“Ecommerce Briefs” is my occasional series of news and developments from online merchants. In this installment, I’ll address grocery wars, international expansion by Amazon and Walmart, and Pepsi’s embrace of ecommerce.
Alibaba Eyes Kroger
In an effort to diversify and expand, Alibaba, the Chinese ecommerce giant, is following in Amazon’s footsteps with its “New Retail” initiative — acquiring brick-and-mortar stores in China and looking to make similar acquisitions overseas. Like Amazon, Alibaba believes that securing a stake in traditional retail is helpful to its growth.
Alibaba has invested almost $8 billion in brick-and-mortar stores in China, primarily by acquiring stakes in local supermarket chains. It also started a new supermarket chain that blends in-store and online shopping. Called Hema, the chain also operates as a fulfillment center, delivering online orders within an hour. Hema has 13 stores, 10 in Shanghai.
Now it appears that Alibaba may be looking at entering the American supermarket arena in a big way. Kroger, with 2,790 grocery stores, is considering multiple collaboration options — from a technology alliance to an outright acquisition by Alibaba. An acquisition could cost Alibaba $50 billion, four times more than last year’s acquisition of Whole Foods by Amazon. Working with Kroger could give Alibaba the ability to sell more American goods and access valuable data on American consumer preferences. Additionally, the potential partnership could give Kroger access to Alibaba’s marketplace in China, where consumers are eager to purchase American products.
Kroger is facing stiff competition from German discount grocers Lidl and Aldi as well as Walmart. Additionally, Kroger’s stock lost 35 percent of its value the day after Amazon announced its acquisition of Whole Foods. To quickly expand its online presence, Kroger reportedly offered between $300 million and $400 million to buy Boxed — the online bulk distributor of groceries and household goods. Boxed rejected the bid.
Amazon Expands in Brazil
In October of 2017 Amazon launched an electronics and appliance online marketplace in Brazil, Latin America’s largest market. Previously, Amazon sold only books in Brazil. Amazon will now lease a 50,000 square-meter warehouse just outside São Paulo, the country’s largest city. Amazon currently relies on third parties to ship their own goods sold on its marketplace.
However, Amazon receives many customer complaints in Brazil about delayed or canceled orders — something that is a lesser problem in countries where Amazon itself packs and ships orders.
Argentina-based MercadoLibre, Latin America’s largest ecommerce site, will likely be hurt by Amazon’s move. B2W Cia Digital, based in Brazil, is another online merchant that will likely be affected by Amazon’s expansion in the country.
Walmart and Rakuten
In January Walmart announced a partnership with Rakuten, one of Japan’s leading ecommerce companies, to provide products and services in both Japan and the United States.
Rakuten and Walmart brick-and-mortar grocery subsidiary Seiyu GK will work together to offer an online grocery delivery service in Japan. Seiyu’s current delivery service will be folded into the new offering, which will be called Rakuten Seiyu Net Super. It will launch in the second half of 2018. The companies intend to increase capacity in Japan with the establishment of a dedicated fulfillment center while offering deliveries from Seiyu stores as well. Product offerings include produce, meal kits, and products from merchants on Rakuten’s marketplace.
A joint press release stated, “To serve the needs of customers increasingly short on time for preparation, the service will include not only fresh produce and daily consumables but also a rich lineup of convenient items such as cut vegetables, partially-prepared foods, and ready-meal kits, as well as popular local gourmet products from merchants on the Rakuten Ichiba marketplace.”
Japanese consumers spend $19 billion annually on food, according to Yano Research Institute.
Also, Walmart will become the exclusive mass retail partner of Rakuten’s Kobo e-readers in the United States, giving it the ability to sell Kobo’s millions of e-book and audiobook titles on Walmart.com. All Kobo content will also be available through a Walmart and Kobo app, which users can access on mobile devices, desktops, and Kobo e-readers.
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PepsiCo announced it would be spending some of its tax savings to bolster its ecommerce efforts. The company issued a statement saying, “We have seen the benefit of investing in capabilities such as e-commerce, a business that is now approximately $1 billion in annualized retail sales for us, with a long runway for continued growth.”
In-store impulse purchases comprise roughly 30 percent of overall beverage sales, according to Ali Dibadj, an analyst at Bernstein Research. With fewer people shopping in stores, sales could plummet. While online shopping will not satisfy an impulse, Pepsi’s website directs consumers to other online sites — Amazon, Target, Walmart — for bulk purchases.