The challenge will lie in establishing a strong foothold in lower-tier cities, IGD said.
China’s top retailers were setting records in a store opening race in December 2020, with Alibaba opening 21 new Freshippo stores and JD.com launching 14 SEVEN FRESH outlets in just one month, IGD reported.
Alibaba’s 21 new stores include 19 Freshippo supermarkets and two Freshippo Mini. A Freshippo official commented that the store opening in December has been the fastest in the company’s history.
Meanwhile, JD’s 14 new stores in the same month include SEVEN FRESH supermarket and its community store format SEVEN FRESH LIFE. JD.com’s official post revealed that the new openings are in Beijing, Tianjin, Tangshan, Langfang, Guangzhou, and Huizhou.
IGD commented that the store opening race is also the race of establishing a strong foothold in lower-tier cities. The report noted that the main challenge will be on how to adapt the operating model that works in tier-1 and tier-2 cities in less developed areas.
“This challenge is manifested into many sub-areas, from shopper attitude, shopping habits, visit frequency, spend level, local preferences to supplier network, blockchain and logistics,” IGD’s senior retail analyst Jiong-Jiong Yu said.
IGD believes that both companies have the capability of solving these puzzles, by way of utilising their abundance of data and sophisticated algorithms.
“There will be failures and store closures along the way for sure. The only way to progress is to keep trying, which is often the case in China,” Yu said.
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