China Doesn't Want to Go to the Store for Groceries, Either

Issue 12-04-17   |   Reviewer:   Thomas Coe


Although online sales of fresh food is a small fraction of total grocery retail sales, a battle is brewing in China, the world's largest food market, between Wal-Mart and Alibaba and other companies that partner an online platform with a brick-and-mortar retail chain. 

The stakes are large in both absolute terms, as well as for developing the model to exploit in other markets. Companies are finding it fruitful to develop partnerships with either online platforms (as with Wal-Mart) or with retail chains (as with Alibaba) instead of creating an in-house platform and losing time (and revenue) to the competition.

Wal-Mart is designating space within its existing stores in China as "dark stores" for its fresh grocery business, where orders can be taken, filled, and loaded for delivery with third-party independent contractor drivers who make the deliveries in a local market. As the model proves successful, expanded delivery can be offered by establishing satellite "dark stores" in an expanded network. As the local inventory patterns are established, greater efficiency in ordering the right inventory and in the proper amount will improve Wal-Mart's overall grocery operations.

Alibaba has also entered this market and has developed its partnership by making an investment in China's largest grocery store chain. As Wal-Mart's and Alibaba's services expand, other, smaller startup online retailers will be waiting to follow the leaders and get their slice of the action.

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