New retail has fallen in eight years, and platform business is returning to its essence

Exploring new traffic is the key starting point of new retail, but the new space for online traffic is the sinking traffic opened up by social e-commerce and content e-commerce.

On the first day of 2025, Alibaba announced that it would sell off all of its shares in Sun Art Retail. Together with the sale of Intime Department Store half a month ago, the only two key companies acquired from external offline retailers where Zhang Yong, the former head of Alibaba, had served on the board of directors have been sold. Coupled with the occasional acquisition rumors of Hema, the new retail strategy of Internet companies will eventually come to an end.

The original intention of new retail is to use the advantages of Internet technology, traffic and consumer insights, to advance To B and To C simultaneously, and to enter categories that e-commerce platforms cannot penetrate, such as fresh food, wine and beverages, and home furnishings, in order to achieve an increase in online sales penetration.

Since proposing the new retail concept in October 2016, Alibaba has intensively acquired offline retail companies such as Sanjiang Shopping, Intime Department Store, Lianhua, Xinhuadu, and Gao Xin Retail, as well as online platforms such as Ele.me from 2017 to 2018, and proposed the Tmall Store plan to penetrate into the community.

Today, the bold words of the past are more like optimistic expectations for the future under the confidence of e-commerce platforms. The development of the times is not subject to the individual will of any enterprise. Since Alibaba explored new retail, the online traffic pool has indeed expanded further, and a lot of it does come from offline, but not entirely from the large chain enterprises that Alibaba e-commerce started with, and not all the traffic flowing into the online pool enters Alibaba e-commerce.

The failure of e-commerce platforms in new retail is an inevitable result of the reshaping of the traffic structure within a certain period, and it also makes e-commerce platforms feel their own boundaries.

Now is actually the eve of the reshaping of the domestic traffic pattern, and it is more urgent than the new retail era, because we are now facing the traffic growth bottleneck caused by the population bottleneck, and AI is also ready to move. Platforms are looking for traffic everywhere, including instant retail and investment in AI. But at the same time, they also emphasize returning to their core advantages and the essence of business.

When traffic turbulence is brewing, it is important to understand the core traffic barriers of each platform and the commercialization conditions and ceilings of this traffic, so that we can understand their possibilities in the next traffic cycle.

1. Traffic is the key to new retail

Let’s go back nearly ten years.

At the beginning of 2017, Alibaba announced that its annual active user number was 454 million, which means that one out of every three Chinese people shopped on Taobao and Tmall. With high penetration rate, the growth rate dropped rapidly, with the annual active user number increasing by only 2.5% month-on-month and only 7.3% year-on-year.

The mainstream market opinion is that after Taobao's mobile transformation is basically completed, the growth space for new users is already limited, and the country has lost the e-commerce demographic dividend of 5-7 years ago.

At the beginning of 2017, Alibaba's per-user revenue contribution was 251 yuan. According to estimates by CICC and others, Alibaba's customer acquisition cost rose from more than 200 yuan to more than 400 yuan in 2016. After a brief decline at the beginning of 2017, the cost of acquiring new users exceeded 500 yuan for the first time by the end of the year.

As a giant traffic-consuming company, in the web era, Alibaba obtained a large amount of traffic by purchasing advertisements from various websites. However, in the mobile Internet era, the purchase and redirection of traffic advertisements within apps have been a clogged road for quite a long time.

Alibaba needs a new traffic entrance.

In 2017, e-commerce platforms accounted for only 13% to 15% of retail sales. The time left for e-commerce to account for 50% is only half (5 years).

In other words, there is still a vast space for offline sales growth. Although categories such as clothing, cosmetics, and 3C have been taken over by e-commerce, supermarkets/fresh food, which are more daily, have more frequent and rigid needs, and can still contribute relatively stable customer flow every day (at that time), seem to be a fertile land.

Earlier in early 2016, the first Hema store caused a sensation. Instant retail expert Zhang Chenyong once mentioned in an article that the important factual basis for Alibaba's new retail strategy decision is the success of Hema's Shanghai store. After the opening of Hema Jinqiao store, online orders continued to grow to an average of 20,000 orders per day, and other new stores in Shanghai also grew rapidly. "The density of home delivery orders from Hema stores exceeds that of Taobao. If the Hema model is copied to cover the whole country, the total order volume will exceed that of Taobao, and a major retail revolution is just around the corner."

Therefore, driven by the need to acquire new traffic entrances and convert offline traffic online, coupled with Alibaba's almost unrivaled status in the e-commerce field at the time, and the superiority of efficient Internet people in transforming the backward and corrupt situation of traditional retail, Alibaba made a big move in offline retail, aiming to become not only an online giant but also an offline giant.

Caixin also reported that Zhang Yong had met with Walmart's global CEO, Doug McMillon, and the two sides had a very pleasant conversation. The two largest online or offline retail companies in the world envisioned packaging Walmart's online and offline assets in China, such as No. 1 Store and Sam's Club, and Alibaba's online supermarket resources, such as Tmall Supermarket, to jointly establish a joint venture company, and then invest billions of dollars to build an absolute retail hegemony and seamlessly connect O2O. However, the two giants ultimately failed to reach an agreement on the equity ratio of the joint venture company. "Everyone wants to have a majority stake, but they can't get over this hurdle." The failure to reach an agreement led to the subsequent cooperation between Walmart and JD.com.

Even so, the only competitor Alibaba encountered in offline shopping was Tencent. When the two companies, which have massive amounts of consumer data, were most confident in the market, they had the ambition to integrate and clean the scattered data from e-commerce, entertainment, social and local service platforms into operational and meaningful data, and realize the overall operation of consumers' "panoramic data".

2. The ceiling of new retail has not been opened, but has been opened by social traffic and live broadcast closed loop

Time goes back to the present.

Looking back at the actions and results of the so-called new retail transformation over the years, the biggest difficulty lies in overly high expectations and limited capabilities.

E-commerce's transformation of retail has seriously underestimated the fragile but huge inertial survival characteristics of offline stores, and is often eager to see scale and results. When great efforts cannot create miracles, we will eventually see that the limited innovation of e-commerce cannot solve the fundamental problems of retail. Ultimately, the best retail companies are not those with strong capital, but those with careful budgeting. This is also the quality that e-commerce people are most likely to lack.

The offline business suffered a setback, but on the other hand, the opening of the online traffic ceiling was ultimately not contributed by Alibaba, a giant company.

The differentiation of online channels, the sinking market and social traffic relied on by Pinduoduo, the algorithm-driven and content traffic introduced by Douyin, and the formation of a closed loop of content traffic-e-commerce/local life transactions through live streaming e-commerce, Tencent's private domain precipitation through offline stores + corporate WeChat/mini programs/video accounts, and the forced promotion of online fresh food purchasing habits during the epidemic are all the main driving forces for the increase in online penetration in recent years.

As for where these incremental online traffic will go, it will ultimately come down to consumer demand, consumer spending power and spending habits. The world does not revolve around Alibaba. Therefore, recognizing limitations and divesting redundant businesses has become one of Alibaba's main actions in sorting out its e-commerce business.

3. Return to the essence of platform business

Finally, let’s return to the essence of business.

The essence of platform business is to continuously consolidate traffic barriers on the one hand, and to continuously enrich and optimize the commercial monetization capabilities of traffic on the other hand. From social platforms to content platforms, to e-commerce platforms, or local life service platforms, they cannot escape this essence.

One of the reasons why Pinduoduo is known as the Internet company that understands e-commerce best in China is that it has fully released the social traffic of WeChat and formed an entry effect by relying on low-price supply. It still maintains extreme sensitivity to live broadcasts, videos, short dramas and various external traffic, and has formed a positive cycle of e-commerce platform through extremely efficient and low-threshold commercial products on the site.

The essence of the Douyin model is to gather traffic through new content with low thresholds and strong stimulation. Whether it is advertising, e-commerce or local life, it is a way to commercialize its traffic, and it is firmly focused on the essence of the platform model, which is traffic and traffic commercialization.

This is also why, after its rapid development in the local life sector in 2023, it made a significant retreat in 2024, shifting its focus from expanding the service-oriented takeaway business to the light-mode of attracting traffic to stores - including basic group buying of catering and last year's accelerated testing and expansion of product categories, and the sale of leads from local to comprehensive industries.

Whether it is group buying or online traffic, the essence is the sale of traffic, and food delivery exceeds its capacity limit under a certain investment cost. That is an area where Meituan, which has a service transaction mentality, is better at.

The essence of Meituan's business is also inseparable from the mindset of local service entrance. Its traffic mindset comes from the local grid service capabilities, including local grid supply and a set of instant delivery networks that have formed economies of scale. The core of commercialization is to form local traffic entrances and barriers through high-frequency, low-profit, high-threshold takeout, and earn high-profit advertising and service fees from local hotels and travel.

After Douyin grabbed some of the group buying market share and began to try food delivery, Meituan quickly strengthened its defense of food delivery, or in other words, its defense in local supply and instant delivery network. It started Pinhaofan, built satellite stores, and engaged in instant retail.

In addition to divesting new retail assets and returning to the platform model, strengthening the acquisition of new traffic and new commercial products, emphasizing the low-price war, maintaining brand supply, and using unique supply and service capabilities to solidify the mindset of being an online transaction portal are also the business essence of Alibaba e-commerce when returning to the platform.

Especially in the current cycle, as e-commerce suppliers, especially brand merchants, increasingly focus on transaction costs and efficiency rather than attracting new users and expanding scale, companies like Alibaba that excel in transaction services may regain their relative advantages.

So the question is, will Alibaba sell Hema? After Hou Yi left, Hema's new CEO just announced this week that Hema has been profitable for 9 consecutive months, with double-digit growth in 2024 and 63% of online transactions. We can certainly interpret this as a show of strength for subsequent transactions. But don't forget that when NetEase returned to its main business and divested non-core businesses such as Koala, it only retained the Yanxuan business that has both brand value and supply chain value. If it can run positively, Hema will also mean the same to Alibaba.