Alibaba Plots Digital Revolution

The competition between online retailers and brick-and-mortar stores is getting increasingly fierce in China. Alibaba's Tmall and Taobao marketplaces reported a combined 19.1 billion yuan (US$3.12 billion) in daily sales for their Double Eleven promotions, double the revenue generated by the United States' Cyber Monday, which is the Monday after Black Friday, the Friday following Thanksgiving.

The change in shopping habits comes as almost half of China's population now has direct access to the Internet. Of that number, nearly 80 percent own smartphones or tablets.

China's e-commerce market grew at an average rate of 71 percent from 2009 to 2012, and its value is expected to reach 3.3 trillion yuan by 2015, said a report released by consultancy Bain & Co on Wednesday.

However, chain retailers have had a tougher time over the past several years. The total sales of listed retail companies rose 12.2 percent year-on-year in 2012, a much slower growth rate than in recent years.

Their aggregate net profit decreased 7.7 percent from 2011, the first drop in recent years, said a report titled "China Power of Retailing 2013" released by consultancy Deloitte Touche Tohmatsu Ltd in August.

"The booming online retail sector is grabbing market share from traditional retailers with its advantages of lower prices, convenient payment systems and door-to-door delivery," said Long Yongxiong, a consumer and transportation industry joint leader at Deloitte China.

Under assault from e-commerce firms, the profit margins of the physical retail industry in China fell from 5 percent in 2005 to about 2.5 percent last year, a Kantar Retail report said.

In Alibaba's view, there can be a win-win situation for online retailers and their offline counterparts as long as brick-and-mortar stores go the digital route.

Wu Qian, senior director of Tmall.com, Alibaba's online marketplace, painted a picture of the future of the retail industry.

"All shopping malls will be equipped with Wi-Fi. As soon as you enter a mall, your mobile phone will automatically send you a message about the location of the stores you may like, which is based on your previous shopping preferences online," she said.

"There will be fewer and fewer cashiers because people will pay online, and shopping carts will be smaller as there will be home delivery."