, I'd wait till I get to Costco. Let's talk about Peloton. So, interesting news, farther down the path or the treadmill, so to speak, ongoing into wholesale to deal with the Dick's right.
Steve Dennis 07:24
Yeah, so they announced, I guess, a month ago that they were selling on Amazon and a couple of other attempts to go, more, into wholesale. So, another brand taking the D out of DTC as our friend Simeon Segal says. So, yeah, they're going to Dick's Sporting Goods. So, you know, I feel like, you know, on the one hand, there's some merit to this sort of strategy of a balance of direct, and wholesale. But increasingly, as you look at their numbers, their chief marketing officer left. You know, there's an air of desperation as well. But I do think Dick's Sporting Goods, you know, great brand,
Michael LeBlanc 07:57
Yeah, yeah.
Steve Dennis 07:57
Good partner. So, I think, you know, that has the opportunity to be pretty successful, but it's certainly a huge, huge shift in, in what their prior strategy was just, you know, even six months ago,
Michael LeBlanc 08:08
Well, it's certainly not a specialty store outlet strategy. I mean, Dick's is, is massive, right? They're a massive player in across the country.
Steve Dennis 08:15
So, I think they're going to be, I may have this a little bit wrong, but I think they're going to be, you know, adjusting the sort of SKUs they sell there. So, there's going to be a little bit of a kind of channel management strategy, I think in terms of the offering and the pricing.
Michael LeBlanc 08:28
All right, now, let's head to the Wobbly Unicorn Corner. Wait,
Steve Dennis 08:31
No, no,
Michael LeBlanc 08:32
No,
Steve Dennis 08:33
Nope. we're actually not going to go there this week. Stop, stop,
Michael LeBlanc 08:35
Stop, stop. Okay.
Steve Dennis 08:36
Normally, at least in the last several weeks, we have gone there where we hear tales of woe, from former unicorns that have lost their status and are struggling. But because we try to be positive here every once in a while, there's actually some good news coming out of the digitally native vertical brands, several brands. Down-swell, popular support, that I think is Marc Andreessen sharing. And sorry, we're going to go for the inside venture capital jokes now. But now three, three of these DTC digitally native vertical brands, did some capital raises in the past week or so. Caraway, which is a home goods brand cooking products, raised $35 million. Monos, which is an accessory brand, I, I happen to own one of their, (crossover talk),
Michael LeBlanc 09:01
I got one right. It's a very nice bag.
Steve Dennis 09:12
Backpacks, I got a good deal on them,
Michael LeBlanc 09:15
I've never heard of them. Is that where, how did you come across them?
Steve Dennis 09:28
Oh, I, I don't know. Being a thought leader. I guess, (crossover talk), Being a thought yeah,
Michael LeBlanc 09:40
They just come to you, right?
Steve Dennis 09:43
Yeah, I get, I get like the thought leader filter, it just gets dropped from heaven on me. They raised $30 million. And then Everlane, which has been around for (crossover talk), for a while. They raised $90 million. So, you know, at a time where a lot of these brands have lost as we've talked about a bunch of times, lost a ton of market value. And a lot of venture capitalists and other investors have stepped away from the table. Here are three brands that were able to do pretty good capital raise. So, I don't, you know, we don't know because they're private. We don't know much about their financial performance. But apparently, there are some investors that are willing to step-up and write some pretty sizable checks.
Michael LeBlanc 10:08
All right. And speaking of counterbalancing news, physical retail, still not dead,
Steve Dennis 10:15
What, you're kidding? Yeah. Turns out, yeah, physical retail st-, still not dead. A few pieces of news this past week: 1) we're actually seeing that US store openings continue to outpace closures, at least according to BDO. So, 2,478 new stores opened in the United States. And then we also got an announcement from Ralph Lauren, which is doing a little bit of a Nike strategy in terms of shifting a bit away from wholesale and more towards direct-to-consumer. They are going to open, or they're planning to open, 250 stores across 30 markets. And then ThirdLove, a DTC brand. They're continuing to expand, I think they're going to, like triple their store count in the next year or so. And then this is just I mean, this is hardly like a, a new story about expansion. But I was just blown away by the number that Starbucks opened its 1000th store in Shanghai. So,
Michael LeBlanc 11:14
A 1000 stores,
Steve Dennis 11:15
A 1000 stores (crossover talk). Now, Shanghai is a very big city. (Crossover talk),
Michael LeBlanc 11:20
I think there's like the entire population of Canada and, (crossover talk),
Steve Dennis 11:23
Yeah, 30 million.
Michael LeBlanc 11:24
Yeah, yeah.
Steve Dennis 11:25
No, it is, admittedly, it is a huge city, but trying to get my head around a 1000 stores. I remember there was an old joke, I think maybe John Stewart told on The Daily Show, was that Starbucks recently announced the first opening of a store inside another Starbucks. I don't think that is literally true here. But it does seem like many of these stores need to be pretty darn close to each other to get to 1000 stores,
Michael LeBlanc 11:46
I would think and I was doing a little bit of a bit of research, and there's actually now six. That brings the store count down to 6000 in China. Now for context, there are 8900 company owned and 6400 licensed in America. So, just to give the listeners some context about, you know, how big is big. I mean,
Steve Dennis 12:01
Apparently,
Michael LeBlanc 12:03
That's a lot of stuff. All right let's talk about Sam's Club. They've opened a dedicated design studio, which of course, we chatted about briefly with our last guest, Tim Simmons, right from Sam's.
Steve Dennis 12:18
Yeah, I mean, I think, you know, it's just evidence that Walmart and Sam's Club are continuing to invest in innovation. So, some people may know Walmart is building this new campus in Bentonville, which I got to drive by a couple months ago. But in any event, yeah, they're going to be opening a dedicated design studio to continue to foster innovation and, and collaboration. So, I thought that was pretty, pretty interesting. If folks go online, and will do a link where you can see,
Michael LeBlanc 12:34
Yeah,
Steve Dennis 12:35
Some of the renderings of that space, which looks pretty cool.
Michael LeBlanc 12:46
Well, all right. Well, that was a great news segment and now for the listeners out there will be posting some pics from live from this conference. Lots of interesting sights and sounds and thanks again to MarketDial who is hosting us in the, in their booth. It's beautiful to have a podcasting studio. And speaking of MarketDial Let's hear a few words from them. Just before we get to our interview with Tony Shan, Head of Tmall Global in the Americas for Alibaba.
Michael LeBlanc 13:24
MarketDial is an easy-to-use testing platform, emboldens great decisions, leading to reliable, scalable results. With MarketDial you can be confident in the outcome of your in-store pilot initiatives before rolling them out across your fleet. In a challenging retail climate of supply chain disruption, labor shortages and dynamic customer behavior. The need for reliable insights has never been greater. Validate your remarkable ideas with MarketDials in-store testing solution. The proof is in the testing. Learn more @marketdial.com, that's marketdial.com.
Michael LeBlanc 13:40
Tony, welcome to the Remarkable Retail podcast. How are you doing this afternoon?
Tony Shan 13:48
Very good. Thank you for having me. It's great to be here.
Michael LeBlanc 13:50
Well, we're all here together in person at Groceryshop. You know, this is really, we are looking forward to this. And learn more about Alibaba and Tmall. I think it's Alibaba's Tmall. I wanted to ask you about all that. (Crossover talk) Got to get all that nomenclature worked out. Who better to do that than yourself? So, let's start at the beginning. Tell us about yourself and, and who you are and what you do for a living, bit of your background?
Tony Shan 14:12
Okay, great. So, I've been in the retail industry for around 15 years. I started off in a more traditional brick and mortar retail in merchandising and planning. But in the last 10 years or so I've been in, in eCommerce for, for a while. And specifically, most recently more in the Chinese eCommerce space.And currently I am leading a team here for Alibaba's Tmall Global, which is our B2C cross-border eCommerce platform, servicing the Chinese market. Myself and my team, what we do is we work with brands and merchants from North and South America that are interested in selling and exploring the Chinese market. So, we work with them to help with market entry, and, and reach our consumers on our platform,
Michael LeBlanc 15:04
Excellent. Now, retail sometimes has been described as an accidental career. Was it an accident for you? Did you always want to be a retailer? How did you find your way into those original gigs?
Tony Shan 15:14
A great question. Yeah. So, when I was in college, I was actually working part-time at a Gap store as a sales associate, to, to make some extra money, for tuitions and, and such. And I just really enjoyed the experience. Like kind of seeing products coming in each season and how customers are reacting to it. It's always very fast paced and dynamic. So, I always thought it was interesting to me. It was either that or accounting,
Michael LeBlanc 15:44
Good choice,
Tony Shan 15:44
So, it's the other choice. So, so, after college, I kind of just got into, into retail.
Michael LeBlanc 15:51
So, we kind of started chittin and chatting about Alibaba, Alibaba and Tmall. Why don't we step back? There's no one who's going to be listening to this podcast who hasn't heard of it. But maybe they might not know enough about it. And then I want to talk a little bit deeper on its relevance here to grocery and to CPG brands. So, why don't we start off, just give us an ug-, sk-, sk-, sketch a landscape for us, so to speak, of how these two brands coexist? Which one does what? What makes it different in scope and scale? That kind of stuff?
Tony Shan 16:17
Yeah. So, Alibaba is its umbrella, the parent company. It's a multi-national multi-faceted company that covers many different industries, sectors, and also different international markets as well. So, we have two major divisions, I would say, within Alibaba, one is focused more on the domestic Chinese market. So, we have business units really servicing the Chinese consumers or merchants within, within China. And then we also have a global division that is basically anything outside of China. And then we also have these affiliated businesses, like payment, cloud, marketing, local delivery, logistics that sort of supports our core commerce business. And also, be able to have a, a basically a one-stop solution to our consumers, and also our, our merchants that we work with.
Michael LeBlanc 17:09
Neat. Now when I, when I think of your business, I think of, is it Free Shippo. The flagship of Freshippo, Fresh Hippo,
Michael LeBlanc 17;13
Fresh Hippo,
Tony Shan 17:16
Like the animal, (crossover talk), yeah
Steve Dennis 17:20
Did you always want your hippo fresh? Frozen hippo,
Michael LeBlanc 17:23
And you don't want him mad. You don't want an angry,
Tony Shan 17:24
I think it's because they like to eat everything, maybe. So, and it's fresh. So,
Michael LeBlanc 17:29
There you go. So, so, that to me, is the physical embodiment of grocery. And we see these wonderful videos and, and this, you know, delivery right in the neighborhood kind of stuff. Talk about your presence here. And what again, is the relationship with gr-, you know, what brings you to Groceryshop and CPG? And what are they called fast moving consumer goods. Help, help us understand that.
Tony Shan 17:49
Yeah, so Freshippo is our innovative grocery store concept. It's not just a typical, typical grocery store. It's also a food court, a warehouse, a fulfillment center, to basically offer fresh, fresh groceries to consumers in China. So, I was just on a track on a panel speaking about cutting edge innovative grocery experiences from around the globe. And I think you know, Freshippo is a great epitome of innovative experience, at least for the Chinese market. And that, that is also I think, being duplicated elsewhere around the world as well. But also, my business unit, specifically Tmall Global, we work with a lot of CPG and food brands, as well that are interested in selling to, to China. A lot of well-known global brands, CPG global brands that you've heard of, like, you know, Ocean Spray, Sun-Maid raisins. We also work with a lot of small family-owned businesses as well. Emily's Chocolates from Washington State and our Freshippo business. We also source fresh cherries and lobsters from here in the US as well.
Steve Dennis 19:01
We're getting you just as you've come off the stage, you mentioned the panel you were on. Wh-, what were some of the key lessons or what were some of the other, other things you highlighted?
Tony Shan 19:10
Yeah, so we talked a little bit about consumer expectations and shopping preferences. And when it comes to groceries in China. I mentioned our customers really value convenience. They like to be able to shop anywhere, anytime. So, with Freshippo we have this mobile app that you're able to browse, you know, the closest location near you. The selection offers there and you're able to shop on this app. And then have it delivered to your apartment and into your house within 30 minutes if you're within the three-kilometer radius within the store.
Tony Shan 19:38
But also, for those of you that like to shop in-store, right, like you can go into the store, use the app and browse and be able to scan QR codes on products to be able to see the ingredient list. And learn about where it's being sourced from. And when it arrived in-store even and was able to shop there. And you can actually, I mentioned this also a food court. So, as you shop, you can find the lobster that you're buying and be able to have it cooked there and eat there with your friends and family while you're shopping. And then if you don't feel like carrying your groceries around, and maybe you're going to dinner after you shop, you can actually schedule a delivery as well. So, it's very convenient in terms of, from a consumer's point of view, like however they want to shop, however they want their food to be delivered. Freshippo will be able to fulfill that, you
Steve Dennis 20:33
You know, I feel like in the United States, a lot of people have been paying attention to the innovations in China and Alibaba in particular. And sometimes there's a sense of well, you know, if it's popular in China, eventually it's going to make its way to the US or make its way to Canada or, or Europe. But that doesn't always seem to be the case. Do you think that's particular to the different cultures of the different countries? Is there something about legacy retailers having a hard time changing, whereas Alibaba, you know, not really a startup anymore? But, but started with a blank sheet of paper in a lot of respects to build out (crossover talk), the whole ecosystem?
Tony Shan 21:12
Yeah, I definitely think there are nuances in terms of culture, but also how consumers behave as well. There are definitely things that translate well, like the Global Shopping Festival. So, for example, the Double 11 Shopping Festival is our marquee event of the year, and it's the largest in the world. And, and now, you have Prime Day that's very similar to this concept of Double 11 Shopping Festival. But things like live streaming, which is very popular in China. It hasn't really taken off here in the US, but people are trying, right, I think it might take a few years. But I think what also makes a big difference is because we have this ecosystem within the Alibaba umbrella, that everything is really integrated together. It's a more seamless experience where you don't really have to download, you know, other apps or jump into a different company's website, etc., to be able to shop or do whatever you want it to do. So, for us, we're really giving the consumer that seamless shopping experience or browsing experience, whatever it is,
Steve Dennis 22:17
And do you think that sort of integration is inevitable in other parts of the market?
Tony Shan 22:22
I think there are players, of course, who are trying to do that right now. You know, Amazon, I'm actually X Amazon. So, Amazon's doing a lot of work in, in terms of like, kind of consolidating various components to, to make it easier for consumers to shop with their grocery concept like Amazon Go and Amazon Fresh. They are similar to Freshippo in a way as well. And I think it's really, you need players to be, who can have this one app experience to really help and contain the consumer, in, in their journey,
Steve Dennis 23:00
Perhaps a too open ended a question, but since you've got this vast experience, and you see what's going on, in a lot of parts of the world, are there any general lessons that you see in terms of what people get right, about innovation, particularly digital innovation, and what people tend to get wrong, or maybe not appreciate as much as they should pay more attention to?
Tony Shan 23:20
Yeah. I think, Alibaba, we started as an eCommerce digital company, right. And our mission is to make it easy to do business anywhere. And to do that you need to be able to connect, you know, supply and demand and, and globally, whether that's via online or offline. So, we've been spearheading this concept of "New Retail", which is really blurring the lines of online versus offline. It's really trying to digitize the entire retail value chain, to make that more integrated. A seamless experience, not only for the consumers, but also on, on the merchant side, as well. To be able to have all the information, all the data that they need to be successful. So, I think, of course, we're big proponents of eCommerce and, and China has the largest eCommerce penetration in the world.
Michael LeBlanc 24:07
It's gone up in COVID, right? Isn't close to 50%.
Tony Shan 24:10
I think it might have; it's going to break 50% this year.
Michael LeBlanc 24:13
So, 50 percent of all retail sales, (crossover talk),
Tony Shan 24:16
Retail sales are done online. And it's, (crossover talk),
Steve Dennis 24:18
Just could I clarify that because this is one of my, my pet peeves, ordered online, right? Because I think sometimes when people focus on eCommerce penetration, there's kind I think Alibaba is a great example of this. There's kind of the assumption that as eCommerce grows, that comes at the expense of physical stores, but not necessarily, right, if you've got it integrated,
Tony Shan 24;24
Exactly.
Steve Dennis 24;25
You may be ordering something digitally, but it's fulfilled from a physical store. And if you didn't have the physical store, you wouldn't necessarily have gotten the sale. So is that (crossover talk),
Tony Shan 24:51
Yes, (crossover talk) I am glad you brought it up. But that was my next point. It's really not an eCommerce or bust as really you think. There's definitely a role that offline stores need to play as well. So, that's why I mentioned our "New Retail" is really kind of the integration of online and offline experience. To be able to utilize both of these, these channels it's not just like an omni-channel, you just have various channels. It's about integrating or harmonizing those channels together to serve the customers.
Michael LeBlanc 25:18
So, you know, as we just, we think about innovation. I mean, you guys are the, the OG of the Super-app, you're you touched on it before that the innovation of bringing it all together into one the multiple apps. And then I wanted to connect it with what consumers love, like when I think of, of, we've got some great grocers in Canada T&T Supermarket, it's part of Loblaws. And they have redefined what fresh means in the grocery store. So, these two things together technology and a consumer, that, that just loves fresh and redefines how fresh actually needs to mean. Tell me how, when you look to the future two, three, five years, what, what do you see? And what are you working on?
Tony Shan 25:58
Yeah, I think freshness is one, Freshippo is we need to have the, the fresh in Freshippo. So, when a customer walks into the store, for example, today is a Monday, right? So, if you go into a store, you can see packaged produce, and milk cartons or egg cartons that have the number one on it, meaning that these items arrive today. So visually, as a consumer, you already know that you're getting the freshest of the ingredients. So, that is something that we're continuing to do, because that's what's expected from a consumer’s perspective,
Michael LeBlanc 26:29
Have you started growing in-store, I've seen some, some green examples where grocers are bringing in and actually a little micro-greenhouse of sorts. Is that, is that on the roadmap as well, I mean, it's fresh on the back of a truck or will just grow it right, here, so now vertical stores, (crossover talk),
Tony Shan 26:29
We are always evolving and developing new concepts as well to serve as different consumer behavior changes as well as different markets as well. But I think one thing we're also done over the years, especially during the pandemic, is how we can connect the farmers with the source of the products directly to the consumers as well. So, Freshippo has many different extension concepts as well, where we connect, like farmers directly to the end user,
Michael LeBlanc 27:13
Farm gate, we call that farm gate, kind of stuff,
Tony Shan 27:15
Yeah, and we also developed this community-based marketplace called Taocaicai, which is really focused on the lower tier cities. In the rural areas, you might not have a Freshippo store, within the area that you're in, but you still want fresh produce. But you might be a little bit more price conscious. So, this platform is also like a group buying platform where you can get the community together to buy certain things, and they come and arrive in bulk at these pickup locations. Then you can come pick them up,
Michael LeBlanc 27:44
Oh, I've seen that. Yeah, yeah, yeah.
Tony Shan 27:45
So it's, it's, it's a good price, and it's still fresh. So, it's, it's, a new thing that we're trying to, to service different markets as well.
Steve Dennis 27:54
Can you maybe just touch on? I mean, it sounds like there's so much innovation going on. How do you prioritize what gets worked on? Not you personally, necessarily, but you know, as, as, part of that process of, of, of improving convenience, more integration, all these different kinds of ideas. Massive technology investments, obviously, and, and investments in all sorts of other support. How do you figure out what to work on, how to prioritize that and which comes first, I guess, in many cases?
Tony Shan 28:25
I think, you know, technology is one thing, but also, we do have a lot of data in terms of the consumers, you know, browsing behavior, shopping behavior, what they're like, we do a lot of segmentation and targeting a lot of personalization as well. You know, our Freshippo app is based on what you bought in the past, you know, we can personalize and, and, and show you different things that that's on offer. So, I think that it really all stems from like the consumers, right, that they're really the core of our, our business and how, how they're shopping or what they're looking for. It's what's really guiding how we think about our roadmap and, and the different developments. Yeah, I think for us, we're definitely looking for more growth. And what's key for my business, at least, is really more selection, more different variety of products. We service 1.3 billion customers within our ecosystem. As you can imagine, they have a wide array of interests, looking for different things, as well. So, you know, my work and my team here is really we're looking for new brands and new products that's high quality, that's innovative, that's that consumers would want.
Steve Dennis 29:05
I know we're coming up on our time, and I'm going to ask you a very open-ended question. But what, what are you most excited about next either Tmall in particular, or Alibaba, bigger picture?
Tony Shan 29:49
And I think especially given the kind of the situation there with a pandemic in China, travel is still relatively limited. So, they aren't able to come out and explore and shop So, it's even more important for us to be able to bring these great global brands, and global products, whether it's food or grocery, or health wellness, which is really it's, it's what they're very cognizant about, to them at home. So, that is something that we're continuing to, to, work on. And continue to, to kind of seek out the new trends and the new brands that we have here.
Michael LeBlanc 30:23
If you had to choose, if I forced you to choose between convenience and freshness, two very important attributes. Could you, could you make that choice? Like if, if it comes down to, more convenient or more fresh, and sometimes the two don't go together? Could you make that like, what choice would you make? That's a tough choice for you guys, right?
Tony Shan 30:42
Very hard. Yeah, I think that is something that we have to balance as well. And, you know, we, we are looking at the data in terms,
Michael LeBlanc 30:57
Sure, sure.
Tony Shan 30:59
(Inaudible), for any given location, what type of potential consumer brands there are for any certain types of products, because we also want to reduce unnecessary waste as well, right. So, we want to optimize the inventory that we have in the store, to make sure that we're offering the freshness and the convenience, but also still kind of, (crossover talk),
Michael LeBlanc 31:13
It's a tough trade off to make, I think. Yeah, we want it all. All right,
Steve Dennis 31:22
Why are we forced to make choices, let's have everything but.
Michael LeBlanc 31:25
Well, Tony, thanks so much for joining us.
Tony Shan 31:27
Definitely, thanks for having me.
Steve Dennis 31:29
I, I think I have been encouraging clients and others over the years to, to really pay more attention to what's going on in China and Alibaba, in particular. All the innovation is really incredible. And who knows what's, what's next, it is very exciting to keep paying attention to what you've got in store. And thanks for joining us.
Michael LeBlanc 31:41
If you like what you heard, please follow us on Apple, Spotify, your favorite podcast platform, so you can catch up with all our great interviews, like our discussion with Seth Godin on what retailers can actually do to fight climate change. New episodes of Season 5, presented by MarketDial will show up each and every week. And be sure to tell your friends and colleagues in the retail industry, all about us.
Steve Dennis 32:03
And I'm Steve Dennis, author of the bestselling book, ‘Remarkable Retail: How to Win and Keep Customers in the Age of Disruption’. You can learn more about me, my consulting and keynote speaking at stevenpdennis.com.
Michael LeBlanc 32:17
And I'm Michael LeBlanc, Consumer Retail Growth Consultant, keynote speaker and producer and host of a series of retail trade podcasts, including this one. Plus, the host of the popular YouTube cooking show, Last Request Barbecue. You can learn even more about me on LinkedIn, or meleblanc.co.
Michael LeBlanc 32:18
Safe travels everyone.
SUMMARY KEYWORDS
Alibaba, consumers, crossover, store, retail, brands, china, Steve, business, Michael, continues, fresh, eCommerce, grocery, shopping, talk, dtc, innovation, customers, convenience