Question

“For months, Daniel Zhang huddled with a small team in an underground garage in Shanghai. The chief executive of Alibaba Group Holdings Ltd. was working on a secret plan that would sound crazy even to many of his own colleagues 100 miles away in Hangzhou. Zhang wanted to launch a startup inside the e-commerce giant that would combine a grocery store, a restaurant, and a delivery app, using robotics and facial recognition to speed up logistics and payment. That project, Freshippo, has since become a major part of Zhang’s blueprint for Alibaba’s future, with 150 stores (and counting) across 17 Chinese cities.”

Question In light of the above observation, identify and critically discuss the strategy underpinning the “new retail” that Alibaba Group Holdings Ltd. is pursuing under Daniel Zhang, the chief executive and chairman. ?

Answer 1

The above-given case study defines the main strategy of freshippo project the Alibaba could opt to boost its revenue and speed up the logistics and payment. It explains the SWOT analysis of Alibaba, characteristics of the main strategy, and what other strategies Alibaba could use to achieve its desired goals.

The explanation of my answer with reference to the question is given below.

Explanation:

The main characteristics of the strategy used by Alibaba are as follows:

The freshhippo project is the main strategy highlighted in the given case study. Most services and goods are bought directly from shops and facilities in the region. For instance, food orders, groceries, buying movie tickets, and more that require a long waiting time and consumers don not want to wait. for more than an hour. The only way to do so is to pick it up from a nearby supermarket or a "black" market and send it to the customer for a secure delivery service. Freshhippo is supposed to make this easy.

- This will help in understanding the needs of the consumer and predict them.

- Freshhippo will help in fulfilling the orders in time and accurately without facing stockouts.

- It is essential for the quality management of services and products.

- It is essential in managing variable costs.

- There is an advantage in payment as well that many players are easy to leverage which is one of the payment apps. This helps Alibaba to get a better understanding of consumer purchasing behavior and wallet share as well as having a small commission per transaction as the enabler fee.

The SWOT analysis of the case given in the question is as follows:

Strength:

- Alibaba has a well organized financial muscle where it carefully planned and decided to eliminate its existing business to start a new business.

- The technologies used in expanding the business operation of Alibaba combined a delivery app, grocery store, and a restaurant, using facial recognition and robotics to speed up payment and logistics.

- Zhang provided top retailers with new rates of knowledge about their customers to draw big brands to their site. This involved, who was purchasing what, where do they live?, and which types of advertising performed best.

Weakness:

- Alibaba was unable to identify fakes and remove them. This resulted in losing consumers' and suppliers' trust and revenues as well.

- In the year 2007, Alibaba was unable to find innovative ways of minimizing the risks in the balance sheet and supplementing revenue. This resulted in zero revenue and worsen the balance sheet.

- Daniel Zhang was not able to find the seeds of revenue growth at the right time.

- The information and knowledge provided by Zhang were not appropriate. This led to fixing up meetings every weekend with two or 3 CEOs. These CEOs in 9 months suggested a degree of centralization of decisions.

Opportunities:

- Zhang suggested the freshhippo project, which could prove very beneficial for the organization if implemented successfully and effectively.

- Alibaba never markets outside China with Tmall especially that basically made Alibab the retail king that it is now.

- Alibaba is strengthening the relationship with the Chinese customers by raising the share of distribution, payment applications and allied companies such as event bookings, bill payments, banking, and more.

Threats:

- Since new products are technology-enabled, the production costs are high and their failure could be a huge loss with effects on Alibaba's stock prices and market share.

- Freshippo's business model is typically best achieved by small hyper-vendors. So there will always be a tremendous chance of losing the company to hyper-local rivals.