Alibaba, one of China’s biggest internet conglomerate, has been actively pursuing AR/VR by integrating VR shopping into its e-commerce platform, launching an incubator for AR/VR content and hardware, as well as investing in relatively mature hardware and software companies.
Alibaba’s major activates in pursuing AR/VR:
|Led Series C investment in Magic Leap with a total amount of funding of $794 million USD)
|Kicked off Project Buy+ to build the biggest 3D database for merchandises
|Showcased Buy+ demo of HTC Vive + 3D merchandise shopping experience
|Invested $15 million USD in Infinity AR, an Israel-based AR engine and solution startup
|Launched Buy+ on Taobao APP with a Cardboard + 3D merchandise model
|Invested $6 million USD in Lumus in the Israel-based AR optical element and headset startup’s Series C funding
|Invested over $10 million USD in WayRay, a Swiss-based embedded automobile AR technology company
Current Value Creation
Alibaba is currently focusing on experimenting VR technology applications at its e-commerce marketplace. The showcase it presented in July 2016 allowed consumers to experience a journey of shopping in stores of Target, Macy’s, Costco, and another four oversea retailers.
Consumers need a HTC Vive headset to try out the demo.
Consumers start a shopping journey by selecting one of the seven photos hanging on the wall.
Each of the photos represents one of the seven oversea retailers.
Consumers will be picked up by a limo if a U.S. retailer is chosen.
Consumers can check certain merchandises and turn them horizontally within 180 degrees.
Consumers are only allowed to go one pre-designed route when browsing.
Consumers can only check out selected merchandises in the old online shopping manner
– going through shopping cart, not by interacting with cashiers.
(Picture Credit: 36Kr)
Current value creation model of this VR application is fairly straightforward. On the consumer end, the enhanced online shopping experience is fresh, interesting and presumably more enjoyable. On the retailer end, this use case helps them better exhibit merchandises and therefore, hopefully, boost sales. To lower adoption barrier for consumers, Buy+ on Taobao APP chose Cardboard rather than HTC Vive as compatible headset. And Alibaba has been working on developing dev kits to help retailers establish Buy+ 3D profile for their merchandises.
Current Value Capture
Alibaba’s capability to monetize on Buy+ is constrained in its existing marketplace model – charging commission for successful transactions, given that Buy+ initiative and the whole VR sector behind are still at a nascent stage. With limited consumer and retailer adoption, Buy+ currently is more of a marketing vehicle for both Alibaba and its retail partners to shape their brand perceptions, and a long bet of this e-commerce giant to stay relevant in the potentially coming future AR/VR world.
Given the asset-light model and current impressive profitability of Alibaba’s core business, access to capital is not a problem for the company. Thus it is in a good position to invest in AR/VR. Before the technology and ecosystem mature, price of hardware and software becomes affordable, and user case gets proven, Alibaba can patiently keep on its current VC-like investment and Buy+ experiment. Once the tipping point comes, the established advantage in AR/VR of this internet conglomerate can be expected to play out broadly.
New Normal of Omni-Channel Strategy in Retail Industry
AR/VR is likely to accelerate or even force the whole retail industry to transit to omni-channel operation, as some of the values that are currently perceived as uniquely provided by brick-and-mortar stores, such as seeing is believing, and immersive and interactive experience, will further diminish.
As the tech savvy player, Alibaba is capable of creating and capturing more value by helping brick-and-mortar and even e-commerce retailers to integrate offline and online businesses. In addition, AR/VR can go hand-in-hand with big data at Alibaba’s platform to personalize consumer’s shopping experience, and improve merchant’s overall operation efficiency, especially in areas like marketing and procurement.
Disruption in Video and Live Event Entertainment
Alibaba Pictures is a subsidiary of Alibaba Group that is separately listed in Hongkong and Singapore stock markets. The company produces and distributes theater movies and TV dramas, and invests in overseas film productions (such as Ninja Turtles 2, Star Trek 3, Mission Impossible 5). Furthermore, Alibaba Pictures formed a strategic partnership with China’s leading online video streaming platform, Youku/Tudou, behind Alibaba Group’s financial investment. As the applications of AR/VR grow mature in video entertainment sector, Alibaba stands a big chance to disrupt industry landscape in the lucrative China movie market by bring traffics from movie theaters to online video streaming websites with an enhanced watching experience. Leveraging these same assets, Alibaba can also easily expand to live event business.