Powerful e-commerce and technology multinational Alibaba Group and Fung Retailing – the retail business of the Fung Group – this week announced a strategic partnership to bring more international lifestyle brands to Mainland China.
Privately-held Fung Retailing, whose turnover exceeds $1.8 billion, and stock-market listed Alibaba Group, whose fiscal-year 2018 revenue was $39.9 billion, say they “will join forces in global brand recruitment” and offer them merchandising, marketing and omni-channel distribution services.
Under a memorandum of understanding, the tie-up will focus on the Mainland China market as a first step, and then potentially expand to other regions using Alibaba’s various platforms.
Driving an online and offline retail model
In a statement, the companies said: “This collaboration aims to meet the increasing demand of Chinese consumers, building on the strengths of both parties in online and offline retailing. At the same time, it will better serve international brands by leveraging Fung Retailing’s global portfolio of brands, offline retail channels and marketing know-how, as well as Alibaba’s ecosystem, digital retail leadership, technology, and consumer insights.”
The move will be carefully watched by PRC and international travel retailers, which currently offer many in-demand brands that can be hard to find easily in the Chinese domestic market.
Alibaba boasts over 600 million users while Fung Retailing (totally separate from publicly-listed company Li & Fung Limited) has a network of over 3,000 stores that extends from Greater China to the U.K., France, South Korea, Singapore, Malaysia, Thailand and the Philippines.
According to both companies, this combination of online and offline retailing power and PRC expertise can help global brands tailor their product development and marketing strategies to meet the ever-changing needs of Chinese consumers.
Brands can also draw on Alibaba’s new retail channels, including Tmall and recently acquired Intime, as well as Fung Retailing’s brick-and-mortar stores, to theoretically reduce costs, risks, and speed up entry into the China market.
Alibaba Chief Executive Officer Daniel Zhang added: “It is an honor to kick off full-scale strategic cooperation with Fung Retailing at the historic CIIE. We endeavor to help global brands expand their foothold in the China market by fully integrating Alibaba’s strong capabilities in ‘New Retail,’ big data and technology with Fung Retailing’s unparalleled advantages in brand and supply chain resources. We believe this partnership represents the beginning of a new chapter for New Retail.”
At the deal signing ceremony at the China International Import Expo (CIIE) in Shanghai, Fung Retailing Ltd. Group Managing Director Sabrina Fung said: “Through this exciting strategic partnership with Alibaba, we will help customers navigate the full Chinese retail economy and reach China’s 1.4 billion consumers more easily. In this evolving retail landscape – and faced with changing consumer behavior and disruptive retail technologies – we are focused on developing new ways to do business.”
New Retail is the term coined by Alibaba’s Executive Chairman Jack Ma which he has described as the “birth of a re-imagined retail industry driven by the integration of online, offline, logistics and data across a single value chain.” That concept was a pervading theme of last week’s Trinity Forum, also held in Shanghai.
Smaller brands find globalized platforms
In his 2017 letter to shareholders, Ma went further: “Commerce as we know it is changing in front of our eyes. E-commerce is rapidly evolving into New Retail. The boundary between offline and online commerce disappears as we focus on fulfilling the personalized needs of each customer.
“In China, our New Retail initiatives are taking shape as the starting point to our ‘Five New’ strategy – comprised of New Retail, New Finance, New Manufacturing, New Technology and New Energy. We have already geared our organisational structure toward the support of our “Five New” strategy for the coming decades.”
Ma believes that New Retail will bring about a restructuring of the global supply chain “and change the complexion of globalization from the domain of big companies to small businesses.”
He said: “The Chinese government’s push for the Belt and Road Initiative presents a unique opportunity for Alibaba to grow our business internationally. Last year, I spent a significant portion of my time travelling around the world to seek shared interests. Much to my delight, almost all countries recognize the need to incorporate small businesses into a more-globalized environment.”