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E-Commerce Giants Make an Impression With Physical Footprints

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When talk turns to e-commerce, two names are always central to the conversation: Amazon and Alibaba.

Each dominates online sales and both have developed a suite of tools and services to foster growth for the thousands of companies that sell on their respective marketplaces. Further, both companies are credited with fueling the e-commerce boom—and maligned for ushering in the demise of traditional retail.

But now the two pioneers of the digital space have designs on the physical landscape as well. While scores of stores are going dark and offline retailers are scrambling to boost online sales, Amazon and Alibaba see opportunity in physical locations thanks to the vast stockpiles of data and insights each has derived from their online sales and marketing.

(Read more about the retail virus spreading through the fashion industry: How a Lack of Liquidity is Tanking Retail—And Who’s to Blame)

For Alibaba, which says it hosts 454 million active users, the strategy to date has focused on using its might to pull existing, giant retailers into the data age. On the other hand, Amazon, which accounts for one third of all e-commerce sales in the U.S., has concentrated its in-store maneuverings on developing smaller, more focused, Amazon-owned concepts.

Alibaba’s “New Retail” initiative is all about retrofitting established retail brands with the goal of blurring the demarcation between on and offline. This week, the company took an 18 percent stake in Lianhua Supermarket Holdings, a hypermarket chain, and subsidiary of Bialian Group, with which Alibaba has a strategic partnership. That alliance, which was announced in February, has brought the e-tailer’s Alipay mobile wallet to Bialian’s supermarkets. Similarly, Alibaba’s investment in the Sanjiang Shopping Club means the grocery chain will serve as a testing ground for new store formats.

Through the company’s controlling stake in Intime Retail Group, which focuses on the luxury sector, Alibaba is allowing the commercial real estate company to better connect via mobile to consumers that frequent its 29 department stores and 17 shopping malls.

While Alibaba partners with major offline players, Amazon is going it alone in its forays into the real world. The e-commerce company recently opened grocery pickup locations dubbed Amazon Fresh Pickup, where shoppers can drive in and have their selections loaded into their cars. And it’s testing Amazon Go, a cashier-less convenience store.

From groceries to books, the company has also been quietly rolling out bookstores—an irony that’s not lost on anyone who saw independent (and even chain) booksellers’ fortunes fall as Amazon rose to prominence within this sector. Amazon, which opened its first physical location in November 2015 and its most recent this week, currently has seven locations with at least six more slated to open soon, according to its site.

So why does Amazon think it can succeed where other stores have failed?

The company is attempting to marry the best of online shopping with the discovery that only in-person trips to the store can provide. For instance, the stores are merchandised with titles that have already earned rave reviews online, and signage provides snippets of real consumer feedback from sources like GoodReads to help shoppers choose the page turner of their choice. The stores also create a natural tie into what many see as Amazon’s biggest strength: Prime. Just as they do on the site, members enjoy discounted prices. And because non-members pay a premium, these locations also act as de facto membership drives. Though the selection is relatively small, it’s not surprising that the stores make room for Amazon products like Kindles and books related to its movie and television productions.

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