Freshippo Case: Business Model Evolution in Alibaba’s New Retail

This case study delves into Freshippo, a business under the Alibaba Group, and its innovative approach to catering to the demand for fresh produce in China through the 'New Retail' strategy. Initially, Freshippo faced challenges such as poor customer service and long waiting times, leading to the development of four new business models aimed at addressing customer complaints. Despite these efforts, some customer issues persisted. The case emphasizes the importance of focusing on the strengths of the business rather than solely addressing its weaknesses, advocating for a strategic shift towards capitalizing on core competencies to achieve sustainable and profitable growth. The analysis covers the development of an integrated online-offline (O2O) business model, value creation for customers through health and nutrition information, and the categorization of the business model under B2B and B2C frameworks.

Freshippo: Business
Model Evolution in
Alibaba’s New Retail
Platform

Introduction
 The retail industry of China is thriving
 Alibaba group is a notable name in the Chinese retail industry that
has come forward with a strategy of ‘New Retail’ (Anwar, 2017)
 The given case study is focused on the existing business models of a
business of Alibaba group named Freshippo
 It elaborates the operations of Freshippo to highlight the favorable
and unfavorable aspects of its business models (Kim, 2019)
 Freshippo realized that they are drifting away from core competencies
and strengths of business by being excessively focused on finding
solutions for business weaknesses.

Problem Description
ISSUES OF
MANAGEMENT,
POOR SERVICE QUALITY LONG WAITING TIME FRESHIPPO TRIED TO
FIX PROBLEMS BUT
CUSTOMER
COMPLAINTS WERE
PERSISTENT
LONG DELIVERY TIME
AND COMPROMISE ON
THE PRIOR CORE
BUSINESS
COMPETENCY OF
PROVIDING FRESH
FOOD ITEMS

Analysis and Evaluation
 Development of Integrated Online-Offline Business Model (Jeong &
Song, 2016)
 O2O
 Developed through Alibaba executives
 Enticed customers online to visit the physical stores of Freshippo to
buy their desired items from stores and Alibaba team played an
important role to materialize this idea (Xu & Zhang, 2015).

Value Creation for Customers
 Business commitment to create value for its customers
 Shared necessary information to its customers about importance of a
healthy lifestyle, health issues and food recommendations
 Food recipes
 WeChat to inform its customer about health and nutrition
 Personalized marketing
 Concerned about customers’ issues

Capturing Value from the Customers
Massive number of
customers
Repeat purchase
behavior of customers

Sustainable Profitable Growth through
Freshippo’s Business Model
Innovative
China’s industry of fresh produce exhibits the declining growth rate
(Chen, 2019)
Customer concerns with present business model
Increased market competition
Better performance of competitors
Business model need upgradation for sustainable profitable growth.

Contd.
 The decision of Yi to create differentiated types of stores in addition
to the regular stores of Freshippo is justified.
 Each type of store was opened to innovatively address a specific
issue faced by the customer at their regular stores
 Business model categorization under B2B, B2C
 Yi took maximum advantage of first mover in the market
 Substantial number of stores were opened in the region after
receiving positive response from the customers

Recommendati
ons
Business model transformation
Yi’s mission to focus on strengths
Strength-based business model
Supports diversification, avoids distractions
Freshippo should continue to focus on the constant local
demands of ready availability of fresh food items and create
customer value through innovation in business model (Amit &
Zott, 2012).
Fortify business strengths which can overshadow weaknesses
of business.

Conclusion
 Freshippo is a business of Alibaba group
 focused on catering the innate demand of fresh produce by
the Chinese customers. revolutionized retail business
industry by New Retail strategy
 backlash from customers.
 poor customer service, long waiting hours and other related
management issues.
 The business opened new stores keeping in view the
complaints of customers that resulted in four new business
models.
 customer complaints remained persistent.
 The ‘New Retail’ strategy by Alibaba is intending to
transform or alter existing business models.
 Yi should adopt a strength-focused approach by capitalizing
heavily on the strengths of business rather than its
weaknesses.

References
 Anwar, S. T. (2017). Alibaba: Entrepreneurial growth and global expansion in B2B/B2C
markets. Journal of International Entrepreneurship, 15(4), 366-389.
 Chen, L. (2019). Research on Supply Chain Models for “New Retail”: Taking Freshippo
and JD Convenience Store as Example. Advertising Panorama, (4), 4.
 Jeong, Y. J., & Song, Y. U. (2016). A study on the factors affecting the intention to use
O2O services. Journal of Information Technology Services, 15(4), 125-151.
 Kim, J. R., Chan, S., Huang, X., Ng, K., Fu, L. P., & Zhao, C. (2019, May). Demonstration
of Refinity: An Interactive Holographic Signage for New Retail Shopping Experience.
In Extended Abstracts of the 2019 CHI Conference on Human Factors in Computing
Systems (pp. 1-4).
 Xu, T., & Zhang, J. (2015, July). A development strategy of O2O business in China.
In 2015 International Conference on Computer Science and Intelligent
Communication. Atlantis Press doi: https://doi.org/10.2991/csic-15.2015.81