Today we cannot just separate online and offline... wise words by Daniel Zhang, the CEO of Alibaba, who is eyeing a $2.6bn deal to take the Chinese "Intime Retail Group" department store chain private. Source: FT.com
This follows several offline moves by a number of "tradtitionally online" companies including Amazon, Made.com, Boohoo, Zalando, Farfetch and others.
The main advantage moving from online to offline is the corporate culture of accepting and managing with multi-year losses to build a better business. Most offline businesses with online add-ons have a culture of carefully weighted KPI's on which bonuses and other advantages are based. For example, asking Arcadia Group to all of a sudden swap its profits for two to three years in exchange for a potential upturn in business following increased capex and missed targets would simply be impossible. Acting as a startup means you are willing to accept losses that might occur as a result of higher risks... and rewards.
However, these online companies have a history of increasing sales on a massive scale without having to think too carefully about overheads. Adding property leases to a balance sheet adds weight that is not easily shifted... watch this space in 5-10 years when leases are starting to drag on performance...
We are now writing about Omni Channel retailing. Sign up to our newsletter to get your copy of the report once it is ready (in May 2016)
Note: The Intime Department Store Group was co-founded in 2008 by Lotte (South Korean chaebol, retail group) and Intime Retail of China.
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- Tags: Alibaba, China, China Fashion Market, Department Stores, ecommerce, Lotte, M&A, Omni-Channel Retailing, South Korea, Vertical Integration