Alibaba acquired Lazada; Will It Disrupt or Accelerate Retail Digital Transformation?

Source: Linkedin

Alibaba Group recent announcement that it has entered into an agreement to acquire a controlling stake in Singapore-based e-commerce site Lazada for the price tag of US$1 billion will obviously open up business opportunities for Alibaba’s merchants by accessing to ASEAN market with the population of more than 600 million people and a rising middle class. Besides, the acquisition will disrupt both the current regional e-commerce players and retailers who now have to compete with a global e-commerce giant that provides C2C, B2B and B2C sales platform services.

From an economic point of view, the acquisition brings challenges and opportunities to industry stakeholders as this could be the start of a consolidation and shakeout among the region’s e-commerce companies who many of them cannot break even. However, consumers will benefit and experience a seamless customer centric omnichannel platform where they can choose from a large variety of merchandises at much lower prices. In addition, the logistics sector will enjoy a rapid growth since it is crucial for Alibaba to provide a high level of delivery services across all the channels and enabling consumers to experience a more convenient, faster and consistent order fulfillment.

The ASEAN retail sector has been very conservative in terms of omnichannel adoption and digital transformation. In addition, retailers are currently experiencing a crisis comprising weak consumer spending, low profitability and too many shops. The crisis is accentuated by continued low growth plus the rapid rise in online spending. Considering consumers now ‘shop’ in multiple ways, checking a store’s website, visiting one or more stores, looking at product reviews, viewing the prices of competitors on a smartphone whilst standing outside a store, and choosing finally whether to buy the goods in-store or online and collect it instore or have it delivered to a nominated address. This means retailers have to make clear strategic responses to the changing patterns of how consumers shop, including: deciding the proper number, type and location of stores and how to integrate fully their physical stores, the online sites and other channels such as social media coherently. According to IDC Retail Insights we expect that an increasing number of Asian retailer will make consistent investments in technology and evolving their brick-and-mortar stores to omnichannel stores, where the overall shopping experience offer is obtained by the right mix of store and digital technologies.

IDC has developed the Digital Transformation (DX) MaturityScape to help retailers to assess their current technology state and readiness to cope with the challenges and opportunities that digital transformation can bring to their enterprises. DX is the approach by which retailers drive changes in their business models and ecosystems by leveraging digital competencies. IDC MaturityScape Digital Transformation provides a framework for viewing stages of maturity in five key dimensions: Leadership DX, Omni-Experience DX, WorkSource DX, Operating Model DX, and Information DX. IDC Retail Insights believes that retailer will either become adept at digital transformation and thrive or fail to master the disciplines and struggle to survive.

IDC MaturityScape Digital Transformation is an important tool that enables retailers to:

  • Assess their capabilities and stage of maturity in digital transformation.
  • Enable a dialog among business and technology executives about goals and actions relative to digital transformation initiatives.
  • Identify areas of digital transformation capability that require strengthening.
  • Establish standards for pursuing digital transformation initiatives.

Apart from the initial market disruption, IDC Retail Insights believes that Alibaba will accelerate the retail digital transformation in ASEAN by providing a platform as a service (PaaS) and infrastructure to those retailers who desperately want a slice of the pie

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