Amazon is already putting its own form of New Retail into practice with its seven existing brick-and-mortar bookstores, with six more locations scheduled to open in 2017. These stores bring together the best of offline and online shopping, with Amazon using its vast trove of data to determine how it should stock the stores.
Amazon Bookstore customers can touch the books in the store and flip through their pages, but they can also open their Amazon app in the store, click on the camera icon, take a picture of any book, and the app will bring up that book's page on Amazon's online store. If a customer decides to purchase the book, he or she can scan a QR Code through the Amazon app at the register to pay for it.
Amazon uses its bookstores as an opportunity to display books rated four stars or above on its website, and to sell other products, such as bookbags or water bottles, that are also highly rated on its online marketplace. In other words, its data determines how it stocks the stores.
"Amazon is trying to surround the customer with Prime memberships, its credit card, these bookstores," Feinseth said. "It's a way to try to create customer loyalty in a time when people just want the best price."
In addition to supermarkets, Alibaba has also transformed department store Intime, a chain of stores and shopping malls which Alibaba paid $2.6 billion to fully acquire in January after having first bought a stake in it about three years ago. Data from Intime and Alibaba's Taobao consumer-to-consumer shopping website revealed that consumers were more likely to buy the well-known, bigger name brand cosmetics like Estée Lauder when shopping in the physical store, but preferred the niche cosmetic brands from Korea and Japan when shopping online. "That's very informative," Tsai said. "It could tell us more about how we will do our merchandising decisions in the department stores."
Rather than acquiring or investing further in other retail companies, Alibaba is hoping these successful early examples of the positive effects of the New Retail strategy will serve as prototypes that encourage other retailers to come to Alibaba for help, Tsai said. "So what they bring to the table is they'll have retail locations that are in good spots, good locations, and we'll bring in the technology and the data and the know how...Our intention is to run a capital-light strategy, but initially, you need to develop some prototypes so that people can see how they work and then they will be more inclined to work with you."
This is an important distinction between Alibaba and Amazon's brick-and-mortar transformation strategy.
Alibaba has never been keen to own everything, opting to empower other players instead, while Amazon has always opted to own as much of its operations as it can. This difference is most notable in their delivery methods, with Alibaba relying on about 3,000 delivery companies in China, while Amazon builds its own trucks and even planes. Now that is has prototypes, Alibaba hopes it can simply partner with retailers in the future to help them increase sales with its New Retail strategy, while Amazon opted to fully acquire Whole Foods.
Feinseth said retailers should be willing to try almost anything because the traditional retail model is dead, and they have to change something. New Retail lets people touch and test out products in the store, but it also gives them efficiency and competitive pricing by allowing them to order items to their house or check for better prices online, he said. "I think it's a brilliant strategy," he said of New Retail.
Both Alibaba and Amazon are smart to start adapting for the shift in retail to accommodate both offline and online shopping, Feinseth said. "I think retailers will be coming to Alibaba for help -- both in China and globally," he said.
Editor's Pick: This article was originally published at 7:51 am ET and has been updated with information from the Amazon-Whole Foods deal.