Think America is the be-all and end-all of retail? Think again. Ted Rubin, acting CMO of Brand Innovators and co-founder of Prevailing Path, explores why we need to look further than the States to understand where the future of retail really lies.
Ask the average American what the largest retailer in the world is, and you're likely to get a few familiar answers. It's got to be Amazon or Walmart, right? Not so fast. While Amazon is certainly one of the biggest retailers in the world, Chinese eCommerce giant Alibaba is the largest by a comfortable margin. And that's not an accident, it's a trend. There are a ton of good reasons that Alibaba has grown at such a rapid rate, and it's a story that you'll see repeating itself in the years to come. The US may be a huge, dynamic retail market, but the future of retail is not just about the US, it's global.
At first glance, Alibaba's story sounds a lot like that of popular start-ups in the US, with a visionary leader who wouldn't take no for an answer, and a large, untapped market waiting to be served. But Alibaba is not the average start-up, and China is anything but the average market. With more than 1.3 billion residents, China has more active internet users than the US has residents. Alibaba launched at a time when that market was in dire need of an eCommerce hot-spot and has benefitted from good relations with the Chinese government.
The perfect storm
So, you had a massive market in need of a major online retailer, a rapidly growing economy, and a population where many people were looking to shop online for the first time. The craziest part? China's internet penetration is just over the 50 percent mark, so there's still a huge, untapped local market that can fuel further growth for Alibaba. Now compare that to the United States, where we have a clear leader in Amazon, but also a huge, competitive market with big-name online retailers vying for our attention. Our internet penetration is above 90 percent, so there are also fewer new consumers out there waiting to engage with eCommerce for the first time.
These statistics show that while the US remains one of the world's largest retail markets, the future is ultimately global. Alibaba's explosive growth won't repeat itself in every country, but there are many eCommerce voids waiting to be filled across the world. When the conditions are right, with a healthy economy, a new or growing middle class, widespread internet access, a market in need of retail options, and a government interested in expanding its country's online economy, you've got all the ingredients for the rise of new mega-retailers.
The next wave of mega-retailers also has the benefit of learning from those that came before, rather than starting from scratch. Alibaba and Amazon are both successful because they do a lot of different things well and bring innovative ideas to the table — but they also have some key differences in philosophy. Aspiring mega-retailers in under-served markets can learn plenty by looking at what both companies bring to the table.
The popularity and rapid growth of Alibaba is also a reminder that for US-based retailers, expanding into large, relatively untapped markets will come with its share of challenges, including loyalty. If you've spent your life shopping from a local eCommerce giant that already takes care of your needs, then you may not be too interested in seeing what else is out there. After all, when was the last time you logged into Alibaba's US-based site, rather than buying from Amazon?
There are still plenty of great retail stories to be written in the US, but in the big picture the future of retail is global. There are many untapped markets where new businesses are working to fill the eCommerce void, so Alibaba is far from the last global success story. The US is likely to remain one of the world's largest retail markets, but our biggest businesses are in for some new competition. If they are to remain in the game, now is not the time for complacence, but for innovation.