The Chinese retail revolution is heading west

Employees work at a logistic centre in Langfang, Hebei province, November 10, 2015.

First China, now the world: China's online retail giants are growing at an unprecedented speed. Image: REUTERS/Jason Lee

Richard McKenzie
Partner, Retail & Consumer Goods, Oliver Wyman
Pedro Yip
Partner, Retail & Consumer Goods, Oliver Wyman
Our Impact
What's the World Economic Forum doing to accelerate action on China?
The Big Picture
Explore and monitor how China is affecting economies, industries and global issues
A hand holding a looking glass by a lake
Crowdsource Innovation
Get involved with our crowdsourced digital platform to deliver impact at scale
Stay up to date:


This article is part of: Annual Meeting of the New Champions

China’s two biggest online retail groups, Alibaba Group and, are building retail empires unlike anything yet seen in the US or Europe. After buying stakes or forming alliances with traditional retailers ranging from convenience stores to big-box hypermarkets over the past few years, these two giants now dominate China’s mobile payments. And they are rapidly bringing to scale new forms of retail, where customers walk around a store using their smartphones both to pull up information and to pay.

Though Amazon is widely seen as having set the pace in digital shopping over the past two decades, a second center of retail innovation has simultaneously been developing in Shanghai. The clearest signs that Chinese retailers are also writing the rules for 21st century shopping are in food. Just 3% of Americans buy groceries online, compared with nearly 10% of Chinese – and half of those Chinese buy groceries exclusively online. With a share of around one-tenth of China’s grocery retail sales, and Alibaba are transforming at unprecedented speed into information-fueled networks that gather data from purchases made online or in supermarkets, enabling them to forecast product demand and efficiently coordinate supply and delivery. They also know which websites customers like to visit, the apps they use, and who they follow on social media.

The extraordinary growth has its origins in China’s relatively underdeveloped traditional supermarkets, which were falling behind the demands of the country’s burgeoning middle class. China’s explosion in online access – from just 11% of the population in 2006 to over half in 2017 – made e-commerce a natural alternative. Home delivery is also relatively low-cost, thanks to the density of the cities where wealthier Chinese tend to live.

Now the groups intend to use their new financial and technological might to take the fight to the US and Europe. Alibaba plans to invest $15 billion in global research hubs over the next three years and has been looking at potential sites for European dispatch hubs., which has a strategic alliance with its shareholder Wal-Mart Stores, wants half its profits to come from outside of China in 10 years’ time.

Here are a few ways in which China’s retail giants are redefining shopping at home - and may potentially do so abroad, and soon.

Omnichannel groceries

Alibaba and are pioneering new shopping modes known as O2O – “online-to-offline” that go beyond the parallel physical and online services offered by most major supermarkets worldwide.

While Amazon’s new Amazon Go concept store is a US version of O2O, Chinese retailers are scaling up faster. At Alibaba’s Hema stores, which numbered 47 by April this year, QR matrix barcodes pull up product information on smartphones – which are also used to select and pay for goods. If shoppers don’t want to carry their purchases home, they can request delivery, which is guaranteed within half an hour. But customers can also see and taste fresh food – and a chef will even fry up seafood on the spot.

Some of the stores feature futuristic information devices. 7Fresh, launched by rival, offers automatic payment using facial recognition technology as an alternative to smartphone purchases. It can then convert the data into a chocolate-powder print of the shopper’s face on a cappuccino’s frothy milk. The futuristic experience includes “magic mirrors” that sense when a customer has picked up a vegetable and then display information such as nutritional content and where it was grown. Robot shopping carts follow shoppers through a store, avoiding obstacles.

And they are moving beyond food. For China’s “Singles’ Day” shopping festival in November, Alibaba set up makeup boutiques that let shoppers try out lipstick virtually and O2O furniture stores that act as showrooms and have QR codes for online ordering.

Physical stores

Achieving scale enables and Alibaba to optimize their supply chains and delivery services and to sweep up data from millions of daily transactions. So armed, they are expanding into traditional, brick-and-mortar retail, and supercharging it with digital logistics and nationally-recognized brands. Alibaba has recently been installing products from its Tmall Supermarket online grocery service in supermarket chain RT-Mart and helps provide home delivery for shoppers who live nearby. is providing Wal-Mart’s Chinese unit with an online service platform and also offers one-hour delivery for selected Walmart items.

Since early 2017, both alliances have also been converting some of China’s more-than 7 million family-run stores into convenience store franchises under the Tmall or umbrellas. The convenience stores get well-known brands on their shelves and mobile payment systems for easy checkout. Their managers can replenish stock through a smartphone app. And it arrives much faster than through the old, multilayered distribution networks relied on by the corner shops up until now.

Mobile payments

A growing proportion of the transactions in these stores are carried out by mobile phone – and the two empires dominate here too. Together, they process 92% of China’s mobile payments: Alibaba’s system is called Alipay, while rival is in an alliance with Tencent, which owns WeChat Pay – part of WeChat, China’s largest social app. Mobile phone payments are already used for 35% of supermarket purchases in China. Even when people buy from an independent shop – for a takeout meal, say – the transactions are a valuable source of information on what consumers are buying, where and when. The e-commerce giants can use this knowledge to develop increasingly attractive products and formats. This expertise will then persuade more retailers to sign up with them.

The outlook

Alibaba and’s retail empires are now preparing to expand globally. Alibaba, which has been selling online in the US and Europe for several years, is planning to set up European dispatch centers. It also wants to add European and Asian data centers to those it has in the US in order to support everything from online sales to its cloud computing business. In Asia, Alibaba announced it would double its investment in Southeast Asian e-commerce firm Lazada Group to $4 billion and install one of its executives to run the business.

Have you read? will take on Alibaba and Amazon in the US and Europe this year by starting to sell online, leaning on Wal-Mart for initial logistics support in the US. In June, it said Google would pay $550 million for a 1% stake in the company, in a deal that will make products available in the US and Europe on Google Shopping. In 2017, announced a $500-million e-commerce and financial technology joint venture with Thai retailer Central Group. It has also invested in Tiki, an e-commerce platform in Vietnam, and launched its own e-commerce platform in Indonesia.

It is notoriously tricky for retailers to expand outside their domestic markets, and the Chinese shopping empires are rooted in their country’s specific retail evolution. But Alibaba and may have an easier time, since they have already developed significant technology and scale in China – including the means to make online groceries work.

Moreover, Alibaba and have the financial firepower to buy a company to fill gaps in their operations. Alibaba has a market capitalization of close to $500 billion, while itself is worth around $60 billion. They have already assembled an impressive number of alliances in China through a wave of acquisitions and partnerships over the past four years; Alibaba has made strategic investments totaling $21 billion in retail alone in just the last two years. The next phase of their big acquisition spree might be outside China.

Don't miss any update on this topic

Create a free account and access your personalized content collection with our latest publications and analyses.

Sign up for free

License and Republishing

World Economic Forum articles may be republished in accordance with the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International Public License, and in accordance with our Terms of Use.

The views expressed in this article are those of the author alone and not the World Economic Forum.

World Economic Forum logo
Global Agenda

The Agenda Weekly

A weekly update of the most important issues driving the global agenda

Subscribe today

You can unsubscribe at any time using the link in our emails. For more details, review our privacy policy.

Davos 2024: Special Address by H.E. Li Qiang, Premier of the State Council of the People’s Republic of China

January 17, 2024

Liming Chen

January 14, 2024

About Us



Partners & Members

  • Join Us

Language Editions

Privacy Policy & Terms of Service

© 2024 World Economic Forum